To expand a little bit on yesterday’s Slovakia happenings, I think much of the original reporting on this was somewhat confused and the parliamentary no vote isn’t necessarily that consequential. To see why, let’s step back and remember what we’re talking about. The leaders of the big Eurozone states decided that they want to expand something called the European Financial Stabilization Fund in order to be able to backstop Portugal and Ireland in the event of a possible Greek default. This requires the unanimous approval of the Eurozone parliaments, which includes Slovakia. All of them except Slovakia already agreed, and yesterday Slovakia said no.

But — and here’s the tricky part — the EFSF expansion actually seems to have majority support in the Slovak parliament.

To understand what’s happening here, you need to look back at the outcome of the 2010 elections. Then-incumbent Prime Minister Robert Fico led the social democratic Smer party to capture the largest number of seats. But a coalition of four substantially smaller center-right parties collectively had a majority in parliament and used it to form a governing coalition. Slovakia’s Prime Minister Iveta Radičová supports the EFSF expansion, as does her Slovak Democratic and Christian Union party and two of its three coalition partners. The problem is that one of the three coalition partners doesn’t support the EFSF expansion and Smer doesn’t want to bail the prime minister out by delivering the votes she needs to pass the bill. But they’re not determined to kill the bill either, they just want to use it as leverage. It’d be as if Nancy Pelosi withheld Democratic votes from the TARP legislation unless Bush and Boehner agreed to make some separate concessions on taxes and SCHIP.

The ridiculous thing about these Republican debates is that you keep needing to wade through this vast field of candidates who are essentially doing book tours in order to hear the actual presidential candidates debate. Rick Santorum is not going to be a major party presidential nominee. Nor will Herman Cain. Michele Bachmann had a brief moment when it kinda sorta maybe looked like she could possibly break through, but she didn’t. The actual choice Republicans are making at the moment is whether Rick Perry or Mitt Romney will run against Barack Obama. This is an interesting question, and I for one would like to see the relevant information presented rather than a lot of nonsense from pizza salesmen and Newt Gingrich.

Initially I thought the lack of mano-a-mano debates was helping Perry, since Romney was clearly the superior debater but Perry could kind of hide behind all the other nutters and muddy the waters. But now that Romney seems to have the upper hand against Perry, it’s the reverse. Perry would really benefit from a high-risk, high-reward opportunity to reset the narrative about his skills as a candidate. Based on what we’ve seen so far, even people who prefer Perry on the merits must be worried that he’s too shaky to be a reliable standard-bearer against the incumbent.

Meanwhile, on the issues, nobody said “Slovakia.” There was this weird exchange about whether or not Romney would support a new bailout if, hypothetically, the European situation were to cause some unspecified insolvency of American banks. But why not ask a question about the actual situation? Should the president be phoning up Slovak parliamentarians?

Prague Castle

Tyler Cowen is looking into the dissolution of monetary unions. One recent case is the 1993 “Velvet Divorce” of the Czech and Slovak Republics. The basic mechanics of the switch. The countries had divided back in January, but maintained a single currency for a little bit, though the Czechs insisted on splitting up since they thought the Slovak economy would be weaker:

The current bank notes will be exchanged for stamped ones in the ration 1:1 since Thursday 4 till Sunday, February 7 at all post offices and detached sections of the Czech Savings Bank. During those days the banks will stop withdrawal from accounts and deposit books. Till Sunday only not-stamped bank notes are valid in the Czech Republic.

Stamped notes with the value of 100, 500, and 1000 crowns together with not stamped notes of lower value (10,20,50 and coins) will be valid since Monday, February 8. On the same day the Czech currency will be enriched by the first Czech 200 crown bill with the portrait of J.A.Komensky.

Every citizen aged 15 and more can exchange money to the value of 4000 crown, a person below 15 can exchange maximum 1000 crowns. The exchange will be certified in the identity card.

Persons who will not be able for serious reasons exchange money can do so within the following 6 months. If someone has at home more than 4000 crowns, he can deposit it in the Savings Bank of send through post to his own addresse where it will be delivered already stamped.

The situation in Slovakia was basically the same. Anticipation that the Czech Koruna would appreciate relative to the Slovak one meant “thousands of Slovaks rushed across the Czech border to have their old notes stamped as Czech.” Key to making this work is that at the time I believe the České Spořitelna bank was still a state-owned monopoly so capital controls could be applied in a straightforward and effective matter with ease.