ECB outraged by Slovak refusal to aid Greece-sources

* Trichet outraged by Slovak “no” to Greek loan

* ECB would not back Slovak euro entry, had it known

* Won’t back other applicants if a risk of similar action

By Martin Santa and Jan Strupczewski

BRATISLAVA/BRUSSELS, Sept 10 (BestGrowthStock) – Slovakia set a bad
example by refusing support for a loan to Greece, and the
European Central Bank will not support euro entry by others
unless sure they will not take similar steps in the future, ECB
President Jean-Claude Trichet was quoted as saying.

A memo from this week’s meeting of euro zone finance
ministers, seen by Reuters, said Trichet was outraged at the
refusal by Slovakia to participate in the Greek bailout.

Several EU officials said privately Slovakia could be
snubbed by some of the 26 other EU member states because its
decision is likely to complicate talks on the bloc’s budget,
making the rich net payers less willing to grant aid to poorer
countries.

“Trichet was outraged at the last Eurogroup by Slovakia’s
refusal of a bilateral loan to Greece and said that had the ECB
known Slovakia would behave like that, it would not have
endorsed Slovakia’s euro adoption,” the memo summarising the
discussion said.

“It sets a bad example for future candidate countries. Also
(he said) that the ECB would not back future euro zone
applicants if there is a risk they will do something similar.”

Two euro zone sources confirmed Trichet made the comments.

“That is a fairly faithful account of what was said,” one
source said.

The parliament in Slovakia, the poorest of the 16 countries
that use the euro, last month ruled against contributing 816
million euros ($1.05 billion) to a 110 billion euro bailout fund
for Greece [ID:nLDE67A21W].

NO COMMENT

“Some European institutions voiced concerns about Slovakia’s
stance on the Greek loan during the Eurogroup meeting. Since
this was a meeting of a confidential nature, we will neither
confirm nor decline individual comments,” Slovak finance
ministry spokesman Martin Jaros said.

The ECB had no comment.

In its convergence reports, the ECB evaluates how well
non-euro zone EU members fulfil euro entry criteria.

Besides inflation, the euro entry criteria are: budget
deficit below 3 percent of GDP, gross public debt below 60
percent/GDP, nominal long-term interest rates no more than 2
percentage points higher than the average of the three states
with lowest inflation.

Bratislava said taxpayers in a country that has kept its
debt under control should not have to bail out a profligate one.

Slovakia’s new right-leaning government opposed taking part
in the bailout despite a pledge by the previous administration
to support Greece, where the budget deficit had ballooned so
much that it threatened the stability of the euro zone.

The aid package will go ahead despite the refusal by the
Slovak parliament, but Bratislava’s position dealt a blow to
euro zone unity in the face of the financial crisis and Slovakia
has run into sharp criticism from European governments.

However, the Slovak position has been backed by the Czech
Republic, a country that has taken a slow approach toward euro
entry and currently has no target date.

A major issue in the Slovak refusal to help Greece is that
Slovakia, which only joined the euro in 2009, is the euro area’s
poorest state and its wages and pensions are far below those in
Greece, which makes aid to Athens widely unpopular.

The monthly minimum wage in the ex-communist country which
joined the European Union in 2004 is 308 euros, well below the
Greek minimum legal wage of 863 euros.
(Writing by Jan Lopatka; editing by Stephen Nisbet)

ECB outraged by Slovak refusal to aid Greece-sources