Let them default

Slovakian PM on eurozone debt crisis


Slovakia’s Prime Minister Iveta Radičová is convinced that in spite of all the recent problems with the common European currency, it was doubtlessly beneficial for Slovakia to adopt the euro.

Radičová said this in an interview with Aktualne.cz.

Amid the ongoing European debt crisis, many analysts have been repeating that indebted EU countries such as Portugal, Spain or Italy will need bailout in order to avoid default. The European Commission says that the eurozone member states should give additional billions into the EU rescue fund.

“I must say that so far, I see no damage caused to Slovakia by adopting the euro,” said Radičová in the interview.


Loan for Greece? A rushed decision

Aktualne.cz: The European Commission has said, without giving any details, that it plans to increase the rescue fund. Will Slovakia agree with the increase?

So far, it is an unofficial information, I do not know anything official, and neither do the finance minister. So I could say that when there will be an official petition, the Slovakian government will officially respond, but I am not going to dodge your question in this way. Slovakia has said that we do not consider the already approved measures as definite and sufficient, and we expect further steps.

There are two possibilities – to raise more money for the fund and to increase the basic capital of the European Central Bank through central banks of the member states. This, according to us, is a systemic solution. However, the situation is too serious and we will not block other possible solutions. We believe that if a question of further changes in the stability pact is raised, it will be time to speak about automatic sanctions for those who do not obey the rules, and also about whether the private sector should take part in the rescue of the indebted countries sooner than in 2003. There are more options to discuss – the crucial is that if the conditions fundamentally change, we must talk about reforming the whole mechanism.

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A.cz: Slovakia refused to help Greece, the first victim of the European debt crisis. Was it the right decision? Slovakia was criticized by the rest of the EU and accused of violating the bloc’s solidarity principle.

Our position was known for a long time, and now many experts agree with us that the loan for Greece was not the best solution. More and more EU representatives admit that the decision was too quick and made under time pressure and stress We were different because we said it out loud, while others were merely thinking it. In the summer, we were hit by really serious floods, we asked for help from the solidarity fund, and we received it. So the people saying that Slovakia had discredited itself by refusing to help Greece and it would feel it in the EU’s decisions were proved wrong.

Default – only right solution to excessive debt

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A.cz: Currently, Portugal and Spain are struggling with their debts too. Isn’t it time for some eurozone members to default on their debt?

Sovereign default is not something that has never occurred, not something we would not have any experience with. Even Greece, before joining the eurozone, defaulted on its debt five times. In times of excessive indebtedness, it is the only right solution, because it brings the restructuring of the debt. However,  one very important issue needs to be always taken in account, and it is to keep the euro stable.

A.cz: Is it a good thing that Slovakia has the euro at this moment?

Surely, it is.

A.cz: Why?

Slovakia has benefited from joining the eurozone. In addition, I must say that so far, I see no damage caused to Slovakia by adopting the euro. On the contrary, for us, as an open economy, it is a profitable step. In addition, the common currency is a very good mechanism that prevents governments from starting inflationary spirals. If Greece adopted a national currency today, what benefit would it bring? Its debt would only get bigger. So I must confirm that Slovakia has only benefited from the euro.

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A.cz: On January 1, 2011, Estonia adopted the euro, but other countries – the Czech Republic including – do not seem to want the common currency right now. Would it be better for Slovakia, and its negotiation position within the eurozone, if the Czech Republic, Poland or Hungary had the common currency too?
Adopting the euro is an unambiguous advantage for entrepreneurs and citizens. However, the decision to adopt the common currency is up to every individual country. To adopt the common currency means to have certain economic conditions. And if a government believes that it has no advantage for the country at the moment, I respect it. Estonia had to implement serious reforms to fulfill very strict conditions to adopt the euro. In addition, the conditions are developing. When Greece adopted the euro, they were nowhere as strict as they were for us or Estonia. However, it appears that it is not sufficient to have conditions for adopting the euro, there must also be effective mechanisms of implementing the eurozone rules.

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