Slovakia's parliament backed a plan to bolster the euro zone's EFSF rescue fund on Thursday after political parties agreed to hold an early election, concluding the ratification process in all euro zone countries.
The euro zone's European Financial Stability Facility (EFSF) will now gain more powers to fight the debt crisis in the 17-member club, although political leaders are already planning further measures to counter the deepening crisis.
A junior party in Slovakia's coalition brought down the government on Tuesday after Prime Minister Iveta Radicova made the EFSF ratification a vote of confidence. In the end she had to call an election as the price of passing it in a new vote with the support of the opposition.
The price is high, but I'm glad that Slovakia stood up to its commitments in the end and we are not blocking the euro zone from having this tool at disposal to contain the crisis, Finance Minister Ivan Miklos said after the vote.
The presidents of the European Commission and European Council said the ratification had bolstered the single currency.
The EFSF provides us with a stronger, more flexible tool to defend the financial stability of the euro area. This is in the clear interest of every one of the 17 member states directly concerned, as well as for the wider European Union, Jose Manuel Barroso and Herman Van Rompuy said in a statement.
The failure of the first ratification attempt had rattled financial markets. The euro recovered ground against the dollar after Thursday's vote, but continued to suffer from renewed worries about European banks and the global economy.
Slovakia was the last of the 17 countries using the single currency to approve the new EFSF powers, and its difficulties exemplify the challenge for euro zone leaders when every member state has an effective veto over measures to counter the crisis.
With 5.4 million people, Slovakia accounts for less than 2 percent of the bloc's population and 1 percent of its output.
The EU is due to hold a summit on October 23 to agree further measures to protect euro zone banks if Greece defaults on its debts.
Klaus Regling, the chief executive of the EFSF, said the fund was ready to extend its scope of activity as soon as it received confirmation from all euro countries that they had adjusted their legal framework accordingly.
Under a Slovak law approved on Thursday, an election due in 2014 will be brought forward to March 10, 2012, meeting the opposition Smer party's main condition for support of the EFSF.
I'm glad that ... Slovakia has returned to the map of Europe, Smer leader Robert Fico said. I'm convinced that after the 2012 election there will be a government that does not have differences of opinion like this coalition.
The package will boost the EFSF to 440 billion euros and give it the ability to buy sovereign bonds, extend emergency lending to countries and recapitalize banks.
Slovakia's portion of the guarantees backing up the EFSF is 7.7 billion euros -- about 11 percent of its annual output.
Free-marketeer Richard Sulik, leader of the Freedom and Solidarity (SaS) party, the dissenting coalition member that brought down the government, argued that as the euro zone's second poorest member, Slovakia should not have to bail out richer countries like Greece. Slovakia's living standards are just 74 percent of EU average, below Greece's 89 percent.
Radicova's cabinet will remain in office until a new administration is formed. Coalition officials have not given details on how it will operate and it is possible that it will work only in a caretaker capacity.
Fico, whose Smer party is Slovakia's most popular by far with over 40 percent support, had long pledged support for the rescue fund but stayed out of Tuesday's ratification as a tactical move to topple the government.
President Ivan Gasparovic, who must appoint the next prime minister, cut short a visit to Asia and was due to meet Radicova on Friday. She canceled a trip to a summit of central European leaders in Prague.
Slovaks have been split over the EFSF, but the latest opinion polls show more people backing the plan to expand it than opposing it.
This coin has two sides -- when we are members of the euro zone, we need to take measures the way other countries adopt them, and not distance ourselves, said Michal Sklenar, 28, a clerk.
(Writing by Michael Winfrey and Jan Lopatka, additional reporting by Sylvia Westall in Vienna and Charlie Dunmore in Brussels; Editing by Kevin Liffey)