EU financial rescue system like pyramid scheme: Slovak PM

(BRATISLAVA) - The European financial stability rescue mechanism activated by Ireland this week resembles a pyramid scheme rather than a long-term solution, Slovak Prime Minister Iveta Radicova said Wednesday.

"We are close to a system similar to a pyramid scheme and the moment will come when the whole system will collapse like a house of cards," Radicova told journalists.

On Sunday, Slovakia agreed to back a European Union and International Monetary Fund rescue plan for Ireland, under which the struggling eurozone member may receive loans worth about 85 billion euros (114 billion dollars).

Earlier this year, Slovakia was only EU holdout against a 110-billion-euro bailout for another fellow eurozone member, Greece.

"When we discussed Greece, we said the bailout was not a loan but a gift. I don't feel any satisfaction now in saying: 'we told you so'," Radicova said.

"I can't rule out that we'll be discussing other countries soon. And I must point out that Portugal and Spain are communicating vessels," she added, using a scientific term for a system where liquids spread out equally.

Slovakia, which joined the EU in 2004 and the eurozone in 2009, has been pushing for the participation of the private sector in the rescue mechanism, saying taxpayers should not bear all the costs.

"Banks shouldn't be motivated to keep lending money and ask the EU rescue mechanism for a bailout when problems come," Radicova said.

"The EU has backed a system which is a vicious circle. As long as there's a rescue system, banks have no reason to change their behaviour," she added.