Monday, July 12, 2010

The End of the Slovakia Bailout Blockade?

An internal squabble in Slovakia, the smallest member of the EU has acted as something of a blockade to approval of the EU bailout program, formally known as the European Financial Stability Facility  (EFSF). The  bailout was patched together on May 9 but remains unapproved thanks to Slovakia. All other EU members have signed the €750 billion ($940 billion) bailout agreement, except for Slovakia.

NYT details the situation:
Robert Fico, who is stepping down as Slovakia’s prime minister, said in May that he was backing the emergency program out of European solidarity, but left the details up to the new Parliament, chosen in June 12 elections. Mr. Fico’s party, Smer, won 35 percent of the vote, the most of any party, but could not form a government.

He says he has no mandate to sign without the approval of the incoming prime minister, Iveta Radicova.

Most members of Ms. Radicova’s center-right coalition, campaigning on a platform of fiscal restraint, had opposed the earlier bailout for Greece — a country that is richer than Slovakia, with better social benefits. The main instinct in Bratislava, the Slovak capital, now is to avoid any responsibility for the new fund. Mr. Fico and Ms. Radicova have been trading accusations over who should sign.

On Thursday, Ms. Radicova seemed to suggest she would sign.

“Political agreement about the European safety net is irreversible and the new government will therefore not block its creation,” she said. But, she added, “There will be negotiations about the size, safety measures and requirements, if it came to a real use of this mechanism’s guarantees.”

Nevertheless, after meeting Friday to announce the appointment of new ministers, the coalition parties promptly retired for a three-day weekend without ending the blockade.

Neither Mr. Fico nor Ms. Radicova responded to messages seeking comment.

With markets weakening recently, Slovakia’s European partners have been signaling their desire to wrap up the formalities.
As I have written in the past, those EU countries facing financial problems should "restructure" their debts, i.e., declare bankruptcy.

Radicova would do Slovakia and the entire EU a big favor by refusing to sign the agreement. That there are indications she is going to sign is not surprising. The pressure on Radicova to sign will be enormous. The elite don't like rebels, especially in tiny countries, and especially when a rebel is threatening to hold back their money.

The soonest a decision will be reached on the EFSF will be later in the week, when Radicova is expected to meet in Brussels with EC President Jose Manuel Barroso.

(Thanks to the YenGuy)

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