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The mouse that roared: How tiny Slovakia could prolong Europe's massive debt crisis

Slovakia's vote against expanding the European bailout fund presents an unwelcome obstacle to solving Europe's debt crisis. It also caused the fall of the tiny country's government.

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“This vote is due in part to domestic politics,” says Jana Kobzova of the London-based think tank European Council on Foreign Relations. “But it is also a clear warning by one of the smaller eurozone members that without fiscal discipline the common currency will not work. Basically, the Slovaks say they’re not prepared to pay for the eurozone’s major design fault: the lack of economic governance.”

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Markets anxious for news

Prime Minister Radicova said that the Slovakian parliament would vote on the issue again within the next few days, a move allowed under the Constitution. The opposition, having reached their primary goal by bringing down the government, signaled they would support the vote in the second round, giving some reassurance to financial markets around the world, which are anxiously waiting for decisive action against the sovereign debt crisis that is already turning into a banking crisis.

Later on Wednesday, the president of the EU Commission, Manuel Barroso, is to unveil proposals designed to overcome the debt crisis by refinancing struggling European banks and bringing down the debt burden for Greece.

"This crisis started with the financial crisis [of 2008]. Three years later, we are still facing doubts about the capacity of the banks to cope with, for instance, their exposure to sovereign risk," Amadeu Altafaj Tardio, a commission spokesman, told AP Television News on Wednesday.

In a sign that financial markets seem to be pining for such a coordinated plan, banking shares across Europe went up ahead of the announcement.

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