Slovak PM ties bailout vote to government survival

[October 11, 2011]  BRATISLAVA, Slovakia (AP) -- A political crisis is brewing in Slovakia after the country's prime minister linked a crucial vote on expanding Europe's bailout fund to a confidence vote in her government.

Ahead of talks with members of her government, Iveta Radicova confirmed that a coalition partner has not accepted a compromise offer and added that the vote later in Parliament "will be linked to a confidence vote in this government."

That suggests her government will fall if the vote is not carried, though it does not necessarily mean early elections under the terms of the Slovak constitution.

"It is unacceptable for the prime minister to allow Slovakia to be isolated," Radicova said. "Slovakia has always been a reliable member of the EU and it made sacrifices, not small, to become a eurozone member. Trustworthiness of Slovakia is a priority."

On Monday, the four-party coalition, which met for three hours, was unable to agree on a compromise deal.

Radicova suggested a second vote could take place if the first one fails to approve it, though it's not clear when that could happen.

The 17 nations that use the euro must all approve expanding the powers of the bailout fund, which is designed to shore up Europe's defenses against the debt crisis. Slovakia's 16 partners have already voted the measures through.

Slovakia's "no" would be a bad signal for already nervous financial markets though would not necessarily kill off the plan to beef up the fund.

"Should the vote fail, therefore, it is highly likely to be followed by a second, successful vote and the rapid dissolution of parliament," said Adam Cole, an analyst at RBC Capital Markets. "This could happen within a matter of days and possibly as early as today."

Slovakia, a nation of 5.5 million people, would contribute about 1 percent, or euro7.7 billion ($10.5 billion). With the help of EU funds and foreign investments, it has benefited significantly from its membership in the eurozone and the EU and become a leading European car exporter.

Ahead of the vote, European markets were giving up some of their recent gains though remained sharply higher on the week. The euro meanwhile fell 0.3 percent to $1.3592.

The outcome of the Slovak parliamentary vote is uncertain because a junior member of the four-party governing coalition is strictly opposed to boosting the fund.

The Freedom and Solidarity Party's chairman, Richard Sulik recently described the expanded bailout fund "a road to hell" and vowed again Monday to block it. The three other coalition parties -- Radicova's center right Slovak Democratic Christian Union, the Christian Democrats, and a party of ethnic Hungarians -- all support the fund expansion.

Without the votes from Sulik's party, the coalition government would have to rely on the opposition, but it's unlikely to provide any help. The major opposition party, Smer-Social Democracy of former Prime Minister Robert Fico, supports the fund expansion in principle but was ready to vote for it in exchange for nothing less than early elections.

Early elections would have to be approved by a three fifth majority in the 150-seat Parliament.

Another option would be for President Ivan Gasparovic to appoint a new prime minister though he's currently on a foreign trip in Asia.

Radicova, the first female Slovak prime minister, and her government were sworn in after general elections in June 2010.

[Associated Press; By KAREL JANICEK]

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