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Slovakia: No Money for Greece

In 2006, after eight years of various reforms, lowering the state debt and government deficit in order to meet the Maastricht criteria, the Slovak voters decided it was time to take a break. But the new PM, Robert Fico, under pressure from businesses, changed his pre-election stance, kept the deficit under 3% of the GDP, and in January 2009 Slovakia entered the Eurozone.

But from that moment, in fact like many other euro-countries at that time and before, Fico stopped being afraid of increasing government spending without increasing its income, which resulted in 8% deficit in 2009. One can understand that in the case of a small economy, especially the one tied with the German economy, this was the result of an overall situation in the world. Still, Fico's opponents like to recall his 2008 words: “Slovakia will be not taught by the crisis.”

Then the news of the Greek problems with their high external debt, largely owned by the German and French banks, began to appear. Popular was an interview with Stefanos Manos, published in a Czech newspaper, in which he described the alarming situation in the Greek state sector: high wages, combined with lifetime job guarantees, pensions nearly at the level of wage base, over-employment in state-owned companies. Later also came the reports of Greece's continuous military spending.

The unflattering portrayal of Greece in the Slovak media did not stop Maximos Dragounis, a Slovakia-based ethnic Greek blogger, from describing Greece's debt history in these terms: “[Konstantinos Karamanlis] … started the process of running Greece into debt … Factories and companies that Greece did not need were being built.”

By the time of the 2010 Slovak elections, it was very popular to compare Fico's policies to the Greek ones (e.g., promises of the “13th pension”). The opposition, as expected, was calling the government to act responsibly, but a significant deficit had been created even before the elections.

After the European meeting, the PM came up with a plan to help Greece financially, by increasing the Slovak deficit by another 1.4% of the GDP. The opposition was critical of this so-called solidarity with Greece, arguing that it was an irresponsible step. So, before the parliamentary elections, when the PM's bloc had the majority of seats, it did not find the courage to approve such an unpopular measure. In fact, Fico's party did not vote for it also after the elections. The newly created government kept its original line from the opposition times and promised to lower the deficit under 3% of the GDP in a few years – and did not approve a loan for Greece.

Slovakia came under pressure from the European Central Bank (ECB) because of its refusal “to participate in the Greek bailout.” According to Reuters, ECB's president Jean-Claude Trichet said that ECB would not support “future euro zone applicants if there is a risk they will do something similar.”

A recent comment in a Slovak newspaper alleged that under Trichet's leadership, ECB was buying Greek bonds to help the French banks that had been involved in financing the “Peloponnese adventure”. Also, the German chancellor Angela Merkel allegedly changed her negative opinion on a loan for Greece for the same reason. And ECB's annual 2008 report, published in April 2009, contains no alarming indications of the impending Greek collapse.

A Slovak version of the Reuters report has generated over 1,400 comments, mostly of this kind:

Binky:

I have a great idea. Let's increase Slovak wages, pensions, benefits, simply everything … borrow from the French and German banks and then say that we don't have the funds to repay the debt. And everyone will help us, and our life quality standard will grow by at least about 200%.

Element:

So now it is only Slovakia that is responsible for the problems, while such countries as Greece, Portugal, Spain and Italy are in fact innocent victims?

Ľubomír Pastorek:

… and I'd like to know whether Mr. Trichet would accept a country like Greece?

Timmy_A:

It would be better if he [Trichet] looked into the mirror. What was he doing for ten years that he was not able to find how the Greeks were manipulating the accounting? And what sanctions would be imposed on countries (nearly all in the Eurozone) when their deficits exceed 3 percent? People like him had to be fired from the ECB a long time ago.

GeoRW:

Trichet should better worry about his own chair.

almoska:

I have a suggestion for Mr. Trichet: let him live off 600-700 Euro per month, and the rest of his income he could give to the Greeks.

ithilis_quo:

So if I want to stay in the Eurozone, I would have to move to Greece because Slovakia has destroyed it.

Fero s dlhym…. menom…:

I do not understand… why didn't he speak [as harshly] about Greece?

kornel2:

He does not understand that we will not rescue the German investments in Greece. [...]

markus:

By no means is it about the German banks – in Greece they only have 30 billion. It is about Italy, Spain, Ireland and other countries, which would be bankrupted by the fall of Greece and the subsequent fall of the Euro.

The most popular opinion under the Czech version:

Roman Mrózek, Bohumín:

A poor country must run into debt to help a richer country?

Finally, a blog post by Lukáš Buček, titled “Slovakia, get out of the Eurozone”:

Yesterday we were entertained or outraged by Jean-Claude Trichet, chief of the European Central Bank. He said that if ECB had known that we would act this way, they wouldn't have accepted us to the Eurozone.

Let's have a closer look. Euro stays on three pillars:

1. Adherence to the [Stability and Growth Pact]
2. ECB is not buying state bonds of Eurozone members
3. No bailout clause, which means prohibition of saving member-countries by interstate loan.

We are criticized by France and Germany. Both countries have already violated the Stability and Growth Pact, which they were not able to adhere to; specifically, they had problems with the 3% public deficit. Greece officially fulfilled the criteria for entering the Eurozone on June 19, 2000, but today we already know that this hadn't happened actually.

We are criticized by Jean-Claude Trichet. He, as the chief of ECB, is responsible for the fact that ECB has violated the second pillar by buying Greek bonds.

We are criticized by the rest of the Eurozone, but we are the only member-state that hasn't violated the “no bailout” clause. Is it normal that they criticize us for not breaking the rules?

And what do we have to pay for? The Greeks have had absurd arms expenditures in peace time, the 2009 budget of the Greek Ministry of Defense was 6.582 billion Euro, for this year they have lowered it to 5.73 billion. [OECD] countries spend the average of 7.2% of GDP pensions, Greeks spend 11.5%. We are giving to it 6.2% of GDP only.

What's interesting is that I can't find anywhere any acknowledgment by the EU, Eurozone or ECB of their regrets for having accepted Greece…

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