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SDĽ wants Magvaši for VSŽ presidency

With discussions underway to sell a large chunk of struggling Slovak steel giant VSŽ to a foreign investor, the government has asked its Finance Ministry to find a way to strengthen its voice on the VSŽ supervisory board. But concerns are being voiced about the Finance Minister's suggestion for a president of the company: none other than her party mate, current Labour Minister Peter Magvaši.
While the Party of the Democratic Left (SDL) and Finance Minister Brigita Schmögnerová maintain that with his experience in metallurgy and management, Magavši is the right man for the job, other voices say that attempting to put a political friend at the top of Slovakia's second largest employer smells suspiciously like another case of politicians dividing spoils. To support their claim, they point to other questionable dealings of the otherwise respected Finance Minister.


SDĽ member and Labour Minister Peter Magvaši, shown here trying on a winter hat, may be the next VSŽ president.
photo: TASR

With discussions underway to sell a large chunk of struggling Slovak steel giant VSŽ to a foreign investor, the government has asked its Finance Ministry to find a way to strengthen its voice on the VSŽ supervisory board. But concerns are being voiced about the Finance Minister's suggestion for a president of the company: none other than her party mate, current Labour Minister Peter Magvaši.

While the Party of the Democratic Left (SDL) and Finance Minister Brigita Schmögnerová maintain that with his experience in metallurgy and management, Magavši is the right man for the job, other voices say that attempting to put a political friend at the top of Slovakia's second largest employer smells suspiciously like another case of politicians dividing spoils. To support their claim, they point to other questionable dealings of the otherwise respected Finance Minister.

In March, for example, Schmögnerová and SDĽ were alleged of clientelism for influencing the decision to allow Devín Banka to continue administering the Russian debt towards Slovakia despite serious allegations of theft and impropriety, a move which worried international observers like US Ambassador Ralph Johnson.

"The fact is that the history of Devín Banka is quite well known, both inside Slovakia and abroad, and lets just it doesn't enjoy a particularly high reputation as a banking institution, to put it mildly. The whole question of how the Russian debt is used...there are lots of serious question marks that hang over all that," he told The Slovak Spectator in a recent interview.

Political and economic analysts warn that with questions arising over the government's involvement in VSŽ and other major companies, Slovakia's current leaders appear dangerously close to backpeddling on campaign promises of greater transparency and imitating the policies of their notorious predecessors

"[Schmögnerová's suggestion] is a typical sign of clientelism from the SDĽ party," said Ľuboš Kubín, a political analyst at the Slovak Academy of Sciences, of. "The instances of clientelism, which was frequent during the reign of former government [of former Prime Minister Vladimír Mečiar], just transformed into a new shape, but have not disappeared."

"It's a bad sign for the citizens who voted for a change [of Mečiar's regime] and different methods in managing the country," Kubín continued. "Such signs can shake the grounds of the coalition government as a political entity."

A misunderstanding?

Schmögnerová 's proposal of Magvaši for VSŽ on Twist Radio May 13 spurred a wave of criticism from the politicians of the ruling coalition. The state owns about 25% of VSŽ through state-owned back Slovenská Spori'teľňa and the FNM National Property Fund.

Ivan Mikloš, Deputy Prime Minister for Economy and member of the SDK, the largest coalition party, blamed Schmögnerová for spreading "unfortunate and irresponsible" statements concerning the post of the VSŽ president in times of "fragile balance" in relations among the shareholders, creditors and management.

"Coming up with these statements today means a threat to this balance and positive development, which has been achieved in the last few weeks and months," Mikloš told the news agency TASR.

In response to the critical statements of other cabinet ministers, Schmögnerová said the media had misinterpreted her remark and reminded the public that Magvaši could never be named president for purely political reasons, as his nomination would have to be approved by VSŽ creditors, which include a host of foreign banks, as well as the government.

"None of us [state and creditors] can push its candidate into the post [of president], but we can support a certain candidate. The post of the president will thus also have to be a consensus between the creditors and state," Schmögnerová said.

Education Minister and party mate Milan Ftáčnik backed up Schmögnerová, explaining that the party has " never presented [Magvaši's nomination] as a partisan or governmental proposal."

"Magvaši is just one of the alternatives, nothing more, nothing less," he told The Slovak Spectator at the May 19 press conference. In an official statement, the SDL denied all charges of political wrangling and pointed to Magvaši's qualifications for the job. "The party is looking for people who can manage to help [VSŽ] in such a difficult situation.. If Peter Magvaši is discussed, at issue are his professional advantages and not his political and partisan background," the statement read. Magvaši could not be reached for comment.

Questions remain

Meanwhile, observers are concerned that even the appearance of impropreiety in the case of VSŽ is another blot on Slovakia in the eyes of investors at crucial economic juncture for the nation.

Vladimír Zlacký, advisor to Deputy Prime Minister Mikloš, whose battles with the Finance Minister have been well-publicised, told The Slovak Spectator on May 18, that "it's not good when high political figures are directly involved in the business sector." VSŽ is a huge corporation, Zlacký said, and it wouldn't be appropriate to have it under any political influence."

But Martin Kabát, economic analyst with the Slávia Capital brokerage firm, took a more cynical view and said that to think that the government will just take its hands off of VSŽ is simply not realistic. If Magvaši does not win the post, he said, someone else with political ties likely will.

" The state will always have a political interest to play a serious role in [the company management]...The state is perhaps the least important player in the VSŽ ownership, so it's trying to make its position through the top management."

In general, "the [coalition parties] just divide influence in the institutions of strategic importance," Kabát added.

VSŽ is Slovakia's second largest employer with approximately 25,000 workers in its ranks. The steel maker was cast into financial crisis last October when it failed to make a $35 million payment on a syndicated loan. According to Reuters figures, the company posted a net loss of 11 billion Slovak crowns in 1998 after a 600 million crown profit in 1997.

The companies current president, Gabriel Eichler, was appointed to the post in December 1998 to put the company on the path to consolidation and bring in a strategic foreign investor. Eichler's term in office terminates in June 1999.

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