Richard Sulik, Parliament Speaker of the Slovakian legislature, argued that the only real solution to the debt crisis in the E.U. was rigorous enforcement of the E.U. regulations on budget deficits and public debt. He had been particularly angered by his state, the second poorest in the E.U., having to bail-out a richer state that had consistently violated the E.U. regulations. Additional debt, he insisted, was not a way out for the PIGS. Slovakia, after all, had to adhere to strict limits on everything from budget deficits to inflation rates in order to be able to adopt the euro. “Now when I see what is being allowed for Greece and Italy, it really makes me angry,” Sulik admitted. “We have to pay because of this double standard. It’s a real injustice.” Indeed it was. Bailing out Greece so the state would not default effectively rewarded that state government for profligate spending and tax avoidance in violation of the E.U. regulations.
Solely from the standpoint of debt, adding more was not a viable way out, according to Sulik. “The more we let [states] violate the rules, the worse things will get,” he said. So he opposed expanding the bailout. Undoubtedly putting a chill in the halls of banks in rich states such as France and Germany, he bluntly stated, “Greece has to go into bankruptcy.” This would demonstrate that the E.U. was not an agency of the big banks holding questionable semi-sovereign state debt.
At the very least, having a state government official resist the interests of the big banks and their politicians in the “core” states was in the interest of a fuller debate within the E.U. as a whole on how to deal with “bad” states. In fact, potentially at least, a state like Slovakia could serve as a check on plutocracy gaining a foothold in the E.U. According to Sulik, it simply was not fair to ask poor Slovaks to bailout the big banks and richer states—even apart from the latter’s violation of the E.U. regulations. In short, the E.U. should not have been run in the interest of French and German banks. At the same time, giving each state government a veto would have been a recipe for E.U. impotence at the federal level.
If the bailout had to be expanded to obviate a financial collapse of the E.U., then having one hold-out could have been a very expensive price to pay to avoid giving the E.U. additional competencies in fiscal matters. Were a qualified majority needed to augment E.U. competencies, Sulik's argument could still win the day--but his points would have to be sufficiently persuasive among the poorer states. If the banks' interest must be satisfied in order to avoid financial collapse, enough of the neutral states could turn from Sulik, who might otherwise be able to prevent the E.U. from avoiding catastrophe.
Source:
Gordon Fairclough, “Slovak Official’s Delay of Rescue Fund Vote Poses Problem for Euro Zone,” Wall Street Journal, September 6, 2011.
