Slovak Ruling Party Ties EFSF to No-Confidence Motion

Slovak Prime Minister Iveta Radicova pressured rebel lawmakers to approve the euro region’s retooled bailout fund by tying a parliamentary vote today on the facility with a no-confidence motion.

Radicova made the announcement in Bratislava after coalition partners failed to come up with a last-minute resolution to a Cabinet dispute. Parliament begins debate on the European Financial Stability Facility at 1 p.m. with a vote scheduled for sometime later.

The four-party coalition has struggled to agree on conditions to support the euro-region measure, raising speculation that it will be defeated. Slovakia is the only country in the 17-nation euro area that hasn’t ratified the measure, following approval in Malta yesterday. Radicova said the vote would be repeated should lawmakers reject it today.

“Slovakia’s credibility is my priority,” she told reporters today. “We can’t pretend that we alone are able to deal with problems surrounding us. It’s unacceptable for me to allow Slovakia to become isolated.”

Slovak approval of enhanced 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 in the region.

‘Serious Repercussions’

“It is, of course, possible that Slovakia would hold up or even block the whole EFSF deal,” said Beat Siegenthaler, a currency strategist at UBS AG in Zurich before Radicova’s announcement. “But the repercussions for the country would likely be serious as the external pressure to find a solution would quickly become massive.”

The euro was at 1.3638 per dollar at 10:07 a.m. in European trading, down 0.04 percent.

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.

Freedom and Solidarity, a junior coalition member party, has refused to back the EFSF legislation. Without votes from the party, known as SaS, the EFSF package is destined for rejection today as the two opposition parties have said they won’t support it.

SaS Chairman Richard Sulik said yesterday that his party’s lawmakers won’t change their position on the issue if their conditions for accepting the plan aren’t met.

“Our position” on the bailout mechanism “is known, and we won’t change it,” Sulik, who is also parliamentary speaker, told reporters yesterday.

Opposition Demands

Smer, the largest opposition party led by Radicova’s predecessor Robert Fico, has said it would back the enhancement of the EFSF if the government of the euro region’s second-poorest member steps down. Radicova declined to say when a new vote would be held.

“It’s my big wish that it is approved today,” she said. “But, if our coalition partner doesn’t change its mind, then a repeated vote will be necessary.”

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 Nicolas Sarkozy, said Europe will do “everything necessary” to ensure that banks have enough capital.

SaS Conditions

SaS wants to create an inter-party committee in which each member would have a right to demand the ability for the country to veto individual EFSF disbursements. It is also demanding that the country doesn’t participate in the European Stability Mechanism, a permanent rescue vehicle set to come into force in 2013.

Sulik, whose party seeks lower taxes and less regulation for business, has said repeatedly he thinks European leaders must find a more sustainable way of saving the euro area than continuing to inject money into budgets in the form of loans and revenue enhancements.

The expanded powers of the 440 billion-euro ($589 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.