Europe gets reprieve as Slovakia set to back rescue fund

Europe breathed easier yesterday after Slovak parties agreed to hold a new vote this week on revamping the eurozone's debt rescue fund and the EU pressed banks to urgently beef up their coffers against the crisis.

Under pressure from European partners to vote again, a day after its Parliament rejected an overhaul of the European Financial Stability Facility (EFSF), four key parties struck a deal to adopt it in a second roll call by tomorrow.

'We have reached an agreement on securing the adoption of the most important document of this period -- the EU bailout fund,” said Robert Fico, leader of the left-wing Smer-SD opposition party.

In return for a new vote, the centre-right government of Prime Minister Iveta Radicova agreed to hold snap elections on March 10. Her coalition collapsed with the 'no' vote on Tuesday after a key partner refused to support the EFSF.

EU leaders had pressed Slovakia to hold a new vote in the wake of warnings from the United States and China for Europe to get its house in order quickly for the sake of a weakening global economy.

'The world economy is heavily affected by the financial crisis and every EU country must contribute its share to the fight against the debt crisis,' German Chancellor Angela Merkel said during a visit in Vietnam.

She also said she was confident the expanded bailout fund would be ratified this month. The EU holds a summit October 23 focused on finalising its crisis response ahead of a G20 meeting in early November.