SLOVAKIA will not stand in the way of the start of the European Stability Mechanism (ESM) in July as Prime Minister Robert Fico pledged that the legislation will be approved by the Slovak parliament before the end of June. The prime minister held a roundtable meeting with representatives of the parliamentary opposition on June 14 to discuss the ESM issue and the political leaders also agreed that they would swap ideas on how to achieve fiscal consolidation in Slovakia.
The leaders of six parliamentary parties attended the meeting and all except Richard Sulík of Freedom and Solidarity (SaS) party declared that their MPs will vote to ratify the ESM by the end of this month. SaS did not budge from the position it held last October 2011 when it did not support a vote on previous legislation involving the European bailout mechanism that led to the fall of the four-party coalition government of Iveta Radičová that included SaS.
“I am very sorry that [Prime Minister] Fico decided to break his head on this and obediently fulfils all the wishes coming from Brussels and he doesn’t even think about what would happen if we dared to say ‘let’s wait a month, let’s not be hasty’,” stated Sulík, as quoted by the TASR newswire.
Ratification can be accomplished without any votes from opposition MPs as Fico’s Smer party has more than a simple majority in parliament and only that is needed to pass the treaty. Smer has 83 MPs and only 76 votes are required in the 150-member chamber. But the prime minister said he would welcome it if other political parties helped to ensure that the vote is successful and repeatedly declared that the vote will be taken during parliament’s June session that began on June 19.
The ESM will replace the temporary European Financial Stability Facility (EFSF) and will require some €80 billion from members of the eurozone to establish a package of measures aimed maintaining the stability of the eurozone by assisting eurozone countries that are having fiscal problems or difficulty in selling bonds at a sustainable interest rate, TASR wrote.
Opposition split on the ESM
If Slovakia participates in the ESM, its own public debt will increase and it may be required to take additional austerity measures.
Sulík commented that Fico was moving too quickly, stating that “the poorest country of Europe [Slovakia] must by June 30 by any means declare here in parliament that it will save everybody around”, as quoted by TASR.
The top leaders of the other opposition parties in parliament did not fully share Sulík’s opinion.
“It is a signal,” Most-Híd chair Béla Bugár said about the ESM to TASR. “We might as well send a signal that we are not planning to wait.”
The opposition parties did say, however, that they would like to push the final decision to as late in June as possible since by then it should be clear if Germany and Greece will support creation of the ESM.
Swapping consolidation ideas
The leaders of the centre-right opposition parties in the Slovak parliament agreed to exchange ideas with Fico and his Smer party on how to consolidate the country’s public finances.
“We have received an assurance that some opposition proposals might be passed,” Bugár told TASR.
Fico said Smer will not assess proposals submitted by the opposition solely from an ideological point of view but will look at whether they are compatible with the aims stated in the government’s programme statement.
“We can already say that some of the opposition proposals could be backed by Smer,” Fico stated, giving as an example a proposed land use plan.
While both the government and the opposition parties agree that fiscal consolidation is necessary, Fico stated that new revenue sources that are being discussed by the opposition would only cover about a tenth of the funds needed to reduce the deficit to 3 percent of GDP or less.
“We don't have any systematic alternative from them so far,” Fico stated, as quoted by TASR, adding that his Smer party absolutely refuses to eliminate social allowances as is proposed by the opposition because it would mean taking money from families with monthly incomes less that €1,500.
The opposition parties have stated that the government’s efforts to reduce the budget deficit are too focused on the revenue side of the budget and the government should further cut expenditures. The opposition opposes increases in payroll levies and income tax rates on individuals or businesses.
“Consolidation based on raising taxes and payroll levies, focused on the revenue side of the state budget, will affect mainly small enterprises, the self-employed, and employees: ordinary people,” stated Ján Figeľ, the chairman of the Christian Democratic Movement (KDH), as quoted by the SITA newswire.
Most-Híd, another opposition party, said it opposes an increase in the tax on banks and also disagrees with Smer’s proposal to raise income tax rates on some businesses.
“We would be the only country in the region with a [corporate income] tax of 23 percent, based on Smer’s proposal,” Bugár stated, as quoted by SITA, adding that he believes this will lower Slovakia’s competitiveness.
At the meeting on June 14 the prime minister and the leaders of the opposition parties agreed that detecting tax evasion and being more effective in collecting taxes is a priority but that this alone will not close the budget gap over the next two years.
Smer released its proposed consolidation measures to the opposition as well as to the general public on June 18. The prime minister said he is open for changes during the legislative process if proposed amendments from the opposition “make sense”, SITA wrote.
