News item: Cabinet approves draft budget for 2007 with a public finance deficit of 2.9 percent of GDP, thus meeting one of the main criteria for adopting the euro in 2009.
By Juraj Porubský
One could say many things about next year's state budget, but one could certainly not say it is exceptional. On the one hand PM Robert Fico for the first time confronted his promises with the real possibilities of the state coffers, while on the other hand the economy is growing so fast that it is raising state incomes.
We should acknowledge that Fico was able to distance himself from promises such as immediately reducing the consumer taxes on fuel and gas, or the VAT on food, and raising the full-year health-care dues for people covered by the state, or compensating people who lost money in failed pyramid schemes. Judging from the budget draft, it also looks like the forecast of Sk30 billion in annual spending on freeway construction was about three times overestimated.
Thanks to these and other concessions, as well as a reduction in investments by ministries and better revenues from income taxes in Slovakia's surging economy, the government accomplished something that the prime minister called a miracle. The cabinet looks like it will be able to fulfill part of its pre-election promises and still keep the public finance deficit under three percent of GDP. When we look back at some of those pre-election promises, we have to give Fico credit - it is a miracle.
For the state, however, it is more important to look at what the division of money means for the future. Farmers have probably the greatest reason for satisfaction, as their demands were met to the highest possible extent. But why were the education and health care sectors not as successful? And why did the government reduce the flow of money to road construction?
It would seem that better organized and more tightly concentrated groups are better at convincing the government than larger and looser groupings. It also looks as if this is a coalition of five rather than three parties. The unions were more successful in altering tax change proposals than either the HZDS or SNS, while the financial markets, with their attacks on the crown at the beginning of Fico's tenure, forced his government to sober up quickly from its pre-election promises.
The budget is indeed not as bad as it threatened to be. But if the voters do not forget Fico's pre-election promises, or if the economy stops growing at a record rate, the government might need another miracle. This time a real one.
16. Oct 2006 at 0:00