Poorest to Pay Most in EU Bailout

Posted by: Ben Vickers on November 8, 2011

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Slovakia shows the strain the debt crisis has imposed on euro member governments. Prime Minister Iveta Radicova’s political career has been upturned by the latest bailout plans. The Slovak leader, whose coalition came to office in mid-2010, lost a confidence vote last month linked to the euro-zone’s rescue fund, forcing lawmakers in Bratislava to change the country’s constitution to allow her to stay on as caretaker PM until elections are held in March.

The EU may find it more difficult to answer critics who say the bloc is undermining member states’ sovereignty, especially in smaller countries that carry less weight in EU decisions. The Slovakian parliament approved the proposal to expand the European Financial Stability Facility, but not before a partner in the governing coalition had used the debate to bring down Radicova.

Still, changes in national governments are unlikely to help improve the conditions of the bailout. The message from Brussels for smaller states in the EU is that there is only one route out of the debt crisis and that everyone is expected to toe the line. German Chancellor Angela Merkel said last month that euro-area members must accept a “clampdown at European level” if they fail to meet their commitments under deficit-reduction plans.

However, a further look at who is bearing the brunt of the euro bailout could well bolster the case of eurosceptics, causing more damage to the bloc than the parliamentray tussles seen so far. Slovakia, the second poorest member of the euro zone, for example, is paying or guaranteeing the equivalent of 11.7 percent of its GDP for the EFSF, Bloomberg’s Radoslav Tomek reports. Estonia, the poorest country in the euro, is taking on the equivalent of 13.9 percent of GDP. That compares with 8.5 percent of GDP for Germany and 8.2 percent of GDP for France.

Reader Comments

Amarenthiran

November 8, 2011 9:59 AM

The whole system designed to keep more burden on poor even it is a common man or country. In some poor countries give their precious lives to accommodate with rich.

Solarchild

November 19, 2011 7:49 PM

Not to be overly simplistic but if so many are diseased how debillitating will
this be on those who have yet to become
ill? Looking forward I think we should
get past the word "contagion" and really
start considering "debillitation" and for how long.

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About

Financial markets are on the edge as investors await a solution to the European debt crisis. This blog examines the banks that hold billions of euros worth of Greek, Italian, and other sovereign debt; the governments that must pay off or refinance that debt; and the implications for the worldwide financial system if they can't.

Analyses or commentary in this blog are the views of the author and or commentators, and do not necessarily reflect the views of Bloomberg News.

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