The late Herb Stein was fond of saying that things that can't go on forever will come to an end. In the case of the euro zone, it remains to be seen who will deliver the final blow to the shaky monetary union that today includes a shared bailout fund and no fiscal discipline, The Wall Street Journal reported in a commentary. Now that the German Constitutional Court has ruled that euro-zone bailouts are permissible, the next challenge to proponents of deeper fiscal integration may come from further east, where some politicians are starting to challenge the notion that they should provide unconditional funds to a flawed debt union that rewards bad policies.
In Finland, for instance, Prime Minister Jyrki Katainen has said that Helsinki would block the next wave of Greek emergency loans unless Finland received a significant cash collateral for its contributions.
He's not alone. Many Eastern Europeans, especially those who remember decades of communist rule, are highly attuned to the fundamental unfairness of socializing bank losses and propping up bankrupt governments at taxpayers' expense. Last year, Slovakia was the only country in the euro zone that refused to participate in the initial €110 billion bailout of Greece. The country's prime minister, Iveta Radicova, summarized the government's decision at the time when she said that "more responsible, poorer [countries] should not be raising money for the less responsible, richer ones."
A year later, she has grudgingly agreed to the creation of the European Stabilization Mechanism, which will replace the euro zone's existing temporary bailout fund. Ms. Radicova's government has also preliminarily agreed to bolster the temporary fund and accommodate a second Greek bailout with a commitment for up to €120 billion. Ms. Radicova now says that it "would be irresponsible" for Slovakia to be the one country standing between Europe and its bailouts.
Yet the idea of bailing out governments on the euro zone's ailing periphery remains profoundly unpopular in Slovakia—and rightly so. It is disquieting to see the groupthink of closed-door EU summits trumping popular majorities in European countries, especially those that have only enjoyed the benefits of truly democratic rule for two decades. Read more. (Subscription required.)
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