Greek rescue held hostage by Slovak election

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Eurozone member Slovakia will vote on financial aid for debt-laden Greece only after its June election, the country's prime minister said on 3 May, insisting that Athens must do its homework on spending cuts before receiving any Slovak cash.

Left-wing Prime Minister Robert Fico is seeking re-election on 12 June and aid for Greece – a country with higher wages and wealth than new euro member Slovakia – has become a campaign issue, as the opposition rejects the package.

Greece won eurozone finance ministers' approval on Sunday to draw €110 billion in loans over the next three years from eurozone partners and the International Monetary Fund.

Fico, who has expressed doubt about Greece's ability to implement the required savings measures, reiterated his earlier warning that the Slovak portion of the aid – around €800 million – would not come automatically.

"My government will not sign a blank cheque for Greece," Fico said.

"If we see no cuts in wages, pensions or social standards in Greece, we have no intention to talk with Greece about a bilateral loan," he said, adding that Athens must do its homework first.

The finance ministry has said changes to laws on the state budget and budgetary principles were needed to approve the aid in the parliament. Some opposition parties, which trail Fico's Smer in opinion polls, object to the aid and are calling for a special meeting of parliament before the election, warning that such loans would lead to lax fiscal policies.

"We say an ultimate 'no' to this aid," Iveta Radicova, election leader of the strongest right-wing opposition party SDKU, said on Monday.

Parliaments in France, Germany approve aid

In the meantime, the French National Assembly approved during the night between Monday and Tuesday the bailout package for Greece, while the German government began gathering political support for Germany's contribution ahead of a parliamentary vote on Friday.

EU leaders will meet on Friday (7 May) to exchange information on progress in the parliamentary approval process for the loans in their respective countries. 

In a statement, French President Nicolas Sarkozy said Friday's summit should also focus on drawing lessons from the crisis. The meeting "should allow to confirm at the highest level the support of eurozone member states to Greece and have a first exchange of views on the lessons to be drawn in order to strengthen the governance and cohesion of the euro zone," reads the statement.

The principle of the plan to aid Greece is that eurozone countries borrow money on their behalf, and then lend it to Greece at 5% interest. On her own, Greece could be charged interest rates up to 11%, which is unprecedented for a eurozone country.

Most countries, but not all, borrow sums at an interest rate lower than 5%. Portugal, for example, would be charged a higher interest rate. The eventual loss incurred by countries such as Portugal is compensated by gains by countries which borrow at a rate lower than 5%. Germany for example borrows with 2% interest, and Belgium with 3%.

(EURACTIV with Reuters.)

The influential German daily Handelsblatt ran a cover article on 3 May that included a four-page spread of some two dozen private investors explaining why they would buy Greek bonds. The lead editorial, entitled 'Germany is helping', said a Greek withdrawal from the euro zone would be a major failure and threaten the currency union's very existence.

"The Athens government has given a sign that earns respect with its austerity plan. The Greeks are sinners, but repentant sinners. The aid package agreed by the international community over the weekend will pick up the bill."

"But states alone cannot save Greece. Stabilisation will only come when the country can finance itself freely on capital markets. A contribution is being sought from the large banks. A contribution is also being asked of European citizens - an advance above all in trust. To this end we have launched our initiative 'I buy Greek bonds'. It is about giving a sign of joint responsibility," Handelsblatt writes.

Slovakia became the 16th member of the euro club on 1 January 2009 (EURACTIV 05/01/09). The country left behind the remaining 'Visegrad Four': the Czech Republic, Poland and Hungary, which are at different degrees from joining the euro zone.

Slovak Prime Minister Robert Fico won the 2006 parliamentary elections. His party Smer-SD, or 'Direction–Social Democracy,' is a relatively new Slovak left-wing party.

The Party of European Socialists (PES) had suspended Smer-SD's application process for membership in 2006 over its decision to form a governing coalition with the Slovak Nationalist Party (SNS). The PES regarded the move as a breach of the principle of European social democracy not to cooperate at government level with parties associated with xenophobia. 

In December 2009 Smer-SD was finally accepted as a full member of the Party of European Socialists, despite Belgian and Hungarian delegates voting against the move (EURACTIV 10/12/09).

Meanwhile, relations between Slovakia and its neighbour Hungary have deteriorated recently over a controversial language law in Slovakia (EURACTIV 01/09/09). 

Greece's woes already became a top campaign issue ahead of a key regional election in Germany's most populous state North Rhine-Westphalia on 9 May, where Merkel's conservative Christian Democrats face a defeat that could rob them of their majority of the upper house in Berlin.

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