* Opposition says Slovak lending to Greece a bad idea
* Has chance of replacing PM Fico in Saturday election
* New government must act fast to meet budget targets
By Martin Santa
BRATISLAVA, June 11 (Reuters) - Threats by the Slovak
opposition to refuse to pay Greece aid should they take power
show how the sovereign debt crisis has eroded European unity and
highlight tensions generated by a bailout for euro zone debtors.
Slovakia, which joined the euro zone only in 2009 and is
much poorer than Greece, is due to vote in July on its 800
million euro ($960 million) contribution to Athens' 110 billion
euro bailout.
But Slovakia needs to cut its own budget gap, and whether it
approves its share of the Greek payout depends heavily on the
outcome of its general election on Saturday.
While a Slovak rejection could not stop the bailout, which
has already won parliamentary support from euro zone
heavyweights France and Germany, a refusal to contribute an
albeit minor share would be a blow to solidarity among euro zone
member states and send out wider political ripples.
"It wouldn't topple the whole deal -- that would hinge on
developments in France and Germany," said Neil Shearing, an
economist at Capital Economics.
"But it would cast increasing doubt on the sustainability of
the current setup in the euro zone. It's often in the small
countries where these things get triggered."
While leftist Prime Minister Robert Fico, who backs the
bailout, could still win another term in office, Slovakia's
centre-right opposition stands a solid chance of cobbling
together a majority. []
Iveta Radicova, who heads the leading opposition Democratic
and Christian Union (SDKU), told Reuters in May the party would
torpedo the proposed loan contribution, equal to 1.2 percent of
Slovakia's annual output and 21 percent of this year's planned
budget deficit.
SDKU, which pushed through radical reforms at the beginning
of this decade and made the central European country of 5.3
million a darling among foreign investors, shares its view with
other right-wing parties that may enter government.
Political analysts say the SDKU, which lost power in 2006,
may back off the threat under pressure from Brussels which is
keen to present markets with a united front.
RISING SCEPTICISM
But the Greek crisis has transformed attitudes towards
integration among Slovaks who danced in the streets when they
joined the EU in 2004 and then went on to beat bigger
ex-communist economies into the euro zone.
A survey by the country's Public Opinion Research Agency in
May showed two thirds of Slovaks were against lending to Greece
and only 25 percent were actively in favour.
"Did these Greeks fall out of the sky?" said Dusan Tardik, a
55-year-old taxi driver in Bratislava. "Where was the European
Union, or (European Commission president) Barroso? They hold
meetings all the time. They must have known but did not think it
could end up like this."
Despite fast investment-led growth in recent years,
Slovakia's heavily export-reliant economy is the euro's poorest
and it is recovering from a contraction of 4.7 percent in 2009.
Gross domestic product (GDP) per capita was 72 percent of
the EU average in 2008, versus 94 percent for Greece. The Slovak
average wage is 725 euros a month, still well below the Greek
minimum of 863 euros.
WHY HELP GREECE?
Even so, Slovakia's economic position is stronger than
Greece's and growth is expected to rebound to 2.7 percent this
year, leading the EU along with Poland.
Government debt of 35.7 percent of GDP is half of the EU
average, and its borrowing costs are a fraction of some euro
zone states, with its 10-year government bond yield spread over
bunds only 139.6 basis points, compared with 277.7 in Portugal
and 578.7 bps in Greece.
But the incoming cabinet will inherit high unemployment and
a fiscal deficit analysts estimate could hit 7.4 percent of GDP
this year, a shortfall analysts say could grow to threaten the
economy without pension, healthcare, welfare and other reforms.
Slovakia needs "to stop accruing debt and to present a
trustworthy plan of public finance deficit cuts," said Slovenska
Sporitelna Chief Economist Juraj Barta.
"But (it must be) a plan that will also be followed."
Slovakia is fighting to boost competitiveness sapped in part
by its adoption of the euro just before the global crisis hit.
Its neighbours were able to let their currencies depreciate,
lowering production costs.
Parties on the Slovak right, some of whom once delighted in
embracing their new EU partners, are now far more cautious.
"Greece is a barrel with no bottom. In three years, Greece
will still be where it is today," said Tatiana Tothova, a
spokeswoman for the economically liberal SaS party.
(Editing by Ruth Pitchford)
