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Greek loan divides coalition

FREEDOM and Solidarity (SaS), one of the four parties of the ruling coalition, has hardened its opposition to any further bailout for Greece, leading to a flare-up in the debate over what stance Slovakia should adopt towards the financially-stricken eurozone member. Speaker of Parliament Richard Sulík, who leads SaS, and the rest of his party have gone so far as to try to limit the mandate of Finance Minister Ivan Mikloš – a member of the largest coalition party, the Slovak Democratic and Christian Union (SDKÚ) – to negotiate the conditions for a loan to Greece. SaS collected 30 signatures to summon a special session of parliament with this goal in mind. The session is scheduled for July 1.

FREEDOM and Solidarity (SaS), one of the four parties of the ruling coalition, has hardened its opposition to any further bailout for Greece, leading to a flare-up in the debate over what stance Slovakia should adopt towards the financially-stricken eurozone member. Speaker of Parliament Richard Sulík, who leads SaS, and the rest of his party have gone so far as to try to limit the mandate of Finance Minister Ivan Mikloš – a member of the largest coalition party, the Slovak Democratic and Christian Union (SDKÚ) – to negotiate the conditions for a loan to Greece. SaS collected 30 signatures to summon a special session of parliament with this goal in mind. The session is scheduled for July 1.

Meanwhile, the cabinet on June 21 approved an increase in the amount that Slovakia will offer in the form of guarantees to the European Financial Stabilisation Facility (EFSF) and its successor, the European Stability Mechanism (ESM), which will begin in 2013. All the SaS representatives, plus one minister from the Christian Democratic Movement (KDH), refused to support the increase.

Sulík summoned the special parliamentary session with the help of four deputies of the Civic Conservative Party (OKS) – which is part of the caucus of another coalition party, Most-Híd – and the opposition Slovak National Party (SNS). Sulík said he is not concerned that voting with an opposition party could be interpreted as a violation of the ruling coalition agreement. He argued that SaS deputies have a legitimate right to pursue the line they have taken.

Meanwhile, Pavol Hrušovský, chairman of the KDH parliamentary caucus, said on June 30 that he considers the signatures of the SNS deputies on the SaS initiative a serious matter which could be a violation of the ruling coalition agreement, the Sme daily wrote.

On June 27 the financial daily Hospodárske Noviny reported that Mikloš had threatened to resign if Sulík succeeded in pushing through a resolution to limit his mandate to negotiate Slovakia’s contribution to the financial assistance package for Greece. However, the following day news agencies reported that Mikloš had no problem with receiving a mandate from parliament for negotiations relating to Greece.

“I’ve never had any problem with discussion in parliament,” said Mikloš. “I’ve defined five conditions that Slovakia should submit as necessary for its approval of the bailout, and we’ve agreed on these conditions with SaS in principle.”

SaS has continued to stress that the party is not completely against a bailout for Greece, but says the country should first declare itself bankrupt, Sulík insisting that “this is an unavoidable condition for any further thoughts”. SaS also demands that Greece gets further help from Europe only if part of the money is drawn from the banks that previously lent to Greece.

“I am rejecting this, because this would automatically mean Greece’s bankruptcy,” Mikloš said, adding that such a demand simply cannot be negotiated in Brussels, Sme wrote.

He said he does not understand why SaS is insisting on the wholesale participation of the private sector, which would mean the immediate bankruptcy of Greece. He told the Sme daily that he agrees that the symbolic participation of private investors is not a solution, which is why the government has said that it should be defined quantitatively as participation of at least €30 billion.

Terms for a potential resolution of the impasse have emerged: they comprise five conditions for the Greek bailout: inclusion of the private sector, guarantees for the loan involving real assets, privatisation of state assets, participation of the International Monetary Fund, and the Greek opposition’s agreement to austerity measures.

Mikloš also said, according to Sme, that he does not have a problem with a French proposal that the banks should participate in the assistance package by exchanging some Greek bonds for new ones with longer validity. SaS opposes this option, arguing that Greece has already shown that it is unable to repay its loans.

On June 29, Slovakia’s Finance Ministry said that the Greek Parliament’s approval of a package of fiscal austerity and privatisation measures, which is expected to open the way for the country to receive another tranche of the current recovery loan, is a move forward, the TASR newswire reported.

This doesn't mean that a new loan will automatically be approved, however, said the ministry. “Slovakia still insists on its conditions, which are yet to be discussed by the Slovak Parliament,” ministry spokesman Martin Jaroš told TASR

Eurozone finance ministers were scheduled to discuss on July 3 whether the conditions for releasing the current (July) tranche of the original loan to Greece have been met. The debate will touch on a new loan as well, however, as the IMF has made its own bailout package conditional on agreement of the new EU loan. The new programme should be formally approved a week later, on July 10-11, said Mikloš, as quoted by TASR.

Yet due to the stance of SaS and the KDH minister – Interior Minister Daniel Lipšic – it is still uncertain whether the cabinet’s decision will be approved by parliament.

“I am leaving for Brussels with a clear mandate and will inform [the EU] very precisely: it is approved by the government but I cannot guarantee its ratification in parliament,” Radičová said, as quoted by Sme on June 21.

Slovakia’s guarantees under the current EFSF bailout programme would increase from €4.37 billion to €7.72 billion, based on the draft addendum to the EFSF framework contract passed by the cabinet on June 21. The total guarantees of all eurozone countries would increase from €440 billion to €779 billion, so that the effective capacity of the programme of €440 billion is secured, the SITA newswire reported. The EFSF will be replaced by the European Stability Mechanism (ESM) beginning in June 2013.

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