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FICO GOVERNMENT FOLLOWS THROUGH ON PROMISE TO MEET MAASTRICHT CRITERION

MPs approve budget with 2.94% deficit

THE GOVERNMENT of Robert Fico passed the first test of its fiscal sobriety in parliament on December 12, approving a state budget for 2007 that sets a general government deficit of 2.94 percent of GDP. The symbolism of the deficit figure, which for the first time complies with one of the criteria for adopting the euro on schedule in 2009, was underscored by Prime Minister Fico after the vote.

THE GOVERNMENT of Robert Fico passed the first test of its fiscal sobriety in parliament on December 12, approving a state budget for 2007 that sets a general government deficit of 2.94 percent of GDP. The symbolism of the deficit figure, which for the first time complies with one of the criteria for adopting the euro on schedule in 2009, was underscored by Prime Minister Fico after the vote.

"This is clear evidence that the Slovak government is set on meeting the Maastricht criteria [for euro adoption] so that our strategic goal - the adoption of the euro on January 1, 2009 - is achieved," Fico said. "The vote alone [with all 85 government MPs in favour] confirmed that the coalition was well prepared for the debate on the state budget."

Fico added that the budget was clear evidence that his government's aim of "building a social state" was not incompatible with maintaining tight fiscal discipline and strong economic growth in Slovakia.

The PM also said that the budget finally put paid to fears after June elections that his leftist government would "tear down reforms and bury the so-called great successes of the previous [right-wing] government".

State budget revenues for 2007 are projected at Sk310.5 billion (€8.9 billion), with expenditures at Sk348.9 billion, resulting in a deficit of Sk38.4 billion.

"The main significance of this budget for most entrepreneurs will be that it keeps the deficit below three percent of GDP, which will ensure stability on financial markets," said Robert Prega, an analyst with Tatra Banka.


Satisfaction


Finance Minister Ján Počiatek, 36, declared himself satisfied to have his first budget under his belt.

"I can only say that I'm very happy that we've reached the final stage of our planned consolidation. Now we can start working on our strategy and policies, for which this budget provides a good foundation," Počiatek said.

The big gainers in this budget compared to 2006 will be the health sector, which will get 7.8 percent more money at Sk110.1 billion; social welfare, up 6.8 percent to Sk46.8 billion; education, up 11 percent to Sk65.7 billion; and agriculture, up 4.9 percent to Sk23.4 billion.

On the other hand, freeway and housing construction, and support for business and culture will all see less money next year, even in nominal terms.

Meanwhile, spending on universities will be virtually frozen, rising from Sk13.1 to only Sk13.4 billion, while funding for science and research will fall from Sk7.7 to Sk7.1 billion.

The opposition Slovak Democratic and Christian Union (SDKÚ) criticized the 2007 budget for spending too much on declining sectors such as agriculture and perennial money losers such as health care, and not enough on areas Slovakia will need to increase its competitiveness.

"[The budget] doesn't ensure the development of important fields such as science, research, education, culture, innovation, informatisation or housing support," SDKÚ Vice-Chairman Ivan Mikloš told journalists.

Economic analysts also worried that some of the government's promises for next year, such as raising spending on health insurance dues for state employees, bonuses for pensioners and extra funding for the railways company, were not covered in the budget, and that the government seemed to be hoping that the vibrant Slovak economy would produce extra revenues to meet any shortfalls.

"The budget is formally in line with the Maastricht criteria, but it contains risks in the form of likely expenditures that are not financially covered," said Michal Mušák of the Slovenská Sporiteľňa bank.

Mikloš also criticised the debate on the budget. "During a debate lasting several days, none of the government ministers, not even the finance minister, presented any objections [to the budget]. Nor did the government coalition approve any of the opposition's proposals."

As for the budget itself, Mikloš said that "the only priorities that are growing are the prime minister's reserve fund, by 150 percent, and direct payments to farmers by 44 percent".

The chairman of the Christian Democratic Party (KDH), Pavol Hrušovský, was also surprised that the ruling coalition didn't approve any of the opposition's budget proposals.

"For the first time [in Slovakia] we have seen a coalition fail to approve a single amending proposal from the opposition. That's why our arguments during the debate in parliament - that we [the opposition] regard this budget as populist and unrealistic, as well as insufficiently socially-oriented - were confirmed today", added Hrušovský, who described the coalition's attitude to the opposition as 'insensitive'.


Hi-jinks


However, perhaps due to the fact that the budget was similar to what the outgoing government had scripted before leaving office, the 2007 document produced few fireworks in parliament.

Finance Minister Počiatek even attended the approval of the budget wearing a blue tie signed by his predecessor, Ivan Mikloš.

"This is my secret weapon. I'm counting on right-wing MPs to respond correctly to this colour and the signature and maybe even vote for this budget," Počiatek said.

Mikloš, not to be upstaged, appeared in a red tie bearing Počiatek's signature. "I think they will pass the budget no matter what colour the minister's tie is," he said. "But we won't vote for it."

Počiatek's blue tie did indeed fail to attract the support of any of the 65 opposition MPs in attendance. However, for the first time in Slovak history, the budget was approved in the presence of all 150 MPs.

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