Managing a currency by popular vote every other week (or day) is water torture and almost surely doomed to fail. But with no other choice, the odyssey that is the euro rolls on, which means that the voting, the deal making, the deliberations, the polling–the rise and fall of governments–endures.
The latest installment in this strange drama arrived yesterday, with Slovakia’s parliament rejecting an increase for the euro rescue fund. It’s as if the Federal Reserve or U.S. Treasury needed to seek approval from California this week, Maryland the next, to conduct operations. How long can the Continent carry on with this madness? As long as it takes, and perhaps longer than reasonable minds might expect. But no one said it’s going to be pretty (or effective).
Technically, the vote wasn’t about monetary policy per se; rather, yesterday’s vote was about pouring more money into the the European Financial Stability Facility, last year’s brainchild that was designed to finance the bailout of Greece and, in the process, save the euro from itself. The lines between monetary and fiscal policies are anything but sharp in Europe these days and so it’s unclear where one ends and the other begins. That, of course, is part of the problem. Managing a currency that relies on the kindness of politicians is an act of torture at best.
Slovakia is the odd country out at the moment, rejecting what 16 other euro nations have already embraced. It’s a strange state of affairs to watch one of the world’s leading currencies as it’s held hostage by one small nation. Imagine if the city council of New York City had a final vote on the future of the dollar and you’ve got some sense of what’s going on in Europe these days.
Just to keep things interesting, Slovakia’s government collapsed after its vote yesterday. In other words, another vote is coming, and soon, with expectations high that a soon-to-be formed government will approve a bigger bailout fund. Time notes that Slovakian Prime Minister Iveta Radičová previously vowed that “the vote would be repeated until the bill is passed.”
Meantime, Reuters reports:
Radicova’s finance minister, Ivan Miklos, said Slovakia was still likely to find a way to ratify the agreement soon.
“There is an assumption that the EFSF [European Financial Stability Facility], one way or the other, will be approved by the end of the week,” he told parliament ahead of the vote.
And if Slovakia disappoints on the next vote? No problem. The bailout will continue one way or another, we’re told via The New York Times: “One European official speaking anonymously because of the fluidity of the situation, said that it would probably be possible to go ahead with the bailout without Slovakia, if necessary.”
The fate of the euro rests on Slovakia… or not. “Eventually a yes vote will be secured,” predicts Tim Ash, head of emerging-market research at Royal Bank of Scotland Group. “Does Slovakia really want to be alone among 17 euro-zone members states on this one, and when the future of Europe is at stake?”
Uh, yes…maybe… probably. Whatever happens, this is no way to run a railroad (or a currency).