On 2nd try, Slovakia approves expanding European bailout fund

Slovakia’s parliament approved an expansion of the European Union bailout fund, reversing its course and thereby removing the final barrier to using the money to deal with the Eurozone’s debt crisis.

Slovakia’s parliament approved an expansion of the European Union bailout fund Thursday, reversing its course and thereby removing the final barrier to using the money to deal with the Eurozone’s debt crisis.

The plan, which needed the support of all 17 Eurozone nations, had been approved by the other 16 when the Slovak parliament said no Tuesday, causing the collapse of the government led by Prime Minister Iveta Radicova and forcing early elections.

In return for early elections, the opposition Smer party, which had abstained from Tuesday’s vote, gave its approval Thursday, helping the measure to pass, 114-30.

Radicova’s government will resign after barely a year in power but stay on as caretaker until elections in March.

The European Financial Stability Facility fund, or EFSF, will be expanded to $600 billion and given more power to combat the debt crisis that has rocked the continent.

Slovak Finance Minister Ivan Miklos welcomed the result. “The price was high, but I am glad that Slovakia at the end delivered on its commitments and we don’t block this tool for the Eurozone to stem the crisis,” he said.

The episode pinpointed the vulnerability of Eurozone cohesion as the political disaffection of a minor party in one small European Union nation threatened the entire Eurozone and damaged EU credibility in a time of crisis.

There is also widespread skepticism as to the validity of the EFSF as a bailout system.

“The second vote in Slovakia will pave the way for the EFSF; however, that does not constitute a solution,” said analyst Lutz Karpowitz of Commerzbank AG in Frankfurt, Germany, according to Bloomberg. “The EFSF would still be too small to support countries like Italy or Spain should the necessity arise.”

EU heads of state and government will meet again this month to discuss further measures to counteract the debt crisis, including a plan to recapitalize banks in member states.

Stobart is a news assistant in The Times’ London bureau.