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1998 state budget passed amid array of objections

Speaking in parliament minutes after the passage of his fiercely-contested 1998 budget proposal, Finance Minister Sergej Kozlík was visibly triumphant. Grinning hugely and flashing a jubilant thumbs-up sign to applauding coalition deputies, Kozlík declared that the budget meant a "happy new year" for the country, and praised the opposition for the "high level of culture" it had shown during parliamentary debate over the measure.
Opposition deputies responded by jeering at him and declining his invitation to join the government in a glass of champagne. But Kozlík certainly had reason to celebrate. His 1998 budget proposal has had the roughest passage through parliament of any budget in the last four years, and has left a mood of internal division hanging over the governing coalition. In the end, however, Kozlík was able to patch together enough votes to force the budget through without major concessions to either his coalition partners or the opposition.


Hip, Hip, Hooray. Slovak Finance Minister Sergej Kozlík congratulates governing coalition deputies on passage of the 1998 state budget, and proposes champagne all round.
Ján Kuchta

Speaking in parliament minutes after the passage of his fiercely-contested 1998 budget proposal, Finance Minister Sergej Kozlík was visibly triumphant. Grinning hugely and flashing a jubilant thumbs-up sign to applauding coalition deputies, Kozlík declared that the budget meant a "happy new year" for the country, and praised the opposition for the "high level of culture" it had shown during parliamentary debate over the measure.

Opposition deputies responded by jeering at him and declining his invitation to join the government in a glass of champagne. But Kozlík certainly had reason to celebrate. His 1998 budget proposal has had the roughest passage through parliament of any budget in the last four years, and has left a mood of internal division hanging over the governing coalition. In the end, however, Kozlík was able to patch together enough votes to force the budget through without major concessions to either his coalition partners or the opposition.

"It's a bad budget, what can I say," responded Mikuláš Dzurinda, spokesman for the opposition Slovak Democratic Coalition (SDK), as deputies filed glumly out of the chamber. "But with the HZDS and SNS working hand in hand, there's not much we can do."

Despite Dzurinda's fatalism, cooperation between the ruling coalition parties - the Movement for a Democratic Slovakia (HZDS), Slovak National Party (SNS) and the Association of Slovak Workers (ZRS) - was far from assured. Only three days before the draft's passage, SNS deputies were still berating the HZDS in parliament for not setting aside sufficient funding for the education and defense ministries, both of which are controlled by the SNS.

The ZRS, for its part, criticized the budget for lowering transfers to regional and local administrations, and made its support conditional on the passage of a so-called "millionaires tax," which would increase the tax on citizens with an annual income of more than 1.08 million Sk by 5 to 30 percent.

During the second reading of the budget draft in committee, the SNS managed to secure a pledge of an additional 1.2 billion crowns to be divided equally between the defense, education and agriculture ministries.

"The army received another 600 million crowns, and schools another few hundred million," reported Michal Baránik, a HZDS deputy and a member of the coordinating Finance, Budget and Monetary Committee, adding that beyond these changes, designed to support increases in the salaries of state employees, "not very much else was altered, and not every demand was satisfied."

SNS chairman, Ján Slota, declared on December 11 that he would support the final budget draft only in preference to the alternative, a provisional budget. "A provisional budget would be a catastrophe for Slovakia," he said. "That's why we will support the budget. We chose the lesser of two evils."

In the end, the support of the SNS and the ZRS was qualified, to say the least. ZRS deputies Klement Kolník and Anton Poliak abstained during the final vote, while Slota did not even show up for the third reading. The draft eventually passed by a margin of 81 to 57, with two abstentions and 10 deputies absent.

Major deficiencies

The 1998 budget assumes GDP growth of 5 percent, inflation of 6 percent and unemployment of around 12 percent. State revenues are set at 179.8 billion Sk ($5.39 billion), a 5.1 percent increase over last year, and expenditures at 184.8 billion Sk, a 1.1 percent increase.

Kozlík has boasted that at 5 billion Sk, the nation's deficit is the lowest since 1994. Having decided, according to the methodology of the International Monetary Fund's (IMF), to divide the budget deficit into a minute fiscal deficit and a weighty shortfall in debt principal repayments, the Finance Ministry has claimed that its projections are realistic.

But Brigita Schmögnerová, Vice Chairman of the Party of Democratic Left (SDĽ), said that a misleading deficit forecast is one of the major shortcomings of the 1998 budget, and accused the Finance Ministry of manipulating IMF norms to achieve an even more negligible fiscal deficit figure.

"If we speak in terms of IMF methodology [for calculating fiscal deficit]," Schmögnerová explained, "we have to incorporate the fiscal deficits in the social insurance budget, in the National Property Fund (FNM) budget, [then expenditures on] public works and the financing of villages and towns. These together make up the entire operating budget of the government, according to IMF methodology, and next year should amount to over 21 billion crowns."

But Kozlík disagreed with the IMF calculations, and rejected opposition demands that 10 billion Sk earmarked for highway construction, and a further 3-billion bond issue related to highway and housing construction, be included in the fiscal deficit. "We don't share the IMF's opinion on the issue," he said, adding that such expenditures "should not be included in calculations of lost or unfulfilled budget revenues."

For opposition deputies, the government's murky logic on the calculation of its 1998 fiscal budget deficit was consistent with a level of fiscal irresponsibility shown in expectations of the combined deficit. The budget proposes to allow the government to issue 49.293 billion Sk in state bonds mainly to cover an old bond issue that comes due in 1998, and expects repayment of state debt installments to total an additional 46.3 billion, meaning that in real terms, the year 1998 may cost Slovakia about 95 billion crowns more than the government is ready to admit. "The government is acting as if life ends after 1998," Schmögnerová commented.

The opposition advanced an array of 140 objections to the budget draft during debate, the most fundamental of which were: the 944 million Sk allotted to the Slovak Intelligence Service (SIS); subsidy cuts to the Slovenská Sporiteľňa and Investičná rozvojová banka (IRB), which provide housing credits to married couples; huge deficits in social and health insurance companies; and the increasing share of the tax burden that is levied on individuals relative to corporations.

Despite the blizzard of amendments, not a single one was approved by the government. "They never are," Schmögnerová said.

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