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Slovakia deals blow to eurozone rescue plan

12 October 2011 10:57 (UTC +04:00)

Baku - APA-Economics. Efforts to contain the eurozone debt crisis have suffered a setback after Slovakia rejected plans to expand the regionâ€™s bailout mechanism, This is Money reported.

Its parliament last night voted down a proposal to bolster the â‚¬440bn European Financial Stability Fund, resulting in the collapse of Bratislavaâ€™s fragile coalition government.

The move could potentially derail the drive to prevent contagion from the debtladen periphery from spreading to the core of the currency area.

All of the 16 other eurozone countries have already ratified the plan. But analysts said the package is expected to be voted through by the Slovakian parliament this week.

The main opposition party earlier signalled that it would be willing to support the EFSF deal.

Last nightâ€™s â€˜noâ€™ vote, which was widely expected, will do little to calm concerns over Europeâ€™s faltering attempts to tame the storm ripping through the region.

It came just hours after Europeâ€™s political elite were lambasted by the regionâ€™s top central banker over their dithering response to the debt storm.

Jean-Claude Trichet, the departing head of the European Central Bank, said government inaction was â€˜aggravatingâ€™ a crisis that had now taken on â€˜systemic dimensionsâ€™.

Leaders need to â€˜rise to the challenge and act together swiftlyâ€™ to insulate banks from a possible Greek default and prevent contagion from spreading even deeper into the currency union, he said.

France and Germany have given themselves until the end of the month to hammer out a deal to strengthen Europeâ€™s besieged banking system.

However they had to delay next weekâ€™s meeting of EU prime ministers.