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EDITORIAL

Bankruptcy Law: Tough but effective medicine

A few months, a few years too late, but it's finally here. Parliament's passing of Slovakia's latest bankruptcy laws promise something that banks and ministers have been crying out for over the last 18 months - new life in the economy.
One of the most brutal legacies of the Vladimír Mečiar regime may now have been put to rest. The dreadful loans given out by banks whose managements had a suspicious tendency to dole out cash on the basis of which political party the debtor supported should be a thing of the past. Banks can now get their money back if a company gets into serious financial trouble. They no longer have to fear getting burned by asset-stripping corporate managers, and can once again lend money with confidence to companies trying to expand or get off the ground.

A few months, a few years too late, but it's finally here. Parliament's passing of Slovakia's latest bankruptcy laws promise something that banks and ministers have been crying out for over the last 18 months - new life in the economy.

One of the most brutal legacies of the Vladimír Mečiar regime may now have been put to rest. The dreadful loans given out by banks whose managements had a suspicious tendency to dole out cash on the basis of which political party the debtor supported should be a thing of the past. Banks can now get their money back if a company gets into serious financial trouble. They no longer have to fear getting burned by asset-stripping corporate managers, and can once again lend money with confidence to companies trying to expand or get off the ground.

The rules of the game for the courts have also changed. The process for declarations of bankruptcy has been speeded up and cases can no longer fester in judicial hands while what could be saved of a company rots. Firms will no longer automatically go under as soon as they are declared bankrupt, and creditors can take over at the helm of the sinking ship to steer it to calmer waters as a decision is reached on whether to fold or forge ahead with wholesale or partial restructuring.

The omens are good. Working with the World Bank the government came up with new laws and later alone managed to adopt some even more solid amendments. Eighty-two of 118 deputies voted for the law, and opposition claims that the new laws will add to unemployment have been scoffed at by analysts. Bankers have hailed the new regulations as among the most important in Slovakia's economic history. The corporate sector is set for a revolution that has been a long time in coming. Companies can survive, banks can get their money back and most importantly they can put money into the economy in safety.

The government too is laughing all the way to the bank, almost literally, with the banks' new capacity to lend in a loan-friendly corporate environment likely to boost the sale price for Slovenská sporiteľňa (SLSP) and Všeobecná úverová banka (VÚB). It will also be more than aware of the international kudos it will get as the IMF and OECD watch it bring in regulations that will put its business sector on a par with the West. Well, almost.

Even if the government does little else legislatively in its term, it will have left at least one indelible imprint of its time in power. For once, it seems, everyone's a winner.

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