Slovakia ratifies Euro Bailout Fund (EFSF)

As expected, Slovakian politicians have closed ranks to save global elite bankers meant to preserve the current political welfare based institutions, despite the valiant last stand to oppose the EFSF by the Slovakia’s classical liberal party, the Freedom and Solidarity (SaS) led by Richard Sulik

From Bloomberg,

Slovakia approved Europe’s enhanced bailout fund, completing ratification across the 17 euro countries as the region’s leaders prepare for a summit.

Lawmakers voted 114 to 30 with three abstentions to support the European Financial Stability Facility in the second attempt this week after parliament failed to approve the measures on Oct. 11.

Enhancing the powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries. European Commission President Jose Barroso yesterday called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund to ease debt woes.

So the EFSF appears to defer the day of reckoning. Nonetheless like the Greek mythical beast the Hydra, for each head decapitated, grew two more, today the credit rating S&P downgraded Spain. Governments are likely to clamp down or apply censorship on these politically privileged entities too.

Markets have been gyrating based on a whack-a-mole patchwork approach applied by global governments.

Slovakia Rejects Euro Bailout, government falls

I would like to congratulate Slovakia’s classical liberal party the Freedom and Solidarity (SaS) party led by Richard Sulik for standing firm against the Euro bailout which not only led to the rejection, but also to the fall of Slovakia’s government too.

I earlier pointed out that Mr. Sulik’s party could become the last impediment to the EFSF

From Bloomberg, (bold emphasis added)

Slovakia’s opposition leader said lawmakers must find a way to approve Europe’s enhanced bailout fund, which was rejected yesterday amid a dispute over the future of Prime Minister Iveta Radicova.

Slovakia “must sign up to the rescue fund,” Robert Fico said late yesterday, adding that his party, which didn’t back the measure yesterday, is awaiting a proposal from the ruling coalition. Radicova said the only country in the 17 nations that use the euro that has yet to approve European Financial Stability Facility, must find a solution to approve the EFSF “as soon as possible.” No time for a new vote has been set…

A total of 55 lawmakers of the 124 present backed the motion, short of the required majority of 76 deputies. Nine were against it. The vote was destined to fail after the Freedom and Solidarity party, one of four coalition members, said it wouldn’t support the changes.

With average salaries still below those in Greece, it’s getting tougher to garner support among the poorest euro citizens for further aid to their Mediterranean partners.

As the crisis continues to engulf the euro region and threatens its lenders, German and French leaders at a meeting on Oct. 9 pledged to devise a plan to recapitalize banks, help Greece and strengthen Europe’s economic governance. German chancellor Angela Merkel, after meeting French President Nicholas Sarkozy, said Europe will do “everything necessary” to ensure that banks have enough capital.

The expanded powers of the 440 billion-euro ($600 billion) EFSF would allow the fund to buy the debt of stressed euro-area nations, aid troubled banks in the region and offer credit lines to governments. The EFSF’s current role is to sell bonds to finance rescue loans.

The Slovakia’s vote on the EFSF is still expected to be passed as the ruling party intends to tie up with other opposition bloc.

Aside, ECB officials are reportedly weighing on options to circumvent Slovakia in case she remains intransigent. In short, rules be damned, just save the bankers.

Obviously the hefty rebound by global equity markets have been based on the recently announced QEs by the ECB and the BoE, which has been mostly rationalized from ‘promises’ by major EU political leaders to secure a bailout that would ring fence the EU banking system.

The markets appear to have even written off a potential rejection, in what seems as strong confidence that the EFSF will get through with Slovakia’s vote or without Slovakia’s participation.

In my view this seems to be a tenuous premise from which to latch a bullish perspective on. This signifies as extreme faith towards government’s ability to solve social problems by inflationism and financial repression even if the supposed panacea seem lacking the scale compared to the previous measures

And as said before there is still is a China factor to consider.

I'll be in constant vigil

Is Slovakia’s Classical Liberal Party the Last Stand Against the Euro Bailout?

Today the Slovakian parliament will vote to ratify on the rescue mechanism for the Eurozone.

However, there seems to be a complication—a party of libertarian-classical liberals led by Richard Sulik, leader of Slovakia’s libertarian Freedom and Solidarity (SaS) party—are opposed to its passage.

From Sunday’s Financial Times (bold emphasis)

A hardline libertarian party in one of the newest, smallest and poorest members of Europe’s single currency looks set to throw a spanner in the machinery of expanding the eurozone’s bail-out fund – seen as crucial to restoring market confidence in the bloc.

Despite pressure from across the continent, Richard Sulik, leader of Slovakia’s libertarian Freedom and Solidarity (SaS) party, repeated on Sunday that his party would reject the measure.

A last-minute meeting of the four-party ruling coalition is set for today in an effort to persuade Mr Sulik to back down and support the extension of the European financial stability facility at a crunch vote on Tuesday.

Mr Sulik made clear that his 21 MPs will reject the EFSF expansion if the other coalition parties do not agree to his proposals. Without those votes, the 77-member governing coalition has no chance of a majority in the 150-seat parliament.

Last week SaS offered to support the EFSF, but in return for a Slovakian veto on how its contribution would be spent and an outright refusal to participate in the permanent European stability mechanism, due to replace the EFSF next year….

The quiet-voiced Mr Sulik looks more like a demure bureaucrat rather than what he is – a self-made millionaire and one of the last of central Europe’s true believers in economic liberalism. Free market doctrine was hugely fashionable in the 1990s across the region, when ministers who had gained most of their experience from economic texts found themselves in power. They pursued radical solutions to eliminate the last remnants of state socialism.

“We are a classical liberal party. We are defenders of the Austrian school of economics,” says Juraj Droba, an SaS MP, describing his party’s relationship with the neoliberal school.

If the Slovakian parliament fails to garner the required votes, then whatever gains that we’ve seen in the financial markets lately—mostly based around expectations of political promises—will turn out to be fleeting.

Anyway even if the rescue package gets ratified, the EFSF is no guarantee of success. Bailouts incentivizes moral hazard or reckless behavior, which is why we are seeing this continuing crisis which began to unravel in 2008.

Hopefully Slovakia’s classical liberals will remain steadfast in their quest to champion sound money policies and continue to fight against tyrannical redistributionist policies that favors the political and banking elites. (hat tip Angel Martin, David Boaz).