Slovakians Still Expected to Approve EFSF
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October 12, 2011 TheFreshOutlook  |
The Slovakian parliament is to vote again on the expansion of the EFSF after the motion was defeated on Tuesday.
The Freedom and Solidarity Party (SaS) defied their government partners by voting against the expansion, which they say puts an unfair burden on one of Europe’s poorest countries. Under the terms of the EFSF, Slovakia would have to contribute €7.7bn.
“The EFSF is going to massively hurt Slovakia in favour of bailouts for foreign banks,” said Richard Sulik, the SaS leader.
The SaS deviation has forced the collapse of Prime Minister Iveta Radicova’s coalition government. However, the party’s defiance is unlikely to block the EFSF’s adoption for long.
The Socialist opposition only refrained from voting yesterday to put pressure on Prime Minister Radicova. As parties scramble to form a new government, the majority of parliamentarians are expected to vote in favour of the proposal when it’s forwarded again in the coming days.
“We’re saying no to a rightist government, but we’re saying yes to the rescue fund,” said Socialist leader Robert Fico.
Accordingly, Europe’s leaders have reacted in a manner which suggests that the Slovakian impasse is merely a delay in the consolidation of the €440bn fund. German Chancellor Angela Merkel seemed to ignore events in Slovakia, saying simply: “The EFSF will be ratified at the October meeting.”
Her sentiments seemed reflective of the behaviour of European markets this morning with the Cac, Dax and Ftse all rose in early trading.
Brian Devine, an economist at NCB stockbrokers in Dublin, said that although markets are extremely sensitive to political developments in Europe, events in Slovakia would not cause investors to panic.
“It’s not ideal, but it’s not a deal breaker,” Mr Devine told The Fresh Outlook. “Slovakia simply isn’t a big enough player on the European stage to cause serious concern.”
Mr Devine also feels that the recent stabilisation in European stocks can be attributed to an increased sense of action amongst European politicians, especially after the announcement of a Franco-German plan last Sunday.
“They now realise they need to do more than they are doing,” said Mr Devine. “Markets are generally expected to stay positive until we get the details of German and French proposals but nobody knows what will happen in the future.”
Meanwhile, Troika inspectors have said that Greece should receive a further €8bn in EU-IMF bailout funds. Whilst conceding that the country’s austerity targets for 2011 were “out of reach”, inspectors are happy that Greece had made enough “important progress” to warrant more external help.
Nevertheless, much concern remains over the ability of Greece to deal with its staggering $350bn debt. Yesterday, the Luxembourg Prime Minister and president of the eurogroup, Jean Claude Juncker, said that creditors may be forced to take a loss of 60% on Greek debt.
By Dermot Tobin
[Image courtesy Of Terra Nova Foundation]
