Slovakia, the little country that could derail us
Wrapped up as you are in the GOP presidential debates, the Occupy Wall Street protests, the fate of President Obama's jobs bill and -- oh, OK, who are we kidding, the trial of Michael Jackson's doctor, the NFL season, the non-NBA season and the baseball playoffs -- you might have missed Tuesday's big news.
Here's The Times' headline: "Slovakia rejects Europe bailout fund on initial vote."
Now, before you go clicking away to the Fabulous Forum blog, take 30 seconds and read this. Because even though you might not be able to find Slovakia on a map, you need to know this stuff:
Lawmakers in Slovakia on Tuesday rejected a proposal to beef up Europe's bailout fund for debt-stressed nations, but supporters are holding out hope that the measure will pass in a second vote expected to take place within days.
The plan to strengthen the rescue fund is widely considered imperative for Europe as it tries to tame a debt crisis that has already forced Greece, Portugal and Ireland to accept emergency loans to stay afloat. But in a tense showdown, a junior party in Slovakia's ruling coalition refused to back the measure, saying Slovaks should not be on the hook to bail out richer but less financially responsible nations.
Expansion of the fund requires the ratification of each of the 17 countries that share the euro currency. All but Slovakia have given their approval.
Prime Minister Iveta Radicova is now expected to appeal to Slovakia's main opposition party to help her government pass the measure in a second vote. But its support will come at a steep price: The party's leader has said he will back the plan only if Radicova calls an early election.
Analysts say she has little choice but to comply. Not to do so would risk throwing already volatile global markets into even greater turmoil.
So the fate of America's stock market -- and thus your 401(k), the country's economic future, the world's economic future -– may rest in the tea party-like hands of the government of Slovakia.
And you thought the debt-ceiling debate was stupid.
Don't think it's serious? Here’s how the Associated Press put in, writing about Tuesday's stock market results:
Markets have been swinging wildly since early August, when Europe's economy suddenly seemed closer to the brink of collapse.
Moves of more than 100 points for the Dow have become commonplace as traders react swiftly to every whiff of news coming out of Europe. The S&P 500 is up 8.8% since last Tuesday, when it traded 20% below its April peak.
Many market watchers think the volatility will continue until heavily indebted countries like Greece, Spain and Italy have established a clear path out of their current debt mess.
It's not yet Chicken Little time. Cooler heads will probably prevail. Europe won't drown in a wave of debt, taking us with it. [Updated 12:23 am Thursday Oct. 13 2011: This just in -- lawmakers in Slovakia on Thursday approved a proposal to beef up Europe’s bailout fund for debt-stressed nations.]
But Tuesday night, the Republican presidential candidates met in a debate on the economy.
Slovakia didn't come up.
Instead, they talked about Herman Cain's "9-9-9" tax plan, and Rick Perry's idea to turn the U.S. into a giant oil well (or something), and then Rick Santorum said he wanted to go to war with China over trade, and Ron Paul trashed the Fed.
And watching the debate, I couldn't help thinking that these candidates would have fit right in in the classroom scene from "Ferris Bueller’s Day Off":
Teacher: In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics.
-- Paul Whitefield
Photo: Slovak Prime Minister Iveta Radicova speaks to reporters in Bratislava. Credit: Samuel Kubani / AFP / Getty Images