Slovakia's Superman

A profile of Richard Sulík, the Slovak who might yet pull the plug on the eurozone's bail-out fund.
Dressed in a green Superman costume, with spermatozoa rushing alongside him, cheered on by the slogan “For future
generations!”: that is how campaign billboards depicted Richard Sulík before the 2010 elections, which catapulted his
party, Sloboda a solidarita (Freedom and Solidarity, SaS), into the Slovak parliament and gave him the post of speaker
of the parliament.
The party also ran another set of billboards, showing Sulík, this time dressed in an ordinary suit, claiming: “I am no pretty
boy, but I play fair.”
Since the SaS has for the past 17 months been one of the greatest political obstacles to the eurozone's rescue plans,
many in Europe and at home feel that Sulík is neither pretty, nor fair. Instead, they see him as irresponsible and populist.
But whether you are a fan or a critic, there are three reasons to believe that Sulík is indeed the type who would be willing
to risk everything – including international turmoil and the fall of the Slovak government – and vote against changes to
the EU's bail-out fund, or ‘euro-buffer', as Slovaks refer to it.
The first is his life experience: Sulík has some reason to believe that he has supernatural powers.
In 1980, at the age of 12, he emigrated with his parents – his father was a dentist, his mother a lawyer – and two
younger sisters from communist Czechoslovakia to West Germany. As communism was falling, he was preparing to
become a pilot for Lufthansa. Today, he says he is glad his life did not follow that route: “What sort of a career is it being
a bus driver in the air anyway?” Instead, he returned to his homeland, opened a chain of copy-service centres and
became a millionaire.
When wealth started boring him, he decided to study economics. In 2002, before finishing his degree, he visited a
business forum and approached the newly appointed finance minister, Ivan Mikloš, and handed him a sheet of paper. On
it was Sulík's plan to introduce a flat tax in the country. And a request to become an adviser to the minister.
He achieved both. Mikloš, who now holds the same post again and is Sulík's arch-enemy in the euro-buffer debate, took
him into his team. Mikloš had moments of doubt, but Sulík was persistent and, within 51 weeks of handing him that sheet
of paper, a flat tax was introduced in the country. It remains one of Slovakia's great success stories.
When asked whether it was arrogant of him to give his plan to Mikloš, Sulík has said: “It wasn't arrogance, but naïveté.
Had I realistically assessed the chances of that plan, I would have done nothing.”
With this same attitude, Sulík later reformed Bratislava's waste-management company, became an adviser to finance
minister Ján Pociatek (whose socialistSmer party Sulík despises), and started the SaS, which within a year of being
founded became the second-strongest political force in the four-party government.
It was with the same mix of self-confidence, idealism and ignorance that he entered the euro-buffer – the eurozone's bail-
out – debate.
The second reason for Sulík's stubbornness is that he firmly believes that the European plan is wrong. If Prime
Minister Iveta Radicová can in some ways be likened to the former Czech president Václav Havel, Sulík is the Slovak
version of Václav Klaus, the current Czech president and Havel's arch-foe. Both Sulík and Klaus are economists, both
are firm in their convictions, and both are Eurosceptic. Just as Klaus opposed the Lisbon treaty, Sulík is now against the
eurozone's financial mechanisms.
In his widely distributed pamphlet “Euro-buffer: the road to socialism”, he claims that supporting the plan equals
“economic treason”, because it puts the country on a “road to economic serfdom”.
Given that the SaS has not left the coalition that agreed to the terms of the eurozone's rescue packages, Sulík probably
does not entirely mean everything he writes. But there is little doubt that he believes “the euro-buffer is the greatest
threat to the eurozone, because it solves old debts by creating new ones”, which is like “extinguishing fire with a fan”.
And even if the eurozone's plan goes ahead, Slovakia should stay out, he believes.
The third reason why anything can be expected from Sulík is that he has nothing to lose by voting against changes to the
European Financial Stability Facility (the vote may be held next week).
He founded the SaS party with a small circle of supporters, and it went into the elections with just over 200 members,
none of whom had previously been in politics. Sulík is no despot, and the SaS's members are no puppets. Still, a party
with so few core members and with so little addiction to power (or attachment to European politics) offers little resistance
to Sulík's will.
Although the SaS has pushed its liberal agenda, the presence of Christian Democrats in the government means that
ideas such as the legalisation of marijuana and gay marriage will not become law. So, if the SaS does not want to
become the latest in a long series of one-hit wonders on the Slovak political scene, it needs to find a decent agenda.
Opposing EU measures or wasteful spending on abstract EU projects is as good a populist gamble as you can find.
And as for international pressure, that does not trouble the party or Sulík. The SaS does not care for European parties,
and Sulík himself can only benefit – after all, would the boss of a small-ish Slovak party command space in the
international press but for his tough stance? If Europe ever develops a Tea Party movement, Sulík is now perfectly
positioned to become one of its most prominent faces.
But even if the party apparatus, domestic politics and international politics all played against Sulík, which they do not, he
would still not have to care. He is no career statesman, and as he says, he entered politics because it “gives him a kick”.
Blocking the most important political project of today's Europe could give Sulík the kick of a lifetime. And if it all goes
wrong, Sulík can always find something else to keep himself amused.
Still, many may feel that hailing from Slovakia should be enough to deter Sulík from making trouble in the eurozone – the
country is new to the club, small, poor, and wholly dependent on the West. But do not forget that in his lifetime, Sulík has
used four currencies on a daily basis: the Deutsche mark, the Czechoslovak koruna, the Slovak koruna, and the euro.
Imagining using one more is not frightening. Especially when you are green in politics. And when you are Superman.

EU bailout is racket for financial elites

Bravo to the Slovaks for voting against it, writes Ambrose Evans-Pritchard.
Slovakia's ''nie'' will not stop the approval of Europe's bailout fund, the European Financial Stability Facility.
The outcome has never been in doubt. As in Germany, the opposition backs the bill. In any case, Slovakia's political class knows that
their country will pay a fearful diplomatic price if this drama drags on for much longer.
What the Slovak debate has shown us yet again - as if the political storm in Germany over the past two months has not been enough -
is that escalating bailouts are nearing their political limits.

The traumatic affair almost brought down the German government. It has in fact brought down the Slovak government. You can't
keep doing this. Democracies are not to be toyed with.
This political revolt matters because Europe will soon have to come back for more money and bigger bailouts. The revamped bailout
fund was overtaken by events two months ago. It was agreed by European Union leaders in July before Italy and Spain were drawn
into the maelstrom. (Lest we forget, Italian and Spanish 10-year yields topped 6 per cent in August on mounting fears of a global
double-dip recession, which would play havoc with debt dynamics.)
Only bond purchases by the European Central Bank stopped a spiralling debt crisis then. The apparent calm today is artificial.
The EFSF's €440 billion ($595 billion) firepower - or €300 billion after Greece, Ireland, and Portugal have taken their bites - is not
enough. Willem Buiter at Citigroup has called for €2.5 trillion, the Royal Bank of Scotland and the European parliament have called
for €2 trillion.
So even when the Slovaks fall on their sword, nothing will have been resolved. A reluctant ECB will remain the only credible lender
of last resort standing behind European Monetary Union, in breach of the Lisbon Treaty. Its actions already face a challenge at the
European Court.
No doubt the German Finance Minister, Wolfgang Schauble, is plotting to leverage the bailout fund into the stratosphere, perhaps by
using it to guarantee the first 20 per cent of losses on Club Med bonds (the sort of alchemy of structured credit used to disguise risk
in the US subprime conspiracy). He has allies in Brussels, Paris, Rome and elsewhere. However, he was forced to give categorical
assurances to the Bundestag that the bailout fund would not be enlarged further.
Most people understood him to mean that it will not be ''leveraged''. Pledges to parliaments have consequences. And as Schauble
himself said, the ruling last month by the German Constitutional Court has blocked off any possibility of euro bonds.
Slovakia's cry of defiance has not been entirely pointless. Richard Sulik - the speaker of parliament - has caught a mood of popular
disgust that goes far beyond his own country. His objections are unanswerable. How can there be any justification for a state of
affairs where a poor but rule-abiding EMU state must bail out a serial violator with twice the per capita income, and triple the level of
the pensions - a country which is in any case irretrievably bankrupt? How can it be that the no-bail clause of the Lisbon Treaty has
been ripped up?
But he also touched on the most neuralgic issue, reminding everybody that the EFSF is ''mainly for saving foreign banks''. These are
French, German, British, Dutch, and Belgian banks, of course.
Sulik is right. The EU-IMF rescue loans have not helped Greece pull out of its downward spiral. They have pushed the country
further into bankruptcy. Greek public debt will rise from about 120 per cent of gross domestic product to 160 per cent under the
rescue program, and the IMF is pencilling in figures above 180 per cent.
The rescue loans have rotated into the hands of creditor banks, life insurers, pension funds, and even a few hedge funds. ECB bond
purchases have allowed to investors to dump their holdings at reduced loss, shifting the risk to EMU taxpayers. It is a racket for
financial elites. A pickpocketing of taxpayers, including poor Slovak taxpayers.
''I'd rather be a pariah in Brussels than have to feel ashamed before my children,'' Sulik said.
Bravo.
Telegraph, London

Slovakia poses increasing threat to EU bail-out fund

BY HONOR MAHONY AND RENATA GOLDIROVA

Plans to strengthen the firepower of the eurozone's bail-out fund may be put in jeopardy by Slovakia, where a coalition
stalemate is prompting the government to consider asking for a special derogation.

Last in line to vote, Slovakia's parliament is supposed to pass two pieces of legislation - one agreeing the framework of the
new fund and a second piece that would formally raise Bratislava's guarantees from €4.4 billion to €7.7 billion.

However, the junior ruling coalition party Freedom and Solidarity remain steadfastly opposed to raising the country's
contribution, depriving the centre-right Christian Union party of Prime Minister Iveta Radicova of the necessary
threshold of votes.

According to sources in Bratislava, the government is now looking to see if it can secure a formal declaration on its
contribution, understood to mean that Slovakia's money would be ring-fenced.

But Brussels on Friday (30 September) promptly dismissed the hoped-for exit route, reminding Slovakia that it "fully"
signed up to a 21 July agreement of EU leaders that would increase the fund to €440 billion, and each participating
country's share in it.

"Other member states, when the political reality was very difficult, voted and ratified the agreements concerning the
enhancement of the EFSF," said the European Commission's economic affairs spokesperson, making a special reference
the eurozone's paymaster Germany, which on Thursday agreed to raise it share of guarantees from €123 bllion to €211
billion.

He noted that the euro has been "very beneficial" for Slovakia and that it is in the "selfish interest" of Slovak citizens and
politicians to have the changes greenlighted.

The spokesperson also rejected the notion that Brussels was considering some sort of contingency plan. "There is no plan
B because we have a Plan A," he said.

Privately, the language of EU officials has been stronger. One high-ranking official said the mooted demand would be
"unacceptable" while others noted that Slovakia's international reputation would take a hammering if it failed to ratify
the fund.

Slovakia's EU commissioner Maros Sefcovic, currently on a trip to his home country, said he was "convinced" that that
the solution being considered by the government would be "hardly acceptable for our partners".

The enhanced fund, whose new rules would allow it to buy the debt of eurozone countries, capitalise troubled banks and
give pre-emptive credit lines to governments, needs to be approved by all 17 eurozone states.

Slovakia, where political debate has focussed on the justification for per capita poorer Slovaks bailing out richer Greeks,
emerged almost immediately as the country likely to have the most profound problems.
The Slovak debate is likely to make markets even more sceptical about the eurozone's political willingness to take all
necessary measures to save the single currency.

The €440 billion is already viewed as far too small to deal with possible contagion to Spain and Italy and the Europe's
under-funded banks, with informal talks already underway to leverage the fund to give it a credit capacity of €2 trillion.
Richard Sulik has emerged as Brussels's public enemy No. 1. As leader of Slovakia's Freedom and Solidarity party, or SaS, Mr. Sulik has
consistently and vocally opposed euro-zone bailouts. SaS parliamentarians' refusal to back changes to the European Financial Stability Facility
(EFSF) led to the collapse of the Slovak coalition government on Tuesday.
Mr. Sulik's opposition to paying for what he describes as other people's mistakes led Germany's Handelsblatt newspaper this week to label
his anti-bailout movement a "central European tea party." Yesterday Slovak lawmakers reached a deal to pass the EFSF expansion in a fresh
vote before the end of the week. But at what cost?
There are strong arguments in favor of approving the changes to the EFSF, especially if it will be used to strengthen Europe's banks. But
consider this: In 2010, Slovakia's GDP per capita was €11,692 ($16,114), while Greece's was €19,822. Going into this crisis, average
earnings in Slovakia stood at €8,700 per year, while in Greece they were around €23,900. Meanwhile, the average Slovak pension was €250
per month, compared to €830 a month in Greece. You can see why sympathy for Athens is in short supply in Bratislava.
There is another and arguably more compelling reason why Slovaks should question the need to cough up in the name of so-called European
"solidarity." Slovakia has benefited from euro-zone membership and from EU funds. But Slovakia has also paid a price. Over the last two
decades, the country has undergone painful structural reform on the path from communism to a market economy, and later to EU and euro-
zone membership. By streamlining its tax code, labor market, and social welfare and pension systems, it reduced unemployment, attracted
foreign investors and created a base for long-term economic growth.
The immediate effects of reform have not always been easy to swallow.
Between 1999 and 2001, the liquidation and restructuring of Slovakia's
publicly and privately owned banks cost the economy between 11% and 15%
of GDP, leaving the banking sector almost completely in the hands of foreign
owners. But Slovakia's financial system emerged stronger than it was before. And yet, having walked this difficult road, Slovakia is now being
asked to provide loan guarantees to bail out countries that failed to enact similar reforms. You can see the potential for moral hazard on a
huge scale.
First, banks in several triple-A economies, including Germany, continue to live
under the protection of sovereign bailouts and European Central Bank
liquidity. They have not been forced to restructure and recapitalize, even
though this is an absolutely necessary part of any long-term solution to the
crisis.
Second, the sovereign bailouts have transferred private-sector risk to the books of taxpayer-backed institutions. This has created perverse
incentives, possibly leading banks to chase profits through higher yields on peripheral sovereign debt and thereby increasing their exposure
to the crisis. The toxic mix of moral hazard and political failure has left Europe fighting for survival on two fronts, facing both a systemic
banking crisis and an increasingly desperate fiscal crisis.
Are sovereign governments learning these lessons? The Slovak parliament rejected the EFSF amendments on the very same day that the
EU and the International Monetary Fund signaled that Greece would receive the next tranche of its original bailout, even though the country
has clearly failed to meet its austerity and deficit targets.
Moving forward, it is encouraging that euro-zone leaders are now considering ways to manage a hard Greek default while finally looking at
ways to recapitalize euro-zone banks. But as EU leaders look for clever ways to leverage the financial stability facility, possibly quadrupling it
in size without increasing the existing loan guarantees—and as the euro zone reluctantly moves towards more fiscal integration—it must keep
one vital lesson in mind: Conditionality is king.

Failing to impose costs on those responsible for the crisis, particularly the banks, not only sows the seeds for future economic
problems but also fuels political divisions. The euro zone can ill-afford more of either.