The Czechs and Poles are delighted to be in the EU and outside the Eurozone. Now Slovakia’s elite is wondering if it shouldn’t rejoin them.
In 2008, Slovaks celebrated the nation’s entry to the continent’s common currency.
Two years later, one thing is obvious: pride has been tempered by the responsibilities that come with sharing a common European currency heading down the toilet. As EU nations are asked to help bail out Ireland and Greece, many now see the euro as a burden, not a blessing. And some in the Slovak leadership are looking for the exit.
In a recent newspaper article, Parliament speaker and eminent economist Richard Sulik sent shock-waves across the already edgy eurozone by arguing that Slovakia should be ready to abandon the euro and switch to its former national currency. The Finance Ministry was quick to dismiss his remarks, and pro-Brussels economist Nicolas Veron says that leaving the eurozone “would be economically disruptive”.
But anti-euro sentiment remains strong in a country that defied its partners earlier this year by refusing to provide its euro800 million ($1.05 billion) share of the euro110 billion ($145 billion) EU bailout loan for Greece.
“Everyone with common sense can see that the system is ill,” said Matus Posvanc, an analyst from the F. A. Hayek Foundation, a conservative think tank in Bratislava. He called attempts to bail out Athens futile “because Greece’s bankruptcy is inevitable.”
In refusing to pay its share of the Greek bailout package, “our main objection was … that it was only the taxpayers who have to pay,” Slovak Finance Minister Ivan Miklos told AP. “But the banks, which contributed to the problem and made profit by providing loans to problematic countries in the past, didn’t have to pay a single cent.”
Hard to disagree with that.
“The profits are privatized but the losses are socialized,” Miklos said. “When it works, a few make money, but when it collapses because they take too big a risk, we all have to pay. That’s a huge problem.”
Nigel Rendell, an economist at RBC Capital Markets in London, said Slovak concerns were understandable.
“Slovakia worked incredibly hard to gain membership of the euro,” he said. “Now they find themselves having to dip into their own pockets to finance foreign governments that spent too much and should have known better.”
Although Slovene Prime Minister Borut Pahor has defended his country’s loan guarantees for Ireland, a recent survey by Mediana indicated 67 percent of citizens were opposed.
Meanwhile, Poland’s budget deficit – like those of some other former Soviet bloc nations – remains notably above the 3 percent benchmark needed for eurozone entry. Polish scepticism about the euro has been growing since the country did relatively well during the global economic downturn while still using its currency, the zloty. In 2009, Poland’s economy grew 1.7 percent, making it the only EU country to avoid recession.
Euro outsiders can now devalue their currencies against their eurozone partners and – like the Polish zloty – the weaker Czech koruna has helped Prague’s export sector during the financial crisis gripping the eurozone.
The Czech Republic is yet to set a target date to join the euro, which President Vaclav Klaus has repeatedly described as a failure.