Slovakia rejects expansion EU emergency fund

[PhoenixAsh]

This is at the moment a very important development.


The parliament of Slovakia has just rejected the expansion of the EU emergency funds used to loan money to suffering economies.

A majority in parliament could not be reached because the Liberal Party (you know...the free trade kind) refused to vote.

The planned expansion requires unanimous consent by al EU members.
This expansion covers the nominal figure of available emergency funds but also an increase in its powers.

This will seriously hamper the possibilities of continued aid to countries such as Greece, Italy, Spain and Portugal...

Slovakia is currently one of the poorest countries in the EU and refuses to pay for the rescue of the richest nations in the EU.


HOWEVER...the Slovakian government will put the plan up for vote again later this week and expects it to be accepted during the second vote.

I have not much info on this...but it appears that the government has fallen over this. And now functions as an intrim government. They expect that the current opposition will be swayed now that the government has fallen to vote yes to the proposal.

[PhoenixAsh]

Links are appreciated!!!


Here is an interview with the dissenting party SaS and an explanation why it would vote no:


Yesterday we reported that tiny Slovakia's refusal to ratify the expansion of the EFSF 2.0 (even though a 4.0 version will be required this week after the "Dexia-event"), may throw the Eurozone into a tailspin as all 17 countries have to agree to agree to kick the can down the road: even one defector kills the entire Swiss Watch plan. Yet an interview conducted between German Spiegel and Slovakia party head Richard Sulik confirms that tiny does not mean irrelevant, and certainly not stupid. In fact, just the opposite: his words are precisely what the heads ot the bigger and far less credible countries should be saying. Alas they are not. Which is precisely why the euro is doomed.

From Spiegel:

Only two countries, Malta and Slovakia, have yet to ratify the expansion of the euro bailout fund. Its fate may be in the hands of a minor Slovak party headed by Richard Sulik. In an interview, the politician explains why he hopes the fund will fail and what he sees as the only way to save the euro.

SPIEGEL ONLINE: Mr. Sulik, do you want to go down in European Union history as the man who destroyed the euro?

Richard Sulik : No. Where did you get that idea?

SPIEGEL ONLINE: Slovakia has yet to approve the expansion of the euro backstop fund, the European Financial Stability Facility (EFSF), because your Freedom and Solidarity (SaS) party is blocking the reform. If a majority of Slovak parliamentarians don't support the EFSF expansion, it could ultimately mean the end of the common currency.

Sulik: The opposite is actually the case. The greatest threat to the euro is the bailout fund itself.

SPIEGEL ONLINE: How so?

Sulik: It's an attempt to use fresh debt to solve the debt crisis. That will never work. But, for me, the main issue is protecting the money of Slovak taxpayers. We're supposed to contribute the largest share of the bailout fund measured in terms of economic strength. That's unacceptable.

SPIEGEL ONLINE: That sounds almost nationalist. But, at the same time, you've had what might be considered an ideal European career. When you were 12, you came to Germany and attended school and university here. After the Cold War ended, you returned home to help build up your homeland. Do you care nothing about European solidarity?

Sulik: If we now choose to follow our own path, the solidarity of the others will also crumble. And that would be for the best. Once that happens, we would finally stop with all this debt nonsense. Continuously taking on more debts hurts the euro. Every country has to help itself. That's very easy; one just has to make it happen.

SPIEGEL ONLINE: Slovakia's parliament is scheduled to vote on the bailout fund expansion on Oct. 11. How do you predict the vote will turn out?

Sulik: It's still open. The ruling coalition is composed of four parties. My party will vote "no"; the other three coalition parties intend to say "yes." What the opposition says is decisive.

SPIEGEL ONLINE: The Social Democrats have offered your coalition partners to support the reform in return for new elections. Do you think the coalition is in danger of collapse?

Sulik: I don't see any reason why it would.

SPIEGEL ONLINE: What will you do should the EFSF reform pass despite your opposition?

Sulik: For Slovakia, it would be best not to join the bailout fund. Our membership in the euro zone, after all, was not conditional on us becoming members of strange associations like the EFSF, which damage the currency.

SPIEGEL ONLINE: If the euro only causes problems, why doesn't Slovakia's government just pull the country out of the euro zone?

Sulik: I don't see the euro as the problem. It's a good project. Everyone involved can benefit from it -- but only if they stick to the ground rules. And that's exactly what we're demanding.

SPIEGEL ONLINE: Which ground rules should we be following?

Sulik: We have to observe three points: First, we have to strictly adhere to the existing rules, such as not being liable for others' debts, just as it's spelled out in Article 125 of the Lisbon Treaty. Second, we have to let Greece go bankrupt and have the banks involved in the debt-restructuring. The creditors will have to relinquish 50 to perhaps 70 percent of their claims. So far, the agreements on that have been a joke. Third, we have to be adamant about cost-cutting and manage budgets in a responsible way.

SPIEGEL ONLINE: Many experts fear that a conflagration would break out across Europe should Greece go bankrupt and that the crisis will spill over into other countries, including Portugal, Spain and Italy.

Sulik: Politicians can't allow themselves to be pressured by the financial markets. Just because equity prices fall and the euro loses value against the dollar is no reason for giving in to panic.

SPIEGEL ONLINE: But do you really believe that politicians can calm the financial markets by stubbornly sticking to their principles?

Sulik: Let's just ignore the markets. It's ridiculous how politicians orient themselves based on whether stock prices rise or fall a few percentage points.

SPIEGEL ONLINE: You're not afraid that a Greek insolvency could mark the beginning of the crisis instead of the end?

Sulik: No. There's not going to be a domino effect along the lines of "first Greece, then Portugal and finally Italy." Just because one country goes broke doesn't mean the other ones automatically will.

SPIEGEL ONLINE: Nevertheless, banks could run into significant problems should they be forced to write down billions in sovereign bond holdings.

Sulik: So what? They took on too much risk. That one might go broke as a consequence of bad decisions is just part of the market economy. Of course, states have to protect the savings of their populations. But that's much cheaper than bailing banks out. And that, in turn, is much cheaper than bailing entire states out.

SPIEGEL ONLINE: Does one of your reasons for not wanting to help Greece have to do with the fact that Slovakia itself is one of the poorest countries in the EU?

Sulík: A few years back, we survived an economic crisis. With great effort and tough reforms, we put it behind us. Today, Slovakia has the lowest average salaries in the euro zone. How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?

SPIEGEL ONLINE: What can the Greeks learn from the reforms carried out in Slovakia?

Sulik: They have to make cuts in the state apparatus. The Slovaks could also give them a few good ideas about the tax system. We have a flat tax when it comes to income taxes. Our tax system is simple and clear.

SPIEGEL ONLINE: One last time: Do you honestly believe the euro has any future at all?

Sulík: I believe the euro has a future. But only if the rules are followed.

Interview conducted by Maria Marquart



http://www.zerohedge.com/news/slovakia-why-it-votes-no-efsf-expansion-greatest-threat-euro-bailout-fund-itself

[PhoenixAsh]

Right...as it turned out the plan for the EFSF was rejected and the government lost a confidence vote and has fallen.

It has been voted in favor of the plan by 55 of 124 members of parliament. The required vote is 78.

No date has been set for a new vote; Finance Minister said revamped EFSF will likely be passed this week and the leaving prime minister will ask for aid from the opposition.

Slovakia is the only one of the 17 EU members to have voted against the EFSF.

We all know the democratic trac record of the EU...so they will be heavilly pressured. It is FUBAR that this can even be put up for a revote.