Innocent bystanders

12 October 2011 By Martin Hutchinson

The demand for Slovakia to devote more than 10 pct of its GDP to the EFSF brought down its government. That may let in the left, who ran up big deficits and foolishly revalued the currency before joining the euro. Clumsy EU crisis solutions may end up toppling innocent dominoes.

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Slovak opposition leader Robert Fico and parties in the outgoing Slovak government coalition have reached an agreement to ratify a plan to strengthen the euro zone’s EFSF rescue fund by Friday and to hold an early election in March, Fico said.
Three parties in the coalition held talks with Fico’s leftist opposition Smer party on Oct. 12 after their cabinet collapsed in a failed confidence vote that Prime Minister Iveta Radicova had tied to ratification of the euro safety net.
The libertarian Freedom and Solidarity party led by Richard Sulik had originally refused to support the EFSF.
Slovakia’s share of the 440 billion euros ($605 billion) EFSF would be 7.7 billion euros, but Sulik argued this was excessive when Slovakia’s GDP per capita was 74 percent of the EU average compared to Greece’s 89 percent.
Slovakia has 5.5 million people and a 2010 GDP of $87 billion. According to the Economist forecasters, its GDP is expected to grow 3.3 percent in 2011 and 3.8 percent in 2012 with inflation of 4.0 percent, a 2011 current account deficit of 3.0 percent of GDP, and a 2011 budget deficit of 5.1 percent of GDP. Public debt was 41 percent of GDP in 2010.

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