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June 26, 2022
BUSINESS

Slovakia blocks euro rescue fund, government falls

Bratislava’s parliament has voted against measures to bolster the powers of the eurozone bailout fund, seen as vital in combating the bloc’s debt crisis. However, a second vote could be held soon and is likely to succeed. German Chancellor remains optimistic.

Slovakia’s Parliament rejected on Tuesday an initial vote to ratify the extended European Financial Stability Fund (EFSF), toppling the government which lost a confidence vote, and putting pressure on Eurozone leaders looking to avert a new financial crisis, BBC informs.

International lenders said they were likely to grant a loan to Greece next month, buying time for a broader response. However, the British press agency says a second vote could be held soon and is likely to succeed.

Government officials said they would try to pass the European Financial Stability Fund (EFSF) expansion package in a second vote with support from the opposition, but no date has been fixed for that vote. The measure failed to pass by 21 votes, but that result had been anticipated after a junior party in the centre-right coalition said it would abstain. The Freedom and Solidarity (SaS) party said it was opposed to Slovakia’s taxpayers being asked to cover the debts of richer countries. “Our euro is under threat. The changing situation needs quick and immediate reaction,” Slovak Prime Minister Iveta Radicova said.

Merkel tips eurozone fund to be ratified this month

German Chancellor Angela Merkel remains optimistic that eurozone countries will pass an expanded European bailout fund despite Slovakia’s rejection of the bill. “I am very certain that by October 23 we will have all the signatures of all the member states on the EFSF bill,” Merkel said to reporters during a trip to Vietnam, CNN informs. The German leader said EU countries have the political will to overcome the debt problems in the euro zone, but suggested that an aging population in Europe could affect the EU’s ability to reduce public debt. Merkel said she would argue for more stringent regulations of financial markets at the G-20 summit of leaders at the beginning of November in France. Meantime, Slovakian President Ivan Gasparovic, who is in the middle of a trip to Indonesia and the Philippines, said he would cut short his trip in the wake of the parliamentary vote and return Thursday instead of Saturday. Gasparovic’s office said he will dismiss PM Radicova and her coalition government after they lost a confidence vote Tuesday, tied to the EFSF vote. Gasparovic could also name a new premier. Early elections are an option if approved by Parliament. Slovakia is the only country in the 17-member currency zone that has yet to approve giving new powers to the EFSF. The expansion was agreed by euro zone leaders in July but must be ratified by each country.

Soros: Don’t let faulty euro destroy financial system

Billionaire investor George Soros and 95 prominent politicians, business leaders and academics, including Romanian professors Daniel Daianu and Ion Sturza, urged euro zone leaders to take swift action to resolve the crisis plaguing the region, calling for the creation of a euro zone treasury and stressing that the euro can only be saved if all 17 countries that share the currency act in unison. In an open letter published in the Financial Times on Wednesday, the “concerned Europeans” conceded the euro was “far from perfect”, but added euro zone leaders needed to “fix its faults rather than allowing it to undermine and perhaps destroy the global financial system”. The letter also called for stronger common supervision, regulation and deposit insurance within the euro zone, as well as “a strategy that will produce both economic convergence and growth because the debt problem cannot be solved without growth.”  “We need to increase EFSF capacity and to find European solutions. You can not come up with national solutions to global problems. It doesn’t work”, explained to HotNews.ro, Daniel Daianu.

Markets buoyed; Barroso to unveil proposals on recapitalising banks

European stocks rose Wednesday as investors shrugged off Slovakia’s rejection of Europe’s bailout fund and focused on hopes that a possible workaround solution would be found before a summit of EU leaders next week. Merkel’s optimism was echoed in stock markets, with the CAC-40 in France up 1.4 percent to 3,197.5. According to Wall Street Journal, the FTSE 100 index of leading British shares rose 0.5 percent at 5,421 while Germany’s DAX was 1.4 percent higher at 5,955. The euro has also advanced strongly and was trading 0.9 percent higher at USD 1.3777. Oil prices tracked stocks higher, with the benchmark New York rate up 54 cents at USD 86.35 a barrel. Investors are also anticipating a speech by EU Commission president Jose Manuel Barroso later Wednesday where he is expected to unveil proposals on how to make European banks fit enough to sustain the worsening debt crisis on Wednesday. Barroso said Tuesday that he would unveil several initiatives that should contribute to a “comprehensive response” to the eurozone’s debt troubles. Barroso said a plan to recapitalize European banks would be part of those proposals.

Under-pressure Europe postpones key debt summit

As Nine O’Clock informed, Europe’s leaders postponed Monday a key summit on the debt crisis, buying more time as they decide what to do about Greece now that their banks also need a financial leg-up. As the debt crisis claimed its first bank, with France and Belgium bailing out Dexia, European Union president Herman Van Rompuy announced that a two-day meeting of leaders scheduled for October 17-18 has been put back to Sunday, October 23. Van Rompuy’s goal is to come up with a “comprehensive” solution to the nearly two-year-old emergency. In other words, to try and address everything from a stalled second Greek bailout, a bigger debt write-off by private creditors, a bank recapitalisation plan, to a possible rewrite of EU treaties to bind eurozone states to a common fiscal policy.

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