22nd Oct 2020

Slovakia reluctant to take part in Greek bail-out

  • Slovakia became the 16th eurozone member in January 2009 (Photo: formulaphoto)

As the Greek government awaits the first tranche of a €110 billion rescue loan, its Socialist counterpart in Slovakia has said it will not immediately contribute its share, citing doubts over Athens' ability to push ahead with necessary reforms.

"I don't trust the Greeks," Slovak Prime Minister Robert Fico told journalists on Monday (May 3), a day after the eurozone finance ministers' meeting had welcomed harsh austerity measures linked to the bail-out.

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"The approval by the [Greek] government is not enough. We want to see laws approved by the parliament leading to cuts in salaries, pensions and social benefits. Until then the Slovak cabinet will not authorise its loan."

Slovakia, the latest eurozone member state, is expected to contribute as its share of the bail-out some €816 million over the next three years - a figure amounting to the annual budget of the country's interior ministry, according to media reports.

Some analysts say however that Mr Fico' toughened stance can be seen as part of a heated election campaign.

In February, he argued: "If Europe could pour huge amounts of money into the banks, why not to help the countries in real trouble."

The parliamentary elections in Slovakia are less than six weeks away and most political parties argue against coming to the rescue of debt-stricken Greece.

"At this stage, the parliamentary debate could be counterproductive," finance minister Jan Pociatek said.

The unpopular decision is therefore likely to fall on the shoulders of the next Slovak government and parliament, although Mr Fico - the probable winner - did not exclude his consent to the loan if the conditions are met.

"Nobody cares about Greece. Everyone is currently protecting their own national interests … their own skin, the stability of the euro," he said, referring to Slovak citizens' savings.

The eurozone has agreed language saying: "Parliamentary approval, needed in some member states prior to the release of the first tranche, is expected to follow swiftly."

But it seems the process could be lengthy in some countries.

Slovenia, another recent eurozone member state, will probably need to review its 2010 budget as its share of the loan pool for Greece will jump to €384 million up from an initial estimate of €144 million.

"Slovenia may review government spending because the amount we may have to pay to Greece is so much higher," the government's chief economic forecaster, Bostjan Vasle, said, according to Bloomberg, with Slovenian lawmakers likely vote on the matter in June.

The most crucial vote comes on Friday (May 7), however, when Germany - the biggest contributor to the package - is set to complete its approval of some €22.4 billion.

The European Commission has meanwhile hinted that Greece could gain back its lost credibility sooner than expected and could be able to return to financial markets for funding as early as the second half of 2011.

"They will get back to the market in the course of 2011 at the latest," a commission official said, according to Reuters. "It is not assumed that Greece will have no market access throughout the programme, although it will not need access in the first one-and-a-half to two years."

Should Greece continue to draw on the lifeline throughout the entire three-year period, it will start repayments from mid-2013 through to mid-2016.

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