Slovakian lawmakers late Tuesday voted down their governing coalition's bid to expand the Eurozone's bailout fund, toppling the government but heightening prospects a new coalition can push through a measure many see as essential to the continent's future.
Slovakia, the second poorest Eurozone nation and the only one of its 17 members yet to approve strengthening the European Financial Stability Fund, voted down the request by Prime Minister Iveta Radicova.
The vote in favor of the measure fell short by 21 votes. The largest opposition party, the left-wing Smer, said it would support enlarging the bailout fund in a second vote.
Parliamentarians were working late into the night to form a new governing coalition that is expected to include Smer and result in passage of the measure. A second, successful vote is expected to come later this week.
The enhanced powers of the nearly $600 billion bailout fund are widely seen as essential to protecting those banks on the continent that hold bonds from Greece, Spain and Italy, among other weak Eurozone members. Upon Slovakia's approval of a stronger bailout fund, it could be used to buy bonds from Greece and other weak nations and support vulnerable banks, particularly those in France and Germany.
A Greek default is widely expected and markets are concerned that -- unless European leaders take robust action -- it could be followed by other nations defaulting and the continent's banks suffering acute damage.
Under terms of the failed proposal, Slovakia, a nation of 5.5 million people, would contribute about $10.5 billion to the fund.