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MINISTRIES HAVE TO REDUCE THEIR SPENDING TO SAVE MONEY FOR SOCIAL PROGRAMME

Promises show up in the bill

SEVERAL ministries are going to have to switch into saving mode, a sacrifice they should make at the altar of the leftist Smer party's election promises.

SEVERAL ministries are going to have to switch into saving mode, a sacrifice they should make at the altar of the leftist Smer party's election promises.

The Slovak Finance Ministry has said it will seek to reduce ministry spending by at least 10 percent, thereby saving Sk4.3 billion (€110 million) by the end of the year.

"It is very important that the ministries thoroughly consider how they spend state funds and start looking for reserves in their budgets. Ten percent should be bearable for every ministry," Finance Minister Ján Počiatek told the media.

"It is important to show that there is room for cutting state spending," he added, suggesting the dawning of a new era in state spending.

However, the ministry says the reduction cannot come from salaries or insurance allocations, EU funds and EU co-funding, transfers to international organisations or state debt.

The Defence Department will have to tighten its belt the most, since it will be expected to save Sk883 million, while the Transport Ministry should retain another Sk763 million in its purse.

Spending cut plans for the Education Ministry, however, came as a surprise, since the Fico government originally wanted to increase spending on education from 3.8 percent to 5 percent of GDP.

However, Deputy Prime Minister for a knowledge-based economy Dušan Čaplovič argues that the cuts will not touch the money that should go to science and research.

Local media have pointed out that the ministries have not made any analysis on where and how much money could be saved. Analysts are also arguing that one-time savings will not necessarily solve the dilemma of how to finance increased social spending.

According to the SME daily, the so-called Christmas bonuses promised to pensioners will cost the state budget Sk2 billion, while the Sk15,000 bonus families will receive upon the birth of their first child will cost about Sk300 million. The abolition of the fees health institutions collected from the patients will cost public finance sector another Sk2.5 billion.

Meanwhile, the cabinet on August 9 agreed to increase basic welfare benefits for people in material need as of September 1, 2006. State aid to retired and physically disabled people will also increase, and people in material need would receive Sk60 monthly instead of Sk50 as part of a state subsidy to cover their health care expenses, the SITA news wire wrote.

The basic state aid for people in material need will rise by Sk80 to a monthly Sk1,640, while benefits for an individual with up to four children will rise by Sk1,630 to Sk2,630. The aid for a childless couple in financial need will grow by Sk140 to Sk2,850.

Počiatek is still confident that the public finance deficit will not exceed three percent of the GDP, which is crucial for the adoption of the euro.

On August 9, the government said the euro adoption process is so far going according to plans.

According to a report called "Fulfilment of the National Plan for the Adoption of the Euro in Slovakia", Slovakia is currently meeting the public finance deficit and long-term key interest rates criteria.

In order to qualify to enter the eurozone, Slovakia must keep its public finance deficit under 3 percent of GDP and have an inflation rate within 1.5 percentage points of the average for the three best performing EMU countries. Long-term interest rates should be no more than 2 percentage points above the average for these countries. The report says that, currently, only the inflation criterion is not being met, since it should not exceed 2.8 percent. The rate currently stands at 4.5 percent.

"If Slovakia maintains adequate fiscal discipline, then only the inflation criterion seems to be a problem. The attempt to lower inflation to a sufficient rate is being threatened by increases in the global price of crude oil and other mineral resources," reads the report.


(with press reports)

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