Slovakia clears way for euro zone rescue fund

Thu Oct 13, 2011 2:33pm EDT
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By Martin Santa and John O'Donnell

BRATISLAVA/BRUSSELS (Reuters) - Slovakia finally ratified new powers for the euro zone's rescue fund on Thursday, the last country to do so, clearing the way for a bolder effort to arrest Europe's sovereign debt crisis, which threatens global financial stability.

The vote came 10 days before a European Union summit called to approve a "comprehensive strategy" to fight the crisis, expected to include action to reduce Greece's debt burden, a plan to strengthen European banks and measures to stop contagion spreading to larger euro zone economies.

The Slovak parliament approved the plan to bolster the European Financial Stability Facility (EFSF) after voting to hold early general election as demanded by the opposition. A junior partner in the ruling coalition brought the four-party center-right government down on Tuesday by abstaining in a confidence motion linked to increased powers for the EFSF.

Weeks of haggling over the EFSF in Slovakia and over Finnish demands for collateral on loans to Greece unsettled financial markets and highlighted the fragility of a euro zone decision-making system that requires unanimous agreement.

Jean-Claude Juncker, chairman of the Eurogroup euro zone finance ministers, said he hoped Greece would be granted the money it needs and was expecting a report supporting that from the troika: the European Central Bank, International Monetary Fund and the EU.

"We'll be given the troika report by mid-next week... I don't know all the elements of content of the reports that will be given by the troika, but I'm really optimistic that we'll decide to have the sixth tranche being launched," he said after a meeting in Brussels with Greek Prime Minister George Papandreou and European Council President Herman Van Rompuy.

The United States, Japan, non-euro Britain and other major powers have voiced impatience with Europe's sluggish crisis management and appealed for more decisive action to avert danger to global economic recovery.

In another potential boost for the euro zone, sources preparing for a G20 finance ministers' meeting in Paris said most of the BRICS emerging economies favor bolstering the IMF's capital base to contribute to a financial rescue for Greece.   Continued...

<p>Members of the Slovak Parliament vote on the euro zone rescue fund in Bratislava, October 13, 2011. REUTERS/Petr Josek</p>