PM Ľudovít Ódor with Lego pieces during a press briefing on October 4, 2023. (source: TASR - Martin Baumann)
The interim technocratic government of former banker Ľudovít Ódor unveiled on Wednesday a package of consolidation measures, which the future government could follow to reduce Slovakia’s debt and general government deficit. The Ódor government promised to introduce the measures after the election.
The package features nearly 100 different measures worth almost €10 billion.
“We see the package as apolitical,” said acting Finance Minister Michal Horváth, adding that they tried to choose smart solutions that would not harm the economy. “There are expert measures that political scientists would classify as left-wing, but also those that would be more right-wing."
Horváth pointed out that if the government wants to stabilise the rate of debt, more significant consolidation measures need to be implemented, optimally worth 5 percent of GDP or more than €6 billion. The extent of offered measures in the consolidation document is greater so that the new government can pick means with emphasis on its political heading and priorities.
Of the €10 billion consolidation sum, hiking revenues less harmful to the economy, especially consumption tax or property tax, represents some €3.2 billion. One of proposals is the increase of the basic VAT of 20 percent by 2 percentage points. A proposed reduction in social spending should bring €2.2 billion. The document also includes a more effective tax-and-levy system for some €900 million.
In addition to consolidation measures, the caretaker government also mentions reforms that would take place in the long term; however, Horváth explained that they are vital to return the sustainability of public finances from a high to a lower risk.
Without the consolidation of public finances, the general government deficit will remain close to 7 percent of GDP for the next three years and gross debt will start to hit the 70 percent of GDP mark.
The consolidation path will not be easy, according to Ódor. The debt needs to be stabilised. Otherwise, unless a decisive consolidation arises, Slovakia will find itself out of favour with the financial markets.
“Then we would have to solve the situation with a big axe. Currently the situation can be solved with a lancet,” Ódor said.
