Newswise — I was in Hveizdoslavovo Square in Bratislava, Slovakia for New Year’s Eve awaiting the coming of 2009. The annual event in Slovakia is always a great celebration, but Jan. 1, 2009 was something special because that’s when Slovakia moved officially from the Czech Republic’s koruna to the European Union’s (EU) euro for currency. Becoming the 16th member of the euro zone and adopting the euro were matters of great national pride to this small country of 5.5 million people.
The Slovakian government worked hard to get its economic, social and political house in order so that it could be accepted into the EU. Since the demise of the Soviet Union and its influence in the region, Slovakia has pictured its future in the West with Europe and the United States.
The fact that Slovakia had to work so hard to be accepted into the EU helps us understand why a faction of the government failed to support the enhanced euro zone rescue package known as the European Financial Stability Facility (EFSF). Even though the coalition government of Prime Minister Iveta Radicova had campaigned on policies of fiscal conservatism, the coalition fell apart as the Freedom and Solidarity party, otherwise known as SaS, led the opposition to the measure which would have guaranteed Slovakia’s participation in and monetary contribution to the fund of 4.5 billion euros or about 1.1 percent of the fund’s total. The fact that it was a member of Dr. Radicova’s coalition government that balked at Slovakia’s participation in the bailout is what brought down her coalition government.
The people of Slovakia are not happy about being asked to bail out their free-spending partner in Greece while they have to tighten their belts to ensure their own country’s fiscal stability. Today, Slovakians joke that it is “Greek to want to borrow from everyone,’’ and it’s “Slovak to not want to lend to anyone.’’ As you can see, the prospect of guaranteeing the debt of richer, but more spendthrift countries like Greece, Portugal and even Italy has led to outrage in Slovakia.
The Slovakians generally negative reaction of bailing out any country, perhaps explains where SaS got its courage to move against the plan and as a result topple Dr. Radicova’s government. Just as important is the internal politics of Slovakia. Radicova is the first woman prime minister of Slovakia, which is a feat in itself because the political system is dominated by males. Beyond that, there were many Slovakians who did not care for a lot of her social views on issues like homosexuality. And finally, the opposition – the Social Democracy party or Smer, headed by rival Robert Fico — has been waiting in the wings for a return to power. With Radicova’s coalition agreeing to step down, the path is clear for the creation of a new government led by Smer-backed politicians, who support the euro plan. It is likely that Fico and the new government will vote to ensure Slovakia’s participation in the bailout plan within the coming week.
Still in question however is the level of Slovakian participation in the EFSF. Radicova herself campaigned on the idea that Slovakia’s participation in the plan at 4.5 billion euros was exorbitant and she was going to head immediately to Brussels, Belgium after the election to renegotiate. Most recently, there has been talk the EU will allow Slovakia to not contribute at all if it does not want to participate. The latter option is feared by some observers as the greatest threat of all to the euro plan. If officials exempt Slovakia from participation, it could set a precedent for other small nations to follow that might lead to a complete collapse of the fund. Clearly the U.S. economy stands to benefit from a stable Europe. The euro-based financial system and the obviously bloated and underwater economies of a number of its members make the financial recovery of Europe very problematic. The already complex nature of European management is further complicated by inter-country politics. Therefore, it’s not surprising to see a small country like Slovakia in a position to scuttle the euro zone plan. I am sure there are some in Slovakia who are delighted with their newly discovered power and are pleased to have been able to exercise it — if only for a short while.
John Sumansky, Ph.D., is the director of the Center for Economic and Entrepreneurship Education and professor and chair of the Department of Business at Misericordia University. Dr. Sumansky served in the Czech and Slovak republics as a consultant and lecturer on non-governmental organizations, public policy and corporate social responsibility as an Eisenhower Fellow. He is also a Fulbright Scholar who taught entrepreneurship and economics in the Republic of Macedonia.
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