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Did little Slovakia just exercise its muscle and kill the Euro bailout package?
The Slovaks have spoken! A nation with a population roughly the size the San Francisco area and a GDP of $86 billion has failed to ratify the eurozone's plan for it to contribute $10 billion — about 12 percent of that GDP — to the currency union's bailout plans. This is the latest chapter in a debt-crisis melodrama that's forcing Greece into default and threatening Italy, Spain, and the banks of German, France, and possibly the United States.
Slovakia was the only eurozone country that voted nay. This is from the New York Times:
If nothing else, the unwieldy process underscored how the entire $590 billion euro stability fund, approved by the 16 other members of the euro currency zone, could be held hostage to the domestic politics of one tiny country, in this case Slovakia. It showed as well how a measure intended to increase confidence in the euro zone could instead emerge as a telling example of the shortcomings of a system that relies on an unwieldy group of nations to make and execute difficult decisions.
Couldn't have put it better myself. I can recall back in Late July, when I was tweeting out some news about arrangements had been made to solve Greece's sovereign-debt problem. Since then, the crisis has just rolled on and on. And on. And on. Every time it seems like the eurozone countries have their act together, something goes wrong. You couldn't be blamed for believing that the entire European Union is coming apart at the seams.
USA Today summarizes the carnage:
The EU's welfare states are going broke, and the knives are out for their budgets and the politicians who have supported the EU project. Voters to the north are electing anti-EU candidates who are lecturing about "responsibility" and "thriftiness" to profligate neighbors such as the "lazy" Greeks, Spanish and Portuguese, as German Chancellor Angela Merkel described her southern partners in May.
On the other side, debt-laden nations are resisting measures to curb the benefits politicians have long bestowed on the public in return for votes. They say banks should not have lent them so much and must accept less on loans. Outrage on both sides has Europeans taking to the streets in Madrid, Athens, Paris and London.
So was the Euro, a common currency adopted by 17 of the European Union's 27 member states, a terrible idea? It's tempting to think so now, with one of the smallest countries on the Continent preventing the eurozone from dealing with the biggest crisis it's ever likely to face.
But Slovakia is symbolic. European wanted unification without cost. Specifically, the cost of controlling its common currency in a centralized manner. It needed the big countries to step up. But the big countries failed to do so — even though it was obvious that something would eventually challenge the currency union.
Anyone watching the convoluted, halting political theater of the past few months can see that we're entering the realm of more or less total fail. The slightly tragic consequence is that the northern EU states are the ones that have benefitted most from the currency union — and are the ones who will now bear the burden of dealing with a collapse that could have been avoided if they'd assumed their logical place, running the show. Instead, they shake down...Slovakia.
It's about time the Slovaks spoke up!