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"2007 - A year of vision or blindness?"
By Ivan Štulajter


When Prime Minister Fico before the end of the year expressed personal regret that the government had not managed to introduce the taxation of dividends, the question arose as to whether this was regret for something lost, or whether it was a challenge to take up the struggle. In a wider sense, has Smer given up its pre-election plans for changes to the tax system? Are we going to see the VAT rate reduced on more categories of goods, progressive income taxation introduced, or a separate tax rate for monopolies? The Finance Ministry no longer has any appetite for such changes. Does the prime minister?

Drawing on the information at hand, as well as experience and forecasts, the answer would appear to be no rather than yes. However, given that the VAT rate has been reduced on drugs, there is nothing to say this can't be repeated on other goods, especially if it is backed by a lobby group whose support the prime minister needs to achieve some other political goal. In this context, the prime minister's power ambitions and his ignorance of economics could create a dangerous mix that might not explode immediately, but that in the long term will certainly cause harm.

To take one example: Signs that Slovakia is suffering from a shortage of labour are appearing in all sectors, and affect all classes of jobs, from manual labourers to university-educated white-collar workers. Much abstract talk is devoted to building a knowledge-based economy in this country, but the fact is that employers are not finding what they need on the labour market. For this reason it will be necessary to reform the school sector, where the state plays a large and irreplaceable role.

But reform of the school system is not just a matter of throwing more money at it. First we have to reform educational institutions in a way that will enable them to offer what the market needs. They must have the motivation to listen to what employers want and to respond, which means introducing greater competition, student autonomy, cooperation with major corporations, and a larger role for private schools. We may never reach the level of Oxford or the Sorbonne, but satisfying domestic demand for skilled labour is an achievable goal. However, reforming the science and education sector is a difficult political task that will be hampered by stereotypes and interests that do not want competition.

This government so far has shown little willingness to take unpopular steps, but without such will, reform is not possible. This unwillingness reflects the personality of the prime minister, who is fortunate to have taken over the country at a time of growth rather than recession. But the country's long term prosperity will require more than car manufacturing and Christmas bonuses, just as people require more than a full stomach to be satisfied with their lives.


Sme, January 4

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