BUDGET TO REDUCE PUBLIC FINANCE DEFICIT; SMK MINISTERS REFRAIN FROM VOTING IN CABINET

Budget vote to test coalition's resilience

THE RIGHT-WING cabinet, which came to power after the parliamentary elections in September 2002, has approved the state budget for 2004 and sent it to parliament, where its approval is expected to be one of the hardest tests of the ruling coalition's strength so far.
On October 14, only ministers for the Hungarian Coalition Party (SMK) abstained from voting on next year's budget, due to the reluctance of their partners to give farmers direct supplementary payments at 55 percent of what EU farmers get.

THE RIGHT-WING cabinet, which came to power after the parliamentary elections in September 2002, has approved the state budget for 2004 and sent it to parliament, where its approval is expected to be one of the hardest tests of the ruling coalition's strength so far.

On October 14, only ministers for the Hungarian Coalition Party (SMK) abstained from voting on next year's budget, due to the reluctance of their partners to give farmers direct supplementary payments at 55 percent of what EU farmers get.

One of the cabinet members coming from Béla Bugár's SMK party, Environment Minister László Miklós, even voted against the budget, as he was deeply dissatisfied with the financial allocation to his ministry, news wire SITA reported.

In desperate need of each ruling coalition vote in parliament, Prime Minister Mikuláš Dzurinda made no secret of his disappointment over the SMK's obstinacy. He insisted that paying the farmers compensations at 50 percent of the EU average, as the approved draft budget defines it, was generous enough.

Finance Minister Ivan Mikloš also sees the SMK requirement as groundless, since the allocations for agriculture are the budget items most increased, up Sk6 billion (€145.23 million) from 2003, SITA reported.

However, during the next few days, Dzurinda will seek support for the budget from deputy factions of the ruling coalition and independents in parliament.

Currently, the power balance between the ruling coalition and opposition appears even. In order to get the budget passed, the ruling coalition needs the vote of at least 76 deputies of the 150-seat parliament.

The budget targets the deficit at Sk59.55 billion (€1.44 billion), while budget revenues should reach Sk250.03 billion (€6.05 billion) and expenditures Sk309.57 billion (€7.45 billion).

The cabinet projects next year's public finance deficit at Sk50.3 billion (€1.22 billion), which is 3.9 percent of the estimated GDP.

The 2004 budget is based on the Finance Ministry's expectations that GDP growth will slightly accelerate to 4.1 percent, and the GDP will reach Sk1.293 trillion (€31.3 billion) in current prices.

The average annual inflation rate should be 8.1 percent, while the average jobless rate should not exceed 15.4 percent.

Compared to analysis and predictions by international institutions and Slovakia's central bank, the cabinet's view on the growth of economy is slightly optimistic, financial daily Hospodárske noviny wrote.

Analyst with the Všeobecná úverová banka (VÚB) Vladimír Zlacký appreciated that the cabinet has kept its obligation to lower the public finance deficit.

"Financial markets welcome the cabinet's steps, while consolidated public finances will contribute to the further healing of the macro-economy," Zlacký told daily SME.

Based on an agreement between Mikloš and Economy Minister Pavol Rusko, Sk300 million (€7.3 million) recently tagged for investment stimuli was returned to the government's reserve and might cover the valorization of teachers' salaries, as had been originally planned.

Mikloš, who is satisfied with the budget overall, said that along with agriculture, the education sector has become one of the priorities. It is planned to receive 12 percent more from of the state pie than in 2003. The ailing health care sector would take 8.6 percent more from the state coffers than it has this year.

The state budget for next year, in many aspects, is different from all previous budget drafts. A number of the proposed changes have to do with the country's EU accession, planned for May 2004.

The onetime finance minister and opposition Movement for a Democratic Slovakia (HZDS) member, Sergej Kozlík, suggested that the budget is favourable for "groups of individuals with strong incomes," while the socially weak will pay for their benefits. He also said that the economic growth is exaggerated. Kozlík does not plan to support the budget in parliament.

However, the reduction of the deficit will not only result from cuts in the state's spending.

"At the start of the year, we will see important changes in the tax system, as well as the last phase of significant increases in regulated prices," reads the Finance Ministry's position paper on the draft budget.

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