Euro marathon

On Friday, Austria became the latest country to ratify the expansion of the eurozone's bailout fund, the European Financial Stability Facility (EFSF), after German lawmakers voted overwhelmingly in favor of the legislation a day earlier.

Eurozone leaders agreed to boost the powers of the rescue fund in July, to increase its lending capacity to 440 billion euros ($600 billion), and to make it better able to help states before they reach full-blown financial crisis. That deal requires ratification by all 17 eurozone nations.

Like Germany, Cyprus and Estonia also approved the new powers on Thursday. France, Belgium, Finland, Greece, Ireland, Italy, Luxembourg, Portugal, Spain and Slovenia had already lent their support to the plans.

The Austrian government had expected the measures to pass with the ruling coalition partners backing the plan, along with most of the opposition Green lawmakers. Only two rightist parties opposed the bill.

"The developments of recent weeks are serious. The debt crisis is now not only touching the eurozone but all of Europe and the Western world," Finance Minister Maria Fekter said in parliament before the vote.

"I can assure you that with all the measures taken, no matter how hard they are, we are acting in the interests of Austria."

The deal has raised Austrian guarantees for the EFSF from 12.2 billion euros to 21.6 billion euros ($29.5 billion).

Malta and the Netherlands are also set to approve the measures in the coming days.

Threat from Bratislava

But the main stumbling block now appears to be tiny Slovakia, one of the eurozone's newest members, where the junior coalition partners in the ruling government are threatening to vote against the measures, arguing that the country cannot afford to pay. After Estonia, Slovakia is the eurozone's poorest state.

Slovakian lawmakers will vote on the legislation later this month. Eurozone leaders will be watching anxiously to see whether the leader of the Freedom and Solidarity party follows through with his threats.

"The rescue fund is simply buying time in an incredibly costly way, but it's not solving the problems," Party leader Richard Sulik told German public television. "If the euro crumbles it will be because of massive deficits in individual countries and not because we rejected the rescue fund," he warned.

However, Slovakia's prime minister said on Friday she was confident her parliament would approve powers for the eurozone's fund to be strengthened. Following a one-to-one meeting with Chancellor Angela Merkel, Prime Minister Iveta Radicova she had a personal commitment to ensure the ratification of the agreement. "It would be a very, very negative decision for Slovakia if we were the one who would block the process, already ratified by countries," she said.

There are currently intensive discussions underway in the Slovak capital, Bratislava, to try and persuade Sulik to change his mind. No doubt he's also feeling pressure from other eurozone nations to back the bill and calm market nerves.

German Finance Minister Wolfgang Schäuble late on Friday said the German government did not intend to increase its exposure, currently 221 billion euros, as part of the terms of the fund.

Author: Joanna Impey, Charlotte Chelsom-Pill, Richard Connor (AFP, AP, Reuters, dpa)
Editor: Martin Kuebler