IV - Early Emergency Funding

Prior to 2010, loan assistance to States was made primarily via bilateral agreements (to Latvia, Hungary, Romania, 1st round of Greek loan assistance).         
The European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF) are two temporary emergency funds, both resulting from the turbulent political weekend of 7-9 May 2010. On May 9, a Decision of the Representatives of the Governments of the Euro Area Member States was adopted expressing agreement on both funds.
The EFSM is based on a ‘Council regulation establishing a European financial stabilisation mechanism’ of May 11, 2010 adopted on the basis of article 122(2) TFEU and therefore binding on all 27 member states of the EU.           
The EFSF is a special purpose vehicle created under Luxembourgish private law by the 17 member states of the Eurozone. The EFSF Framework Agreement was signed on June 7, 2010. On June 24, 2011, the Heads of State or Government of the Eurozone agreed to increase the EFSF’s scope of activity and increase its guarantee commitments.
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What political/legal difficulties
did Slovakia encounter in the negotiation of the EFSF and the EFSM, in particular in relation to (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

Participation of Slovakia in financial assistance plans, especially the ones resulting in direct financial payments, has been a sensitive political issue; mainly due to the fact that Slovakia is one of the poorest Eurozone members and hence it has been difficult to explain to the electorate a Slovak participation in financial aids or guarantees.

A discussion on the Greek bailout and the EFSF took place during the time political parties were campaigning for upcoming elections in early June 2010. The debates on the Greek bailout and the EFSF were intertwined and driven by the former. The Finance Minister signed both the ESFS Framework Agreement and the ‘Greek’ Intercreditor Agreement on May 8, 2010. The Intercreditor Agreement was considered, as in the case of the EFSF, an international treaty requiring a ratification under Article 7/4 of the Constitution.[1] The opposition parties, foremost the largest opposition party SDKÚ-DS, criticized the Fico Government for signing both agreements. The Government meeting on May 10, 2010, after the decisions at the EU level were made, was attended both by the President and the Chairman of the Parliament, which highlighted to the delicacy of the issue. In the evening that day, PM Fico asked the public television to let him explain the issue on air. The government position was that both the bailout and the EFSF had to be understood as protecting the Euro in the interest of Slovakia and that it was crucial not to become isolated from the Eurozone decision-making.[2] Due to the attacks from the opposition and the sensitivity of the issue before the upcoming elections, PM Fico started to condition the participation in the bailout by Greece passing laws increasing retirement age, a decrease of state salaries by 25%, decrease of pensions, and more. The two junior coalition parties were split on the issue. Finally, the Government agreed to the EFSF, but left the decision on the Greek bailout to a new government after the elections.[3] The EU and Eurozone intensified their pressure on Slovakia regarding the EFSF ratification; as part of this effort, an opinion started to circulate that even if Slovakia did not ratify the EFSF, it would have to participate on guarantees after the EFSF came into the effect when 90% of the guarantees were confirmed.[4]

After the elections in June 2010, which the party Smer of the incumbent PM Fico won, but was unable to form a government and went into opposition, the new government of Iveta Radičová with her Finance Minister Ivan Mikloš attempted to negotiate better conditions for the Slovak participation in the EFSF. A few days later, the PM and the Finance Minister “tried to convince EU leaders in Brussels that banks should also contribute to the aid to Greece, along with the taxpayers, and that the poorest countries of the Eurozone should pay less. Slovak leaders also stressed that upon entering the Eurozone, their country had to conduct a series of socially painful reforms, whereas the government in Athens has so far ignored the necessity of such reforms. According to Slovak leaders, stricter principles of the Stability and Growth Pact, an introduction of concrete sanctions for breaching the pact and establishment of a mechanism for controlled bankruptcy should be prescribed for Greece’s problems, so that the costs of rescuing indebted countries were also imposed on the banks providing the loans.”[5] This effort failed and the Government finally agreed on the participation in the EFSF, but not in the Greek aid package.[6]

The vote of 11 August 2010 on the ratification of the EFSF Framework Agreement in the Parliament[7] was 140 votes in favour to 1 vote against (1 abstention and 8 MPs missing).[8] The EFSF represented an international treaty under Article 7/4 of the Constitution that required ratification by Parliament by absolute majority of the MPs.[9] However, the same day, the Slovak Parliament voted on the Intercreditor Agreement concerning the Greek bailout[10] and results were quite different with 2 votes in favour and 69 votes against (13 abstentions, 66 missing).[11] This created a heated exchange of opinions between Olli Rehn and PM Radičová, who complained about the Commission interfering into a Slovak sovereign decision-making.[12] Failing to ratify the Intercreditor Agreement of 8 May 2010, Slovakia did not provided the Commission with the Commitment Confirmation and the Agreement has not become binding upon Slovakia in line with Art. 1.2 of the Intercreditor Agreement.[13] As a result, Slovakia abstained from providing bilateral loans to Greece within the first Greek aid package. The original amount of €80bn provided by the Greek Loan Facility was eventually reduced by €2.7 billion.[14]

No information on the debate on EFSM is available. The obligations arising from the EFSF Framework Agreement were implemented by a special law (see below).

Entry into force      
Article 1(1) EFSF Framework Agreement provides that it will enter into force if sufficient Eurozone member states have concluded all procedures necessary under their respective national laws to ensure that their obligations shall come into immediate force and effect and provided written confirmation of this. What does this procedure look like in Slovakia and in what way does it involve Parliament?

After the ratification of the EFSF Agreement, the Government prepared a bill on specific state guarantees (existing Law No. 386/2002 Coll., on state debt and state guarantees was inadequate for Slovakia to act on time and in the way required by the EFSF Framework Agreement when issuing or realizing the guarantees). The Parliament passed the law on Sept. 10, 2010 (76 in favour to 1 against; 73 MPs of the main opposition party Smer-SD left the voting) and the President signed it. It was published as Law No. 381/2010 Coll., on specific state guarantees and became effective as of Sept. 30, 2010. The Law capped the participation of Slovakia at €4.37bn (Sec. 5). On Sept. 29, 2010, Slovakia provided the Commitment Confirmation as stipulated in the EFSF Agreement (not to be confused with a Commitment Confirmation under Intercreditor Agreement within the framework of the first Greek aid package). The Law entitled the Finance Ministry to approve future financial assistances from the EFSF (Sec. 3).

Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Slovakia? What debates have arisen during this procedure, in particular in relation to the implications of the guarantees for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process?

Once the ratification of the EFSF Framework Agreement, adoption of special law on guarantees, and submission of the Commitment Confirmation were concluded, the Ministry of Finance has been responsible for financing and management of the Slovak asset in the EFSF. The decisions made by the Ministry regarding the guarantees has been implemented by a state institution called the Agency for Managing Debt and Liquidity. No debate was held on the procedure.

Activation problems       
What political/legal difficulties
did Slovakia encounter during the national procedures related to the entry into force of the EFSF Framework Agreement and/or the issuance and increase of guarantees?

For the EFSF Framework Agreement and issuance of guarantees see the answers to previous questions.

At the time of the talks on increase of guarantees, the Slovak coalition was already undermined by the opposition from the junior coalition party SaS. “Sulík [SaS leader] pointed out that the Eurogroup has changed its principles after Slovakia had joined it, and that financing the debts of other countries through further loans only fuels the crisis. … While SaS has consistently used the same arguments, its coalition partners began talking ever more often about shared responsibility for the Monetary Union, which was at risk of a ‘massive debt avalanche’, and much less frequently about the ‘injustice of the poorer countries financing the richer ones’.”[15] Due to these growing differences, the leaders of the coalition parties agreed to wait until Slovakia would be the last to ratify the increase of guarantees of the EFSF. PM Radičová, other leaders of her SDKÚ and a coalition partner KDH most probably bet on the following development – either another country will fail to ratify and Slovakia will be able to further postpone the ratification, or at the time all other countries ratify the increase of guarantees, Slovakia would be able to leverage its position at the Eurozone level and at the same time to use the pressure from the Eurozone countries for securing internal support for the increase of guarantees.

The Government agreed to the increase of guarantees on Sept. 7, 2011, despite four ministers from the junior party SaS voting against the measure. The governing center-right coalition (SDKÚ, KDH and Most-Híd, SaS) of Prime Minister Iveta Radičová had been unable to reach an agreement on the support for the increase of guarantees for several weeks due to an opposition from SaS of Richard Sulík. The Government linked the vote on the increase of guarantees to confidence vote. The Slovak Parliament on October 11, 2011 refused the increase of guarantees and the Government resigned.

After this first attempt with Slovakia being under pressure from the Commission and the Eurozone countries, the remaining three coalition parties made a deal with the main opposition party Smer-SD, which had originally opposed the increase of guarantees. Smer-SD made it clear that it would support the increase of guarantees only in exchange for early elections or government reconstruction. Following this agreement, the Parliament agreed to the increase of guarantees in a vote of 114 in favor to 30 against (two abstentions; an absolute majority of 76 MPs formed a threshold) on September 13, 2011 and adopted a government bill on early elections to be held on March 3, 2012. The Parliament also recalled Mr. Sulík from his position of the Speaker of the Parliament. Sulík threatened to file a constitutional action against the ratification of the increase of guarantees, which did not materialize.

The increase of the EFSF funds from €440bn to €780bn meant for Slovakia that its guarantees increased from €4.4bn to €7.7bn. During the Eurozone summit on October 26, 2011, Slovakia received certain guarantees concerning a consolidation of the first and second Greek aid packages under the EFSF given that Slovakia did not participate in the first Greek Aid Package. Although the statement of the 26 October 2011 Euro Summit does not mention such agreement,[16] the Master Financial Assistance Facility Agreement between EFSF and Greece states in point 9 of the Preamble: “It is acknowledged and agreed that in accordance with the terms of a unanimous resolution of the Member States made pursuant to Articles 5(3) and 10(5)(f) of the Framework Agreement the Slovak Republic is permitted not to participate in guaranteeing a specified amount of Funding Instruments issued to finance Financial Assistance to the Beneficiary Member State which amount corresponds to the notional share of the Slovak Republic in the cancelled non-utilised portion of the EUR 80 billion loan facility dated 8 May 2010 between the then euro-area Member States and the Beneficiary Member State. The Heads of State or Government of the euro area and EU institutions agreed on 26 October 2011 that the effective aggregate amount to be guaranteed by the Slovak Republic for the new Greek programme would not exceed the amount the Slovak Republic committed to guarantee under the concept endorsed on 21 July 2011 which provided for official financing amounting to EUR 109 billion. EFSF and the Guarantors shall enter into such agreements and documents as they see fit to give effect to this arrangement.”[17]

Case law     
Is there a (constitutional) court judgment about the EFSM or EFSF in Slovakia?


What is the role of Parliament in the application of the EFSF, for example with regard to decisions on aid packages (Loan Facility Agreement and Memorandum of Understanding) and the disbursement of tranches, both of which need unanimous approval by the so-called Guarantors, i.e. the Eurozone member states?

Slovakia supported the decision on Irish aid package, “though once again raised objections to the principles of the EFSF [see also question IV.2]. Subsequent reports on the problems with debt servicing in Portugal, Spain and Italy further radicalised the moods in the Slovak ruling coalition. Speaker of the Parliament and leader of the coalition party SaS Richard Sulík appealed for the development of a contingency plan should the Slovak koruna need to be restored.”[18]

Law No. 381/2010 Coll., on specific state guarantees entitled the Ministry of Finance to finance and manage the Slovak assets in the EFSF. That includes an approval of any financial assistance from the EFSF. Such a system, where the aid packages were agreed by the Ministry and not by the Government as a whole, meant that junior government parties, especially SaS, were excluded from the decision-making. It could have been one of the reasons for the escalation of political conflict within the Government during the ratification of the increase of guarantees, where the SaS was able to intertwine the issue with the anticipated Second Greek Aid. During these negotiations on the increase of guarantees, SaS called for the formation of a parliamentary committee that would vote on each disbursement of EFSF loans in which each political party in the Parliament would have a veto.[19] The SaS lost, as mentioned before, and its plans were stalled.

Later, in 2012, most of the opposition parties supported an amendment to the Law No. 381/2010 Coll., on specific state guarantees, which would oblige the Ministry of Finance to get consent (in the form of a resolution) of the Parliament for any decision made within the Eurozone financial stability schemes (EFSF, ESM). This change would have need to be accompanied by an amendment to the Constitutional law No. 397/2004 Coll., on the cooperation between the Parliament and the Government in EU matters, to grant a competence to the Parliamentary Committee on European Affairs to discuss Slovak position for any decision-making within the Eurozone financial stability schemes and to reserve the final decision on the Slovak position to the plenary of the Parliament.[20] The ruling party Smer-SD of PM Fico did not support the bill and it failed the first reading (vote 37 in favour to 67 against (21 abstentions, 3 MPs not voting, and 22 missing).[21] As a result, neither the amendment to the Law No. 381/2010 Coll., on specific state guarantees, nor an amendment Constitutional law No. 397/2004 Coll., on the cooperation between the Parliament and the Government in EU matters were passed.

Implementing problems 
What political/legal difficulties
did Slovakia encounter in the application of the EFSF?

The events mentioned above changed significantly the attitude of politicians towards the EFSF and further EU plans. Any increase of Slovak participation in Eurozone stability mechanisms was unpopular among voters. The most categorical refusal of the increase of guarantees and the second Greek bailout came from the junior coalition party SaS, which also refused Slovak participation in the ESM. The chairman of the party and, until the government crisis of October 2011, the Speaker of the Parliament Richard Sulík started to campaign against the measures.

After the fall of the Slovak Government, the agreement on early general elections and final approval of the EFSF in the Parliament, the negotiations of the Slovak position on the second Greek bailout was left to the Radičová cabinet in demise (without confidence in the Parliament). One of the main Slovak conditions was at least 50% participation of private sector. Slovak participation in the EFSF meanwhile increased from 0,99% to 1,06% due to stepping-out guarantor status obtained by Greece, Ireland, and Portugal. In the Stability program for 2012-15, the Finance Ministry announced that the debt to GDP ratio grew by 2.7% due to the Slovak guarantees (although some other sources claimed that ESA methodology does not require including these guarantees).[22] Politicians opposing the EFSF also pointed out that if all guarantees have to be paid, it would represent one third of Slovak annual budget.

Regarding PSI: Slovakia consistently called for the controlled bankruptcy of Greece, a tightening of the rules of the Stability and Growth Pact, and for the private sector’s participation in financing the rescue packages for indebted states. It was a difficult task for the Slovak cabinet to convince the public that the second loan for Greece was reasonable. First of all, the government had to explain why €109 billion worth of aid for Greece makes sense, since the first loan (rejected and still criticized by the Radičová cabinet), did not bring the expected results, just as Slovakia had anticipated. The cabinet’s key argument was the participation of the private sector in the loan.[23]

The main critic and a party that caused the cabinet’s fall during the ratification of the increase of guarantees, the junior coalition party SaS of Mr. Sulík published, in September 2011, a document summarizing its arguments on the EFSF, increase of guarantees, Greek bailouts, and the ESM. On the participation of banks in the second Greek aid package, the document reads: “Banks propose in their offer a 1:1 exchange of half of their Greek bonds for new Greek bonds. This means that banks will suffer no loss (!) at the exchange itself, the difference lies in interests. Old bonds bear high interests because they are only secured by Greece, which has the worst rating in the world and hence no financial standing. New Greek bonds will be secured by the EFSF with AAA rating, and hence the best possible financial standing, exactly like Germany. While banks will receive for German bonds less than 3% on average, they will receive 4.73% on average for new Greek bonds with an equally low risk (!). Second half of bonds will also be exchanged but with a haircut decrease of principal by 20%. However, interest will increase up to 6.8%, which will compensate the overall haircut in the course of 15 or 30 years. This way, bonds of the value of 37 billion euros will be exchanged in a relatively short period of time. Politicians are trying to convince their voters that this is the private sector “participation”. In reality, however, banks will annually earn on this money approximately 1.5% more with the same certainty than as if they would invest it into German bonds. In other words, banks will exchange Greek bonds of the value of 37 billion euros for Greek bonds of the value of 37 billion euros while their annual profit will be 500 billion euros. This is a joke, not a “participation” of banks.”[24]

Based on these concerns that circulated the debate during summer 2011 (and have been summarized in the above mentioned document later in September 2011), a group of MPs offered, on June 28, 2011, a draft resolution on conditional consent to a financial assistance to Greece provided that the following conditions are fulfilled: 1. Strong participation of private investors (the hair-cut, among others); 2. Collateral with automatic realization if Greece is in default; 3. Commitment to privatize the Greek state asset; 4. Cross-party agreement on the support of the Program; 5. Obligatory participation of the IMF. However, the draft resolution did not pass.[25]

Bilateral support   
In case Slovakia participated in providing funding on a bilateral basis to other EU Member States during the crisis, what relevant Parliamentary debates or legal issues have arisen?

None. For the position of Slovakia and discussion on the first Greek financial aid see above the answer to question IV.1 and related discussion on the Second Greek bailout (within the EFSF, but changing the conditions of the first bailout as well) in the answer to questions IV.4, IV.6, and IV.7.

What other information is relevant with regard to Slovakia and the EFSM/EFSF?

For a summary of arguments against the EFSF see “SaS, European Financial Stability Facility: A Road to Socialism” cited above.         

[1] The 80 000 000 000 EUR Loan Facility Agreement was submitted to the Parliament as an attachment not requiring ratification.

[2], Fico v STV vysvetľoval záchranný plán EÚ a útočil na opozíciu. May 11, 2010. Available at:

[3], Slovensko chce najprv Grékov vidieť konať, potom pomôže, May 4, 2010. Available at:

[4], EÚ postoj Slovenska voči stabilizačnému mechanizmu neznepokojuje, June 24, 2010. Available at:

[5] OSW, Slovakia: the Eurogroup’s enfant terrible, Oct. 18, 2011. Available at: .

[6], Dlhová kríza v eurozóne, March 26, 2012. Available at:

[7] Legislative power in Slovakia rests with unicameral National Council composed of 150 members (MPs).

[8] 4th Session of the 5th Parliamentary Term, voting no. 21, August 11, 2010. Available at:

[9] Only a treaty that transfers competences to the EU requires constitutional three-fifth majority of MPs (Art. 7/2 of the Constitution).

[10] Správa o siedmom roku členstva SR v EÚ (Report on the seventh year of the Slovak membership in the EU), Parliamentary Press No. 435, p. 3.

[11] 4th Session of the 5th Parliamentary Term, voting no. 22, August 11, 2010. Available at: Governing coalition voted mostly against, with an exception of KDH, whose 2 MPs voted in favour and 13 opted for abstention. The main opposition party Smer-SD of Robert Fico, who was the Prime Minister at the time of negotiation of the Intercreditor Agreement, left the voting. According to the Intercreditor Agreement Slovakia would commit to the Facility with €817.850.223,95.

[12], Dlhová kríza v eurozóne, March 26, 2012. Available at:

[13] EUR 80 000 000 000 Loan Facility Agreement and Intercreditor Agreement of 8 May 2010,

[14] In addition to Slovak’s opt out, “Ireland and Portugal stepped down from the facility as they requested financial assistance themselves.” European Commission, Financial assistance to Greece,

[15] OSW, Slovakia: the Eurogroup’s enfant terrible, Oct. 18, 2011. Available at:

[16] Euro Summit Statement, 26 October 2011,

[17] Master Financial Assistance Facility Agreement – Greece, See also Euroskop, Institucionální záležitosti v říjnu 2011 (Institutional Matters in October 2011), Nov. 4, 2011, available at:

[18] OSW, Slovakia: the Eurogroup’s enfant terrible, Oct. 18, 2011. Available at:

[19] Reuters, Slovak party sets tough conditions for EFSF approval, Oct. 6, 2011. Available at:

[20] Parliamentary Press No. 99, 6th Parliamentary Term, June 6, 2012. The text of the bill and report are available at:

[21] 3rd Session of the 6th Parliamentary Term, voting no. 143, July 3, 2012. Available at:

[22] Ministry of Finance of SR, Program stability Slovenskej republiky na roky 2012 až 2015, April 2012, p. 23. Available at:

[23] OSW, Slovakia: the Eurogroup’s enfant terrible, October18, 2011. Available at:

[24] SaS, European Financial Stability Facility: A Road to Socialism. Sept. 5, 2011. Available at: , p. 6-7.

[25] Parliamentary Press No. 432, 5th Parliamentary Term, June 28, 2011. Available at: Voting results were 35:1 (51 asbtentions, 61 not voting, 2 missing) (July 6, 2011). Available at: