Poor Slovakia - They Never Even Had a Chance

In the past couple of decades, after Slovakia peacefully broke from the current Czech Republic, the Slovakians eventually turned away from communism. They've reformed their entitlement and taxation programs, privatized formerly public industries, opened themselves up to free trade, put their banking in foreign hands, and adopted business-friendly policies. And guess what? Shocker: Despite the general European slowdown of the past decade, Slovakia has enjoyed one of the fastest economic growth rates in the European Union and a decreasing unemployment rate. Although they're still relatively poorer than most of their European peers and have some heady reforms left to tackle, they're catching up, and these are some very encouraging trends. Well done, Slovakia.

The Slovakians have, however, been running counter to many of their eurozone cohorts. As Slovakia has moved from central planning toward free enterprise, other European nations have largely shifted from free enterprise toward central planning. Greece, for instance, is a chilling indicator of what could come to pass in America if we don't change our tune and stop metastasizing the federal government at every available opportunity. The Greeks are leading the European financial crisis by doubling down on their shameless hands-out, get-mine liberalism, going weaksauce on much-needed deficit reduction, and throwing a general international hissyfit. As to the fact that the progressing Slovaks are now essentially going to be forced to bail out Greek public employees so they can work at cushy jobs and retire at age 58? The looters and the moochers preying on the productive classes just don't give a damn. From the Washington Times:

Richard Sulik, the leader of Slovakia’s minority Freedom and Solidarity Party, held his 21 deputies together as they abstained from voting on the legislation to ratify a boost in the European Financial Stability Fund (EFSF). Slovakian Prime Minister Iveta Radicova had linked expansion of the fund to $600 billion with a confidence vote. When the vote failed Tuesday, the Slovak government fell.

Expanding the bailout fund requires a unanimous vote from all 17 members of the European Union, and Slovakia is the holdout. Mr. Sulik correctly points out that expanding the EFSF means that poorer Slovaks would find themselves bailing out richer Greeks. The average Slovak, who has the lowest salary in the EU, would have to work an extra 300 hours a year to cover the country’s increased guarantees to the fund.

Not so long ago, Slovakia made the wrenching transition from a centrally planned economy to one based on markets. It sold state enterprises, cut entitlements and boosted tax revenues by enacting a 19 percent flat tax. These are the very policies that ought to be put in place in Greece to address the current crisis.

Instead, European leaders desperately hope to limit the financial contagion to Greece with a massive cash infusion, even though Greece has consistently failed to meet its targets for deficit reduction. The International Monetary Fund and the EU are doling out the cash anyway. The $600 billion obligation to the EFSF could grow in the future, as the EU admits that amount won’t be enough to protect larger countries.

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Unfortunately, the Slovakian minority party holding out was overturned a mere two days later, with the parliament voting for the bailout measures at the last. TIME Magazine's spin on this story is, in my opinion, reflective of the disgraceful liberal attitude toward this entire situation:

So after creating a giant kerfuffle on Tuesday by voting down much-needed measures to expand the powers of the euro zone's $1 trillion bailout fund, Slovakia's parliament reversed course and voted for those very same reforms a mere two days later. That means the euro zone can now use the European Financial Stability Facility (or EFSF) to buy up sovereign bonds and recapitalize banks – reforms seen as crucial tools to combat the contagion rampaging through Europe.

So all is happy in euro land, right? Not really. Yes, the snafu in Slovakia ended positively for the euro. But the way it played out showed what might be the most dangerous flaw in the entire monetary union.

That flaw is the way domestic politics can hold necessary euro zone reforms hostage. Because the parliaments of all 17 euro members have to approve any major crisis-fighting decision, such as this expansion of EFSF powers or the second Greek bailout, politicians in every euro zone capital can use euro zone policy to settle domestic political scores, achieve political goals, or pander to local voters. That seems to be what happened in Slovakia. ...

Unless there is a massive change in the governance of the euro zone, one that strips its individual members of power or forces some sort of majority rule, there is no effective solution to this political problem. It is simply built into the euro. So expect more Slovakia scares in the future.