Bloomberg News

Greece Needs Default, Abandon Euro Over Loan, Sulik Says

September 15, 2011

(Updates with comment from EU commissioner in seventh paragraph.)

Sept. 15 (Bloomberg) -- Greece should default on its debt and abandon the euro as further loans won’t solve its crisis, a Slovak lawmaker whose vote in parliament may decide whether the country backs a bailout package for the currency area said.

The Freedom and Solidarity party, a member of Slovakia’s coalition government, will vote in parliament against the European bailout system, founder and parliamentary speaker Richard Sulik said in an interview. His party, known as the SaS, wants member states to “keep to the rules” guiding the euro and “start saving money.”

“The first step is, Greece has to go bankrupt,” he said at his office in the Slovak parliament in Bratislava. “There is no possibility that” Greece “not now, not in the future, not in 50 years, will” pay back “the loans. My personal opinion is it would be better for Greece to leave the eurozone.”

Greece is seeking this month to win a sixth tranche of loans under last year’s 110 billion-euro ($150 billion) aid package from the euro region and International Monetary Fund and to avoid a default. Prime Minister George Papandreou’s government also wants to benefit from a planned second aid package of 159 billion euros approved by euro-area leaders on July 21.

‘Bad Solution’

The European Commission and the European Central Bank have urged member countries to speed up adoption of the second package, which includes bolstering the size of the bailout fund and boosting its powers to provide direct loans to distressed countries and buy their bonds. Failure to ratify the agreement in Slovakia would force countries to come up with a different plan to deal with spreading of the crisis.

“We will vote against the bad solution,” said Sulik, 43. “I’m sorry if we cause some problems for Europe.”

EU Economic and Monetary Commissioner Olli Rehn said he trusts that Slovakia will ratify the July 21 agreement to enhance the European Financial Stability Facility.

“I can only appeal and trust that the Slovakian parliament will be able to approve” the law, he told reporters in Brussels today.

The failure to solve the crisis, which has threatened to spread to Italy and Spain, has rocked financial markets. The euro has weakened 5 percent against the dollar in the past month and bank stocks have dropped on fear of further writedowns should Greece default.

Debt Purchases

The ECB began buying Italian debt on Aug. 8 after the 10- year yield reached a euro-era record 6.4 percent and Berlusconi agreed to the new budget cuts. Even though the ECB has spent more than 60 billion euros buying euro-region debt since then, Italy’s 10-year yield remains around 5.7 percent amid investor concern about the fallout from a possible Greek default.

Sulik said Italy should sell its gold reserves instead of also participating in any bailout program.

Slovakia, the euro-region’s second-poorest member, was the only country in the 17-member bloc which didn’t participate in the first loan for Greece last year after the administration of Prime Minister Iveta Radicova, which came to power in July 2010, reversed the decision of the previous government. Still, Slovakia didn’t block the creation of the EFSF, a temporary bailout fund created to help countries with liquidity problems to bypass market financing.

No Trade

Sulik, an entrepreneur who founded the SaS party a year before the 2010 elections and led calls for Slovakia to remain out of the Greek bailout that year, said his party isn’t seeking to trade its vote on the bailout in exchange for other legislation.

The coalition has agreed that Slovakia will be the last in the euro area to try and approve changes to the EFSF. The earliest the 150-seat parliament, in which SaS has 22 deputies, will vote on the package is in the middle of October, Sulik said, adding the country won’t seek to delay the vote after all other members have backed the overhaul.

His party, which wants to keep taxes low, deregulate markets and decriminalize rules on use of marijuana, has printed a public brochure as a way to rally support in which it called the bailouts a “road to socialism.” Sulik stressed that he sees the conflict over the program outside of the coalition agreement and doesn’t want to link the vote to a confidence motion, a move advocated by some coalition officials.

Without the SaS votes, Radicova needs to secure support from the opposition. Smer, the largest opposition party headed by former Premier Robert Fico, has said it won’t vote for the measures unless the coalition is united in its support. The Slovak National Party, another opposition party, has pledged to reject the package.

“We will have problems, but they will be smaller” than in a situation where the bailouts continue, Sulik said. The package “won’t solve the problem. We are only buying time.”

--Editors: Douglas Lytle, Alan Crosby

To contact the reporter on this story: Radoslav Tomek in Bratislava at rtomek@bloomberg.net.

To contact the editor responsible for this story: James Gomez at jagomez@bloomberg.net.


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