Could what goes on in Slovakia, a country with a population of 5.5 million (the size of Denmark), possibly bring down the European Union and the world economy? On Monday, the country, which only recently joined the EU, was the only member of the 17 EU member nations to vote against expanding the EU’s bailout fund, the European Financial Stability Facility (EFSF). Expanding the fund is a necessary measure in securing the euro’s future, by providing additional security for EU countries with weaker economies (Greece, Ireland, Portugal, Spain), though many say that the amount of 440 billion euros to be added is not enough.
Slovakian Prime Minister Iveta Radicova had attached the measure to vote on the EFSF with a vote of confidence in her leadership. One of her government’s parties proceeded to walk out because they could not vote “no confidence” without voting down the fund. As a result, the Slovakian government has been “toppled” and Radicova, now the outgoing prime minister, has asked her coalition to start negotiations with the left-of-center opposition Smer party, which voted no.
So far, investors on Tuesday seem unconcerned: European stocks have been rising (traders had come to expect a no vote) on the hopes that a workaround solution might be devised over the weekend. At a meeting in Brussels earlier today, European Commission President Jose Manuel Barroso said that a “roadmap” is necessary to recapitalize the banking sector and to restore confidence in the eurozone.
For all the dire predictions of the demise of the euro (which have not yet been at all laid to rest) and the fears of Greece defaulting (which does not seem altogether imminent, with the EU seeming likely to give Greece the next tranche of 8 billion euros in early November), it does feel as if the EU has been stumbling from crisis to crisis and responding rather than being pro-active. Global markets seem to have no choice but to ready themselves for the next up-and-down crisis.
As the Guardian comments, the 15 minutes of fame Slovakia has garnered for itself seem more than appropriate, as no one less than artist Andy Warhol is one of the most famous figures of Slovak descent. Warhol’s parents hailed from Miková in the north east of the country and there’s a statue of him in the capital of Bratislava.
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Photo of downtown Bratislava by Chris Yunker