Alarm in Brussels as Slovaks resist euro rescue net

 

THE INCOMING Slovak government has been voicing unease about the €750 billion rescue net for distressed euro zone countries, prompting alarm in Brussels that it could undermine or derail the risky plan.

Doubt over Bratislava’s participation in the scheme threatens to delay its formal establishment, because signatures from each of the 16 euro zone finance ministers are needed before work can be set in train.

Even though designated prime minister Iveta Radicova softened the line yesterday by saying her centre-right party did not want to block the EU/IMF deal, she failed to make it clear when or if her incoming government would sign up.

Her ambivalence was in keeping with the tone of a debate that has thrown Slovakia’s participation into uncertainty after parties opposed to aid for Greece prevailed in elections last month.

With ministers from the 15 other euro zone countries expected to join the scheme within the next fortnight, Ms Radicova is coming under mounting pressure from Brussels to participate.

Citing his poor election performance, outgoing premier Robert Fico says his left-wing administration has no mandate to sign the framework agreement which sets down how the European Financial Stability Facility (EFSF) will operate.

The EFSF is a €440 billion loan guarantee scheme backed by euro governments. Former European Commission official Klaus Regling – who examined the causes of Ireland’s banking crisis for the Government – took office yesterday its chief executive.

The scheme will operate alongside a €250 billion IMF fund and a €60 billion fund from the European Commission.

The signing of the framework agreement is the first part of a two-phase process in which the EFSF will enter into force. The second part is the release of 90 per cent of funding commitments from participating countries.

While Slovakia’s contribution would be significantly less than 10 per cent, so it cannot block the second phase, its position threatens to disrupt the first phase.

Ms Radicova has played for time as talks on the formation of a new four-party coalition continue, arguing that she will soon be ready for negotiations with the EU authorities on her country’s role in the scheme.

Her stance has provoked surprise and annoyance in Brussels as the participation of all 16 euro zone countries was deemed irrevocable after lengthy talks on the weekend of May 7th.

Ms Radicova drew an implicit rebuke on Wednesday from economics commissioner Olli Rehn, who said each country must respect commitments they had made.

“It is essential that every euro area state that has undertaken a commitment to sign and ratify the inter-governmental agreement on the facility will indeed do so, and the sooner the better.”

Even though Mr Rehn made a point of saying the EU was a “community of law”, Slovakia is not liable for any penalty if it does not sign up as the EFSF is being set up as an inter-governmental instrument which will operate outside EU law.

In a statement yesterday, Ms Radicova kept her options open. “Under the government of Robert Fico, the situation proceeded to the point where it is an already irreversible political commitment,” she said.

“We do not want to block other EU countries and the political agreement that has been sealed. We cannot, however, guarantee its approval in parliament or the ratification by the Slovak president.”