Honolulu Star-Advertiser

Wednesday, July 24, 2024 85° Today's Paper

Hawaii News

Slovakia may hold key to euro debt bailout

BRATISLAVA, Slovakia » In a television advertisement for the popular Slovak beer, Zlaty Bazant, a grinning man with a paunch stands on a sunny beach, nodding his head as the narrator says, "To want to borrow from everyone, that is Greek." The ad then cuts to a skinny man, standing in a field, who shakes his head. "To not want to lend to anyone," the narrator says, "that is Slovak."

The commercial has touched a nerve here in the second-poorest country in the eurozone, where the average worker earns just over $1,000 a month. The prospect of guaranteeing the debt of richer but more spendthrift countries like Greece, Portugal and even Italy has led to public outrage. So much so that tiny Slovakia now threatens to derail a collective European bailout fund to shore up the euro, which requires the approval of all 17 countries that use the currency.

Once among the most enthusiastic new members of the European Union, and an early adopter of the euro in Eastern Europe, Slovakia is proud of its strong growth and eager to leave behind its reputation as the "other half" of Czechoslovakia. But it has also become a stark example of the love-hate relationship that many residents of the continent have begun to feel toward a united Europe.

Adopting the euro required hard sacrifices here that stand in sharp contrast to reports of overspending and mismanagement in Greece. The worries about the union’s future are all too real in smaller, poorer countries like Slovakia, which has about 5.5 million people and is being asked to contribute $10 billion in debt guarantees to a $590 billion eurozone stability fund.

The future of the euro could well be decided next week in the Slovak Parliament, which meets in a modern building that is too small to hold offices for all its members and their staff because it was originally designed to hold only occasional sessions of Czechoslovakia’s Federal Assembly, which usually met in Prague. The Parliament building overlooks not only the Danube but also the former frontier of the Iron Curtain, which cut off Bratislava from Vienna, less than an hour’s drive upriver and the Cold War gateway to the free world.

The expansion of the bailout fund is in danger because the free-market Freedom and Solidarity Party, just one member of the four-party governing coalition, has held out against it.

"I am not the savior of the world," Richard Sulik, who is both the party’s leader and the speaker of Parliament, said in a recent interview here. "I was elected to defend the interests of Slovak voters."

The opposition Smer-Social Democracy party could bridge the gap, but its leader, the leftist former Premier Robert Fico, hopes to bring down the government and win new elections, paving the way for his return to power, and is holding out for the coalition to crack.

The situation in Slovakia illustrates how ambitious young politicians, outspoken populists and struggling small parties can hinder collective action — or even derail it. Even if a compromise is found here, as it was in Finland, by the time agreement is reached among all 17 countries, investors will have long since moved on to a new batch of fears.

The vote over the expansion of the bailout fund, the European Financial Stability Facility, and its powers, is only one step. "The EFSF is not the end of the story. We will need to have other solutions," said Slovakia’s finance minister, Ivan Miklos. "This is the dilemma. Everyone agrees that we need more flexibility."

Slovakia’s relationship with the European Union runs far deeper than a single debt crisis or bailout. In the 18 years since independence, few countries have experienced such unusual twists of fate and fortune. From the "black hole in the heart of Europe," as Madeleine Albright described the backward, isolated state in 1997, the country transformed itself into a neoliberal champion of the flat tax.

With automobile factories springing up across the country, it earned the nickname the Detroit of Europe. It is also called the Tatra Tiger, a name derived from a local mountain range, because of its rapid growth, including the 10.5 percent economic growth rate it reported in 2007, just a decade after Albright’s dire pronouncement.

But perhaps Slovakia’s greatest sense of accomplishment came from beating its former partners, the Czechs; its former rulers, the Hungarians; and its larger neighbor, Poland, into joining the euro currency zone. Many Slovaks are reluctant to be the stumbling block for the euro’s rescue after all the European Union has done for them.

"Thanks to joining the European Union and the prospect of joining the eurozone, investors were more likely to show interest here," said Mayor Vladimir Butko of Trnava, a city about 35 miles east of the capital where a car factory produces Citroens and Peugeots.

The European Union helped to pay for improvements to the rail link to Bratislava, Butko said, and for a highway bypass. But he ranked the psychological benefits of European Union membership even higher than the economic ones.

"When you can now sit in your car and go to Munich, and the same money in your pocket here can pay for a beer there, and you don’t have to stop at the borders," said Butko, 56, "this is a very strong experience for people over 45."

It is an experience that makes far less of an impression on the younger generation. Sebastian Petic, 18, a law student in Trnava who was spending a sunny afternoon on a bench in the town square with his Lenovo laptop, repeated a popular joke.

"For 500 euro you can adopt a Greek. He will sleep late, drink coffee, have lunch and take a siesta," Petic said, "so that you can work."

He opposed increasing the bailout fund, saying that debt would only snowball.

"I was quite positive about the advent of the euro," Petic said. "Now, I’m not so sure."


Comments are closed.