Europe's Rescue Package Goes Down, Stocks Point Up; What Gives?

Oct 12, 2011

Follow along, if you will:

"Slovakia Rejects Expanded Eurozone Bailout Fund."

Bad news, right?

Maybe not:

"Markets Buoyed By Slovakia Revote Hopes."

How come?

According to Bloomberg News, "after the close of U.S. trading [on Tuesday], the Slovak parliament failed to approve the overhaul of Europe's bailout fund, toppling the government. [But] Smer, the largest opposition party, which didn't back the legislation, will support the changes in a second vote, ensuring it will pass, party leader Robert Fico told reporters in the capital Bratislava. Slovakia is the only country in the 17-nation euro area that has yet to ratify the enhanced EFSF."

The BBC adds that correspondents in Slovakia "say a new vote on the fund is likely by the end of this week." And why would Smer reverse its position? "We're saying 'no' to a rightist government, but we're saying 'yes' to the rescue fund," said party leader Fico, according to the BBC.

That "rightist government," led by Prime Minister Iveta Radicova, fell after Tuesday's vote to reject the package. Radicova had tied her coalition's fortunes to passage.

As our friend Jacob Goldstein wrote on the Planet Money blog Tuesday, "Europe's Hopes Hinge On ... Slovakia!"

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