Slovakia on Thursday approved a beefed-up bailout fund to combat Europe’s debt crisis, much to the relief of European leaders who needed the tiny nation’s sign-off before putting their grand rescue plan into effect.
The enhanced, $590 billion fund aimed at shoring up ailing debtor nations and the banks that own their debt was agreed to in July, but its creation was contingent on approval from all parliaments of the 17 nations that share the euro. The Slovak parliament rejected the measure in a vote Tuesday, but with the new “yes” on Thursday, the fund cleared its last hurdle.
Thursday’s approval capped a drama that unfolded over the past week as Slovakia, a former Eastern Bloc nation that adopted the euro in 2009, became the last holdout among euro-zone nations, effectively holding the fund hostage in a domestic political fight. On Tuesday, parliament’s rejection of the fund brought down the government of Prime Minister Iveta Radicova, who had wagered her job with a no-confidence motion in a bid to win the fund’s approval.
Tuesday’s rejection, however, was orchestrated by a renegade party within Radicova’s own ruling coalition. On Wednesday, Slovak opposition leader Robert Fico, head of the Smer-Social Democracy party, struck a deal with three other parties from Radicova’s coalition, promising to help push the fund through parliament in exchange for early elections that analysts say Fico’s party could now win. With the new backing by the opposition, the measure easily passed Thursday.
The events in Slovakia illustrated the quirks of European governance, with Slovakia suddenly facing political upheaval because of a bailout fund largely meant to aid French and German banks and wealthy, profligate neighbors such as Italy.
“The price was high, but I am glad that Slovakia at the end delivered on its commitments and we don’t block this tool for the euro zone to stem the crisis,” Finance Minister Ivan Mikos said in Bratislava after the vote, according to the Associated Press.
The fund’s approval, however, is unlikely to be enough to solve Europe’s problems. Since the expanded fund was agreed upon this summer, the dimensions of the economic meltdown have multiplied, and far more cash might now be needed to quell the crisis. European leaders gathering for a summit in Brussels on Oct. 23 are under pressure to come up with a far more ambitious rescue plan, potentially requiring even more and larger contributions from member states.