(eca057): INTERVIEW: Slovak government defends Greece bailout "No" vote

By Christoph Thanei Aug 22, 2010, 15:59 GMT

Bratislava - The Slovak government stands by its decision to be the only eurozone country to vote against the 110-billion-euro Greek bailout package, the country's foreign minister said in an interview Sunday.

Slovak Foreign Minister Mikulas Dzurinda told the German Press Agency dpa that the deal, brokered in May as the debt-laden Greek government slipped close to bankruptcy, was the misconceived 'solidarity of the responsible for the reckless.'

On August 11 the Slovak parliament voted against ratifying the EU agreement and participating in the bailout package, despite the fact that the country's government had agreed to take part.

Slovakia joined the EU in 2004 and the euro itself in 2009, after years of budgetary consolidation efforts.

Dzurinda said that Slovakia was within its rights to object to the deal. As prime minister from 1998 to 2006, he oversaw the painful measures to adjust the country's economy from former-Soviet structures to euro-ready open economy.

'At that time we had a drop in real incomes of eight per cent. Unemployment climbed up to 20 per cent. At the end however we overhauled the economy and were the first former Eastern-bloc country ready to join the eurozone,' he said.

The founder and leader of the Slovak Democratic Coalition said that the deal posed severe moral hazard, as it 'encouraged populists to waste money and then be saved by the rest.'

When the new Greek government of George Papandreou took over in October 2009, it emerged that the previous government had substantially underreported its level of debt and the size of the public deficit. The subsequent collapse of confidence in the Greek economy precipitated a sell-off of government bonds and drove the country close to economic breakdown.

On May 2 the 16 eurozone countries and the International Monetary Fund agreed on a package of loans to help the country through the crisis, contingent on harsh budget cuts.

'It is so easy to be a populist, to buy voters with promises and to pile up debts for it,' Dzurinda said.

Although the EU has reacted with dismay to Slovakia's U-turn on the Greek deal, the European Commission said that the May 2 bailout wasn't a legally binding agreement and that Slovakia was within its rights to object.

'It was always a process ... that in the end had to stand before national parliaments,' Dzurinda argued. 'The parliament voted against it.'

Despite Slovakian objections, the Greek rescue process proceeds, with the EU saying last week that Athens was ahead of schedule on its budget cuts and in line to receive the next tranche of financial aid, worth some 9 billion euros.

Athens must reduce budget deficit from 13.6 per cent of GDP to below the EU's mandated 3 per cent limit by 2014.