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Slovak coalition scrambles for deal on eurozone rescue

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(BRATISLAVA) - Slovakia's squabbling four-party coalition met Thursday to try to break the deadlock over approving a crucial eurozone rescue mechanism aimed at freeing funds for debt-stricken members like Greece.

Centre-right Prime Minister Iveta Radicova supports the rescue package but has so far failed to convince a junior coalition partner -- the liberal Freedom and Solidarity (SaS) -- to back it in a parliamentary vote set for October 11.

All eurozone members must ratify changes agreed in July for the European Financial Stability Facility for them to be implemented.

With the Netherlands expected to back the increase in size and scope of the EFSF later Thursday and Malta on Monday, Slovakia's decision, as the last state to vote, is crucial.

Radicova, who normally commands a majority 79 votes in the 150-member parliament, is dependent on the nay-saying SaS's 22 seats -- or failing their support, the 62 seats of the opposition left Smer-SD.

"We have prepared a new solution that won't harm Slovak taxpayers but we have to present the solution to our partners before commenting on details," SaS deputy chairman Daniel Krajcer said ahead of Thursday's talks, adding that he expected partners to "take a few days to think about the proposal."

Slovak media quoted an SaS official Thursday as saying it would agree to pass the EFSF changes on condition that Slovakia is effectively granted veto power over future emergency loan disbursements from the fund.

According to the SME daily, the SaS also wants its coalition partners to refuse Slovakia's participation in the permanent European Stability Mechanism (ESM), designed to replace the EFSF in 2013.

Arguing that Slovaks were too poor to foot the bill, SaS leader Richard Sulik earlier threatened to torpedo the fund unless Slovakia is exempt from providing state guarantees worth 7.7 billion euros ($10.2 billion) for the revamped 440 billion-euro EFSF.

The leader of the opposition Smer-SD, ex-prime minister Robert Fico, pledged Wednesday his party's support -- but in exchange for a power shift in the coalition government or a snap election.

Legal experts say that if parliament fails to ratify the EFSF on October 11, the vote could be repeated immediately.

The EFSF was set up last year to help protect the euro area after the EU and International Monetary Fund bailed out Greek to save it from a damaging debt default.

The revamped EFSF may loan money as a precaution before states get too deep into trouble, buy sovereign bonds of struggling eurozone states on the secondary markets and provide countries with money to recapitalise banks.

A member of the EU since 2004 and the eurozone as of 2009, Slovakia was the only country to refuse to participate in last year's emergency loan for Greece.

Only 38 percent of Slovakia's 5.4 million people support their country's contribution to the EFSF, a recent opinion poll found.

The second poorest eurozone member, whose economy is driven by car and electronics exports, it is currently undergoing austerity measures to cut its public deficit from 4.9 percent of GDP this year to under 3.0 percent by 2013.

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