Marathon effort to secure euro bailout deal closes in on finish line

 

Deutsche Welle

On Friday, Austria is set to become the latest country to ratify the expansion of the eurozone's bailout fund, the European Financial Stability Facililty (EFSF), after German lawmakers voted overwhelmingly in favor of the legislation a day earlier.

Eurozone leaders agreed to boost the powers of the rescue fund in July, to increase its lending capacity to 440 billion euros, and to make it better able to help states before they reach full-blown financial crisis. That deal requires ratification by all 17 eurozone nations. Like Germany, Cyprus and Estonia also approved the new powers on Thursday. France, Belgium, Finland, Greece, Ireland, Italy, Luxembourg, Portugal, Spain and Slovenia had already leant their support to the plans.

The Austrian government is confident the measures will pass easily, with the ruling coalition partners backing the plan, along with most of the opposition Green lawmakers. "We are currently finalizing the plans, and the more consistently we proceed, the better it is as a whole," Austrian Finance Minister Maria Fekter assured.

The deal will raise Austrian guarantees for the EFSF from 12.2 billion euros to 21.6 billion euros ($29.5 billion).

 

Relief for Merkel on Thursday as Bundestag passed the legislation

Malta and the Netherlands are also set to approve the measures in the coming days.

Threat from Bratislava

But the main stumbling block now appears to be tiny Slovakia, one of the eurozone's newest members, where the junior coalition partners in the ruling government are threatening to vote against the measures, arguing that the country cannot afford to pay. After Estonia, Slovakia is the eurozone's poorest state.

Slovakian lawmakers will vote on the legislation in October. Eurozone leaders will be watching anxiously to see whether the leader of the Freedom and Solidarity party follows through with his threats.

"The rescue fund is simply buying time in an incredibly costly way, but it's not solving the problems," Party leader Richard Sulik told German public television.

"If the euro crumbles it will be because of massive deficits in individual countries and not because we rejected the rescue fund," he warned.

There are currently intensive discussions underway in the Slovak capital, Bratislava, to try and persuade Sulik to change his mind. No doubt he's also feeling pressure from other eurozone nations to back the bill, and calm market nerves.

Author: Joanna Impey (AFP, AP, Reuters)
Editor: Nancy Isenson