Markets Beware: Slovak Parliament Turns Down Eurozone Bailout Plan

Government falls as Slovakia legislators fail to approve Greek bailout plan; second vote possible

Prime Minister Iveta Radicova of Slovakia (left). Prime Minister Iveta Radicova of Slovakia (left).

The Slovak Parliament late Tuesday turned down the country’s participation in expanding the European Financial Stability Facility Fund, the eurozone-wide $600 billion bailout plan meant to shore up its weakest members, especially Greece.

Slovakia was the last member of the eurozone’s 17 member states to vote on participating in the plan, which was approved in July by the leaders of the eurozone countries, and is the only member state to not approve the plan, though a second vote may take place at an unspecified time, according to the BBC. Such a vote is now tied up with the future of the coalition government.

European markets had held their breath on Tuesday in anticipation of the historic vote; there are expectations that the markets may decline on the news, which some observers said might threaten the future of the currency. The major European stock indexes were down slightly on Tuesday, though Germany’s DAX was up 0.3%, while the euro fell after posting a strong gain on Monday.

In U.S. stock markets, which closed just before the vote in Bratislava, the Slovak capital, the Dow industrials were off 16.88 points, but the S&P 500 was up 0.65 points and the Nasdaq rose nearly 17 points on the day.

The coalition government, led by Prime Minister Iveta Radicova, had strongly supported the plan, under which Slovakia would have pledged about $10 billion in debt guarantees for the fund, and had turned the measure into a confidence vote on its leadership.

The BBC reported Radicova as saying before the vote: "What we are deciding on today is the good name of Slovakia, reliability, where it will belong ... or if we exclude ourselves from the community of the successful." During the debate, Radicova said to members of parliament, the National Council of the Slovak Republic, “It is the entire eurozone system which is under threat at the moment, not just a few small countries."

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