Economic analysts and market dealers fear that a planned government reshuffle (see story front page) may see Finance Minister Brigita Schmögnerová recalled.
Many multinational corporations and potential investors see her as a guarantor of economic reform, and her dismissal could have a serious effect on foreign investment, analysts say.
"Both Schmögnerová and [Deputy Prime Minister for the Economy Ivan] Mikloš are people that we follow quite closely and identify very strongly with for reforms," said Jeff Gable, an analyst with Deutsche Bank in London.
"Economic reform is necessary if not popular locally. Moving either of these ministers from their posts would not be a step in the right direction for foreign investors' sentiment."
Schmögnerová, a member of the ruling coalition Democratic Left Party (SDĽ), may be facing a recall from her position as part of a wider process of cabinet restructuring which is expected to see a number of ministers replaced.
The intended reshuffle comes after a scandal over embezzlement of funds from the European Union by the Slovak Government Office, which led to the firing of Deputy Prime Minister for Integration Pavol Hamžík.
Investor intermediaries have already expressed their concern over the possible recall of the minister.
Jake Slegers, director of the American Chamber of Commerce, said: "The stability of government is very important to foreign investors, both potential and those who have established businesses here. A shake-up in government would be a cause of concern."
Local dealers uncertain of impact
Amid growing speculation over her fate, Schmögnerová, voted Euromoney magazine's Finance Minister of the Year for 2000, said May 13 on private TV Markíza that she would like to apply for a position with the Economic Bank for Reconstruction and Development (EBRD) - a move SDĽ party representatives confirmed has their full backing.
A source within the SDĽ, who asked not to be named, said that Schmögnerová had lost support within the party, but that she might be allowed to step down voluntarily into the EBRD job.
"It's an elegant solution," the SDĽ member said.
The minister would have to start the EBRD job, were she to get it, in January 2002, meaning that were she even to survive the cabinet reshuffle planned for the coming weeks, she would leave before parliamentary elections in September next year. She has said that the end of 2001 is time enough to finish the majority of the economic reforms that she has helped implement.
Some local analysts, along with their foreign counterparts, are agreed that were Schmögnerová to leave her post of her own volition, it might not have that much effect on market sentiment. A threat by the Finance Minister to resign in April over a proposed tax law was largely ignored on forex markets. A forced departure, however, would be different.
"If the Finance Minister was removed then certainly we would expect a larger crown reaction than we saw when she last threatened to resign," said Gable.
But other domestic traders added that whatever the manner of Schmögnerová's departure before the next elections, either a recall or a more sedate exit, the uncertainty of who would step into her post would see markets shaken.
"The loss of her personally, either through resignation or recall, would have no influence on the market in itself, but uncertainty over the Finance Minister's post in the future would," said Braňo Matušek, an analyst with ING Bank.
"The situation is pretty foggy. We don't see anyone within the SDĽ party who could take her job."
Under a 1998 coalition agreement governing the make-up of cabinet, the coalition parties divvied up ministerial posts according to the strength of their election results.
Economists have said that were Schmögnerová to go, they would like to see Deputy PM Mikloš take on a dual role also as Finance Minister, just as his Czech counterpart Pavel Mertlík did in 1999.