If Slovakia fails to approve the measure, though, it could force the leaders of euro-zone nations to reopen thorny negotiations over the rescue fund just as Europe appears to be running out of time.
Already, investor concerns have spread from relatively small Greece, Portugal and Ireland to the giant economy of massively indebted Italy, and signs are emerging that the weakest of the big banks that own the debt of troubled European nations are buckling under losses. On Sunday, French and Belgian officials were forced to nationalize Dexia, Belgium’s largest bank, saddled with more than $700 billion in exposure to debt from troubled European nations. On Monday, Austria’s Erste Group Bank announced that it was likely to lose up to $1 billion this year, partly because of the ongoing debt crisis.
Oct. 11 (Bloomberg) -- Simon Sole, chief executive officer of Exclusive Analysis Ltd., talks about the outlook for debt refinancing deadlines faced by euro-zone members in early 2012.
Oct. 11 (Bloomberg) -- Daniel Morris, a global strategist at JPMorgan Asset Management, discusses the euro-zone sovereign debt crisis and the outlook for equity and bond markets. He speaks with Owen Thomas on Bloomberg Television's "Countdown."
But increasingly, Europe’s woes appear to be as much political as economic, with the region unable to reach a consensus on how far it is really prepared to go to resolve the crisis. Even the rescue fund the Slovaks were being asked to ratify Tuesday is already being dismissed by most analysts as too little, too late, with talk now that $2 trillion or more may ultimately be needed to fully address the crisis.
Resentment in Slovakia
The expanded fund — officially known as the European Financial Stability Facility — is meant to bolster Europe’s economic defenses, allowing moneys to be used faster to prop up not only ailing countries in crisis but also the banks holding their debt. Each nation in the euro zone is being expected to contribute to the fund, with Slovakia being asked to pony up about $10.5 billion toward the $588 billion package.
But in post-communist Slovakia, which adopted the euro only two years ago, the vote over the bailout fund became a rallying cry against the notion of propping up its richer neighbors. Unlike Slovakia, which ended generous social benefits and watered down job-security rules to become more competitive in recent years, nations such as Greece and Italy were portrayed in local newspaper editorials and on Slovak talk shows as spoiled rich kids looking for others to pay their bills.
Radicova delivered an impassioned defense of the fund Tuesday, imploring her peers to do their duty for the greater good of a European Union to which Slovakia, for better or worse, has hitched its fortunes.
“I beg you, trust this government,” she said, saying that Slovak “reliability” was at stake.
The rejection of the plan in Bratislava had at least one immediate effect: It threw one of the region’s stable countries — a former Eastern Bloc nation of 5.4 million that is now one of the euro zone’s rare economic dynamos — into a deep political crisis.
“What we do know is that the government is falling because of this vote,” said Grigorij Mesežnikov, a Bratislava-based political analyst. “I do believe the fund will be approved here eventually, but it will come at a political price for Slovakia.”