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Slovak PM to put government on line ahead of EFSF vote

By Michael Winfrey and Martin Santa

BRATISLAVA (Reuters) - Slovak Prime Minister Iveta Radicova will put the future of her government on the line on Tuesday before lawmakers cast ballots on a euro zone rescue mechanism that one of her junior ruling parties looks set to shoot down.

Slovakia is the last member the 17-member bloc yet to vote on a deal agreed by its leaders in July to boost the size and powers of the European Financial Stability Facility.

Three of the four parties in the right-of-center government want to push through the mechanism aimed at preventing the Greece debt crisis from spiralling out of control.

But a fourth, the Freedom and Solidarity (SaS) party, has threatened to vote against it, arguing that one of the poorest members in the single currency club should not have to pay for the huge debts racked up by richer states like Greece or Italy.

Radicova and the like-minded coalition partners have vowed to push through the ratification even if they have to ask for the opposition's support -- a scenario that would almost certainly trigger the collapse of the government.

The vote Tuesday may fail, but the parliament can put the ratification to repeated ballot within hours or days after that once a political agreement with the opposition is in place.

Last-ditch coalition talks failed to produce an agreement on Monday evening, and sources close to Radicova said she would decide on one of three options by Tuesday morning: to tie the EFSF vote to a confidence vote, to resign before the vote, or to resign after the vote in case it fails.

Speaking to reporters Monday evening, she did not mention her threat to resign but indicated she faced a tough choice. Coalition leaders were due to meet one more time at 9 a.m. (0700 GMT) Tuesday.

"I will make a responsible decision by morning," she said.

Any further delay to the ratification of the EFSF expansion, which was originally envisioned to happen by mid-October, could rattle markets already under pressure from signs that the crisis is already spilling beyond Greece's borders.

Belgium won agreement by bank Dexia on the nationalisation of its Belgian division Monday and the Greek central bank effectively nationalised a small bank Monday.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks late Sunday that they would unveil new measures in the coming weeks to solve the debt crisis, but gave few details.

Analysts said the brinkmanship, although it would not torpedo the expansion of the EFSF in the end, would still weigh on global sentiment toward the euro zone even as the crisis deepened.

"The SaS should consider that it could trigger not just a collapse of the government, which is a secondary issue right now, but cause turbulences in Europe and on the markets," said Grigory Meseznikov director of the Institute for Public Affairs.

All 17 euro zone states must ratify the EFSF expansion for it to go active. The deal boosts its size to 440 billion euros, allows it to buy bonds from the market to support countries under attack by markets, bail out members who need funding and help them prop up failing banks.

Slovakia's leftist opposition-leading Smer party supports the EFSF but has refused to vote for it Tuesday, betting that government discord can give it a political opening.

It has demanded a government reshuffle or an early election for its votes, meaning those coalition partners that support the EFSF can approach it within hours or days after any potential failed vote to seek a deal to push it through.

"There are three alternatives, the prime minister needs to decide which alternative she will prefer if the EFSF will not be approved or if there is no agreement," Bela Bugar, head of the ruling Most-Hid party told television TA3.

Once the EFSF is voted in, deputies must then also approve a package of domestic legislation to implement the deal -- an issue analysts say should not pose a problem once Radicova secures support either from SaS or the opposition.

(Additional reporting by Martin Santa and Jan Lopatka; Writing by Michael Winfrey; Editing by Maria Golovnina)

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