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New hope for cash-strapped Košice

AFTER cabinet refused to buy almost Sk1 billion ($21 million) worth of Košice forests to alleviate the city of its Sk2.2 billion ($46 million) debt, Prime Minister Mikuláš Dzurinda offered a substitute solution to Slovakia's second largest city.
At a January 8 meeting of coalition parties, cabinet representatives agreed to give a long-term state loan to Košice, Dzurinda said.
The loan would have to be backed by the city's property, but the PM said that cabinet was prepared to sign a memorandum with Košice as soon as January 10 (as the Spectator went to print no official agreement was reached yet) and was willing to give the city a loan of up to Sk500 million ($10.4 million).


"If the management goes wrong, the town itself should carry the consequences, not the country's tax payers."

Milan Muška, ZMOS vice-chairman



Košice is Sk1.2 billion in debt.
photo: TASR

AFTER cabinet refused to buy almost Sk1 billion ($21 million) worth of Košice forests to alleviate the city of its Sk2.2 billion ($46 million) debt, Prime Minister Mikuláš Dzurinda offered a substitute solution to Slovakia's second largest city.

At a January 8 meeting of coalition parties, cabinet representatives agreed to give a long-term state loan to Košice, Dzurinda said.

The loan would have to be backed by the city's property, but the PM said that cabinet was prepared to sign a memorandum with Košice as soon as January 10 (as the Spectator went to print no official agreement was reached yet) and was willing to give the city a loan of up to Sk500 million ($10.4 million).

Zuzana Bobriková, spokeswoman for Košice mayor Zdenko Trebula, said on January 9 that her boss would not comment on the matter until after his meeting with the cabinet.

The city debt accumulated during the 1994 to 1998 period when under the leadership of then mayor and current President Rudolf Schuster, a lavish reconstruction of the city centre was carried out. A paved main street with a water stream running through it and a singing fountain between the St. Elizabeth Cathedral and the Košice theatre building put Košice back among prime tourist destinations in the country.

However, the city soon found itself flooded with creditors' calls for payment, with the situation escalating in December last year when the city faced a cross default.

Košice wanted the government to purchase Sk980 million worth of the city's forests to give Košice managers a better negotiation position with its plentiful creditors.

Žilina based Prvá Komunálna Banka (PKB) said then that it was willing to participate on the restructuring of the city's debt provided that the forest sale went through and would give the city 15 years to pay back its remaining Sk1.2 billion debt.

Cabinet, however, failed to approve that proposal by one vote on December 19. The PM and six other right wing ministers voted against.

The main objection towards the Košice proposed deal was that should the cabinet agree to buy the forests, "an avalanche of similar requests by other cities would follow," said Marek Jakoby, analyst with an independent Mesa 10 economic think tank.

Representatives of the Slovak Towns and Cities Association (ZMOS) also backed the cabinet decision not to buy the forests. Milan Muška, ZMOS vice-chairman told The Slovak Spectator on January 8 that the government would set a "dangerous precedent had it agreed to the deal".

"I think everyone who's starting a local reconstruction project in his city should first of all know how he's going to pay for it. If the management goes wrong, the town itself should carry the consequences, not the country's tax payers," said Muška.

Deputy Prime Minister for Economy Ivan Mikloš agreed: "There are plenty other towns which could ask the government to solve their financial problems in this way."

Mayor Trebula, however, believed that the cabinet should have bought the forests and argued that by offering the cabinet to buy, his city was "presenting an advantageous deal to the government. It's not like we came asking for money with empty hands," he said on January 6.

He also argued that government had in the past helped other cities, such as Bratislava, where the cabinet had given a state guarantee for the construction of a Sk3.4 billion ($71 million) Košická bridge connecting the Old Town with Petržalka suburb.

President Schuster admitted that the government had a right not to pass the proposed deal, but added: "As the cabinet helped Bratislava and didn't help Košice, I see it as a tactics of the right-wing parties".

Mesa 10's Jakoby said although the differing cabinet decisions on Bratislava and Košice could make a "discussion point" he noted that there were some differences between the two projects.

"While the bridge in Bratislava was an infrastructure project to solve the transport problem in the capital, Košice's current problems were caused in the past by a questionable investment strategy for populist projects such as the singing fountain."

Muška from ZMOS added: "I don't want to comment on the skills of Košice managers under the previous leadership but it wouldn't be just when taxpayers from other Slovak towns were made to pay for the Košice debt.

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