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DESPITE CRITICISM, CONFLICT, AND MUCH APPREHENSION THE RULING COALITION SECURED SUPPORT FOR THE LAW

Budget saves cabinet's credit

PRIME MINISTER Mikuláš Dzurinda, who suffers from the most acute lack of public support ever, had a weight lifted off his shoulders on December 12 when the ruling coalition managed to pass the 2004 state budget, which was believed to be the ultimate test of its resilience.
After a fiery discussion, 78 of the 149 lawmakers present voted in favour of the budget with a deficit projected at Sk78.5 billion (€1.91 million) on revenues of Sk231.96 billion (€5.65 billion) and expenditures of Sk310.45 billion (€7.56 billion).

PRIME MINISTER Mikuláš Dzurinda, who suffers from the most acute lack of public support ever, had a weight lifted off his shoulders on December 12 when the ruling coalition managed to pass the 2004 state budget, which was believed to be the ultimate test of its resilience.

After a fiery discussion, 78 of the 149 lawmakers present voted in favour of the budget with a deficit projected at Sk78.5 billion (€1.91 million) on revenues of Sk231.96 billion (€5.65 billion) and expenditures of Sk310.45 billion (€7.56 billion).

Means from the state's financial assets and privatisation revenues worth Sk18.4 billion (€447.79 million) will not be included as budgetary revenues, but will be injected into the health sector to reduce its astronomical debts, the state-run TASR news wire wrote.

In the months leading up to the budget vote, Finance Minister Ivan Mikloš stressed the need to keep the public finance deficit ceiling of 3.9 percent of anticipated gross domestic product, or Sk50.4 billion (€1.28 billion).

However, the opposition, with the assistance of Free Forum (SF) head Ivan Šimko, who has much criticised Prime Minister Mikuláš Dzurinda for what he called undemocratic methods in governing the ruling Slovak Democratic and Christian Union (SDKÚ), managed to pump the public finance deficit up by 0.03 percent, which is Sk360 million (€8.76 million).

Former Defence Minister Šimko formed his own platform on November 16 - the Free Forum - within the SDKÚ caucus. Seven other SDKÚ members have joined the SF, causing the ruling coalition to loose its majority in parliament.

"Increasing the deficit of public finances by 0.03 percent is a problem, but not a fundamental one, on which the budget would stand or fall. I believe that over the course of the year I will manage to persuade the members of the cabinet to keep the deficit at the originally planned level of 3.9 percent," Mikloš told The Slovak Spectator.

Mikloš says that next year's budget is a breakthrough, because for the first time in history it will be financially associated with the European Union. It embraces revenues and expenses connected to EU entry.

Though content with the amendments to the cabinet's original budget proposal that reduced revenues by Sk18.07 billion (€439.76 million) and raised expenditures by Sk440 million (€10.71 million), upping the planned deficit by Sk18.51 billion (€450.47 million), the opposition still calls the budget socially damaging.

Former Finance Minister and Movement for a Democratic Slovakia (HZDS) deputy Miroslav Maxon was disappointed by the failure to increase direct payments to farmers to 55 percent of the European Union average, the private SITA news wire reported.

Slovak farmers will see direct payments at 52.2 percent, with Sk340 million (€8.27 million) less in their coffers. The Agriculture Ministry had demanded compensation at 55 percent, which is the ceiling for direct payments in the countries entering the European Union in May 2004.

According to Communist Party leader Jozef Ševc, the budget is tragic and the most detrimental to the people since 1989.

However, the Slovak currency firmed slightly after the news that the 2004 state budget went through parliament, TASR reported.

"I welcome the adoption of the budget, in which we simultaneously push down the public finance deficit and ease the tax burden, which is a healthy stimulus for economic growth," Mikloš told The Slovak Spectator.

Passing the budget was a life-and-death matter for the ruling coalition, as the opposition was eager to link the failure of the budget to an eventual no-confidence motion in the Dzurinda team.

If it had not been passed, state finances would have been governed by a provisory budget, the one used for 2003. That would have posed serious threats as, starting next year, among many other things, a new tax system will be put in place.

"I'm glad that Slovakia has a budget for next year. I'm glad because this is the year that Slovakia will complete the [EU] integration process. We must be clear on the budget's revenues-expenditure structure," Dzurinda told journalists.

"This budget improves transparency and introduces tough budgetary restrictions. It creates pressure aimed at more responsible and disciplined use of public finances," he said.

However, Dzurinda remains concerned about reductions to the cabinet reserves from Sk1 billion (€24.34 million) to only Sk260 million (€6.33 million), fearing that unexpected emergencies, like floods or other natural catastrophes, might require higher sums, the daily SME wrote.

During its October mission to Slovakia, the International Monetary Fund (IMF) was rosy about the draft state budget for 2004 and was especially appreciative of the assumed radical reduction in the accumulation of health sector arrears in 2003. "The draft budget, including a target deficit in public finances at 3.9 percent of annual GDP, is another step toward fiscal consolidation," the IMF claimed. Mikloš's original budget targeted the deficit at Sk59.55 billion (€1.44 billion), while budget revenues were set at Sk250.03 billion (€6.05 billion), and expenditures at Sk309.57 billion (€7.45 billion).

In previous years, the IMF had been rather solicitous in evaluating Slovakia's reforms while stressing potential fiscal risks.

Slovak President Rudolf Schuster might still refuse to sign the state budget.

He has recently used the right of veto on a number of measures.

In the event that the president returns a law, the parliament votes on it again. Whereas only a majority of the voting MPs is required to pass a law the first time around, a majority of all MPs - 76 votes - is needed to approve a measure previously returned by the president. If the majority of parliament approves a draft, the president no longer has any power to block the legislation.


Marta Ďurianová contributed to the report.

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