By Mark Whitehouse
Judging from the Slovak government's struggle to approve a revamped European bailout fund, Europe's leaders will have a tough time gaining full support for a newer rescue plan big enough to solve the region's debt crisis.
The idiosyncrasies of Europe's governance were on display today as the prime minister of tiny Slovakia, the last country needed to ratify expanded powers for the European Financial Stability Facility, put her job on the line in an effort to garner the required 76 parliamentary votes.
By tying EFSF approval to a vote of confidence in the government, Prime Minister Iveta Radicova is hoping to coerce the junior member of her coalition, the Freedom and Solidarity Party, into contributing its 21 votes. If that doesn’t work, she'll be out, though the measure could then pass with the votes of the largest opposition party.
Even if the EFSF gains approval, Slovakia's political gymnastics illustrate a larger problem: Any bazooka-level solution to Europe's troubles will require the agreement and financial support of nations that have barely ratified much less ambitious measures.
Finland's finance minister, for example, won cheers in parliament this week by saying that taxpayer money wouldn’t be used to bail out European banks. Slovakia, for its part, is already facing increased financial strains despite its relatively low government-debt burden. The cost of default insurance on its sovereign bonds has more than tripled since early June.
Europe urgently needs a plan that will slash struggling governments' debts, recognize how much banks stand to lose and credibly guarantee that those banks can be recapitalized and remaining sovereign debts will be paid. The question is whether the EU's members can, without the attention-focusing aid of a much deeper financial crisis, fathom how much is at stake.
(Mark Whitehouse is a member of the Bloomberg View editorial board.)-0- Oct/11/2011 18:15 GMT