Well, it was all eyes on Slovakia last night. But we still don’t have an outcome, although the situation does seem to be getting a bit more desperate even though I still find it difficult to believe that there will not ultimately be a ‘Yes’ vote, but there is much more politicking to be done before then:
Europe braced itself for the possibility that Slovakia’s lawmakers could reject a measure to expand the powers of a euro bailout fund designed to shore up the defenses against a debt crisis that is threatening the global economy.
Slovakia’s Prime Minister Iveta Radicova confirmed Tuesday that a coalition partner had not accepted a compromise offer, meaning that the government will not have enough votes to get it through if the opposition fails to back the package of measures designed to boost Europe’s firefighting capabilities.
A “no” vote would further complicate the eurozone’s efforts to deal with a crisis that’s already seen three countries get bailouts and raised fears of a Greek default and massive losses for banks.
In a desperate attempt to get her recalcitrant coalition partner to back her, Radicova said the vote “will be linked to a confidence vote in this government,” a move described as blackmail by Richard Sulik, chairman of the Freedom and Solidarity party and the major opponent of the fund.
With the Richard Sulik’s party against the EFSF the government requires the other opposition parties to agree to the vote, this is where it gets ugly:
The leader of Slovakia’s largest opposition party Tuesday said it won’t support the government in a confidence vote, but left open the chance for further dialogue, in a move that will be key for the eventual endorsement by the local legislature of the boosted euro-zone rescue fund.
“We say no to the rightist government but we say yes to the [European Financial Stability Facility],” Robert Fico, pictured right, said.
However, he said that if the government still wants to link the EFSF approval with a vote of confidence in the current cabinet, his Smer-Social Democracy party, or Smer, will have to vote against it and the EFSF in the joint vote, expected later Tuesday.
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Robert Fico, the leader of Slovakia’s largest opposition party, said that in August, his party, Smer, had offered coalition leaders the chance to hold joint discussions to garner enough support across all political parties for the €440 billion bailout fund, but that its offer was rejected
“Smer will be eager to learn what coalition parties are going to offer following the rejection vote [on the EFSF] today,” Fico said. “Smer is ready for this discussion.”
So it would now seem that the resolution will be voted down, but there will then be a second round of negotiations, probably closely followed by resignation of the PM. This will obviously delay the process but should lead to a ‘Yes’ vote. Let’s hope the international media gets the story right.
However, Slovakia is not the only country where the government is struggling for survival under the weight of economics:
Italian Prime Minister Silvio Berlusconi faced intensifying political troubles late Tuesday when parliament refused to approve the 2010 budget review. Mr. Berlusconi, who was in the chamber when the voting tally was released, was visibly stunned, and opposition lawmakers chanted demands that he resign.
Deputies fell one vote short of the majority required to approve the “rendiconto” for 2010, a bureaucratic document reviewing last year’s public finances. Governmental failure to muster a majority for such a standard item is unprecedented in Italy, said Gianfranco Fini, speaker of the lower house.
Mr. Fini was a long-time ally of Mr. Berlusconi and often deemed his likely heir until the two fell out a year ago. Fini loyalists left the majority, prompting Mr. Berlusconi to recruit new members to restore an increasingly shaky hold on power.
“A government that can’t approve its finances for the previous year can hardly approve a budget for the next one,” said Pierluigi Bersani, leader of the opposition Democratic Party, the ANSA news agency reported. “Berlusconi needs to realize it’s time to visit the head of state,” he added.
In the Italian system, a prime minister tells the president of the republic when he no longer has a majority to govern, and the head of state decides whether a new government can be formed or whether early elections should be held.
The other big news out of the Eurozone last night was from Greece, which looks to be getting its next bailout payment. It isn’t like anyone had any choice in the matter:
Greece is likely to get the next portion of its bail-out loans in early November despite missing many of its fiscal targets, according to a report by the country’s international lenders.
An assessment by a team from the troika (European Commission, European Central Bank and International Monetary Fund), says that Greek authorities have made progress in many of their economic reforms, which were conditional on the €110 billion bail-out agreed in May 2010.
But it warned that Greece was certain to miss its fiscal target for 2011, partly because of continued recession but also because some of the agreed austerity measures have not been implemented.
This is just a small kick of the can because Europe had no choice. It has to be, the financial world has already moved on from the idea that Greece can be saved with constant bailouts. That is why Merkozy are now planning a new “plan”. In regards to what that could be we saw an interesting development last night by way of statements from Allianz board member Paul Achleitner:
“Don’t use the EFSF as a lender, use it as a bond insurer,” said Achleitner, who added that his plan would expand the impact of the EFSF, which currently has a lending capacity of 440 billion euros, to cover more than EUR3 trillion in bonds. That estimate assumes that 20% of the debt issued is insured and that it draws upon the full EUR780 billion that euro-zone governments have agreed to guarantee as backstop to the EFSF.
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When it was first proposed six months ago, Allianz’s plan was dismissed by the German government, the biggest and most influential contributor to the EFSF. At that time, people familiar with the German government’s thinking said the proposal was too unwieldy and faced legal hurdles.
But Achleitner said questions about European Union treaties that ban sovereign governments from directly guaranteeing the debt of other members have since been resolved. Exemption clauses for emergencies would get around those restrictions, he said.
Six months ago the German’s were also saying that Greece wouldn’t get anymore money unless it strictly complied with fiscal targets. Interesting to see how opinions suddenly change when there is a crisis.
Update: Slovak Lawmakers Reject EFSF Fund, Vote No Confidence In Government.. … More to come.