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Radičová opens broad discussion about the EFSF

AS EUROPEAN leaders are seeking solutions to calm the edginess that has led to a freefall in global financial markets, Slovak Prime Minister Iveta Radičová will begin holding talks with all parliamentary parties, including the opposition Smer party, about how to protect the stability of the euro and the Slovak economy. The co-ruling Freedom and Solidarity (SaS) party has said that it is unlikely to support any changes to the European Financial Stabilisation Facility (EFSF) with the party’s leader, Richard Sulík, calling the EU’s proposals as a road to socialism and the creation of a “debt union”.

Richard Sulík's SaS is unlikely to support any changes in the EFSF. (Source: SITA)

AS EUROPEAN leaders are seeking solutions to calm the edginess that has led to a freefall in global financial markets, Slovak Prime Minister Iveta Radičová will begin holding talks with all parliamentary parties, including the opposition Smer party, about how to protect the stability of the euro and the Slovak economy. The co-ruling Freedom and Solidarity (SaS) party has said that it is unlikely to support any changes to the European Financial Stabilisation Facility (EFSF) with the party’s leader, Richard Sulík, calling the EU’s proposals as a road to socialism and the creation of a “debt union”.

“These talks are about responsibility for the future of Slovakia,” Radičová said after meeting with Foreign Affairs Minister Mikuláš Dzurinda and Finance Minister Ivan Mikloš on August 8, adding that the country is standing at a serious crossroads.

Radičová stated that European officials are deciding not only about individual countries but about the stability of the common European currency.

“We are saving the day for more than only [other] eurozone countries,” Radičová said, as quoted by the SITA newswire, adding that these decisions involve the stability of savings of Slovak citizens and their future living standards as well.

The broad discussion with all Slovak political parties will take place in August. Changes in the rules of the EFSF and an increase in its resources must be approved by the Slovak parliament and that may prove difficult for the government without votes from SaS.

Radičová also requested a meeting with President Ivan Gašparovič to discuss the pressing issues.

Finance Minister Mikloš stated that “the risk of recession is evident” as reported by the TASR newswire. Mikloš added that he believes the only chance to avert a recession is the rapid and efficient implementation of measures agreed upon by European leaders.

“We have a duty not to be an obstacle and to ensure that these measures, agreed by European leaders, are implemented quickly,” Mikloš said, as quoted by TASR. “They are the only real tools [available] today that can reduce the risk of a potential recession.”

Sulík, however, told the media that he considers the support mechanisms to be counter-productive.

“They would put Slovakia in debt for a long time. We view this as an attempt to put out a fire with a fan," Sulík told TASR.

Sulík added that even financial markets view the repeated intervention by the eurozone on behalf of individual, problematic countries as a mistake, stating that even though Slovakia might become the first country to reject the changes to the EFSF, he does not think it will be the only country to do so.

SaS also has stated its objections to more flexible operational rules that would allow the EFSF to buy bonds issued by countries with problems.

"This would pave the way for a debt union, a straight road to complete socialism. It would be like the Soviet Union all over again. The Soviet Union had 15 republics, the EU will have 27," Sulík stated, stressing that Slovakia had not entered into such a union. Sulík also criticised the recent decision of the European Central Bank (ECB) to buy Italian and Spanish bonds.

"We in SaS will do everything so that it [the proposal] does not pass in parliament," Sulík said, as quoted by the SITA newswire, adding that it is not a valid argument that default by some countries could cause a recession. "Okay, let GDP decline for two quarters in a row. But it's worth the billions that would have gone from Slovakia," he stated.

Martin Bruncko, the Slovak government’s proxy to the European Financial Stabilisation Mechanism said in an interview with the Sme daily that if Slovakia fails to support the changes proposed by Brussels it would thwart the agreement hammered out by the top political leaders of countries of the eurozone.

“In reality it would mean that we are closer not by one but by two steps to a more serious economic crisis than the one we experienced three years ago,” Bruncko stated, as quoted by Sme.

He told Sme that failure to act would lead to a further spreading of panic in the world financial markets and lead to an economic crisis, resulting in higher unemployment and a drop in the living standard in Slovakia.

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