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TALKS DISSOLVE INTO A TUG-OF-WAR OVER FUNDS AND START A DEBATE OVER WHAT TO DO NEXT

State budget in limbo

THE SEPTEMBER 13 budget meeting became a tug-of-war between the Hungarian Coalition Party, the Christian Democratic Movement, and the New Citizens' Alliance over who would get how much.
The ruling coalition parties' failure to agree on the shape of the state purse for 2005 leaves next year's budget in limbo.
The impasse is largely because the proposed budget falls Sk20 billion (€496 million) short of what the coalition ministers originally requested.

THE SEPTEMBER 13 budget meeting became a tug-of-war between the Hungarian Coalition Party, the Christian Democratic Movement, and the New Citizens' Alliance over who would get how much.

The ruling coalition parties' failure to agree on the shape of the state purse for 2005 leaves next year's budget in limbo.

The impasse is largely because the proposed budget falls Sk20 billion (€496 million) short of what the coalition ministers originally requested. If all demands voiced at the meeting were granted, the state budget proposal would inflate by at least Sk10 billion (€240 million).

Finance Minister Ivan Mikloš, who drafted the budget proposal, said it is crucial that all parties stay committed to limiting the state budget deficit to 3.8 percent of the estimated GDP for 2005 - a previously agreed-upon figure.

According to the minister's proposal, overall budget incomes in 2005 will reach Sk289.9 billion (€7.2 billion) while expenses will account for Sk353.9 billion (€8.8 billion). That puts next year's state budget deficit at Sk64 billion (€1.6 billion). The Finance Ministry has estimated that the public finance deficit should be at 3.8 percent of the gross domestic product (GDP).

Peter Papanek, an advisor to the Finance Ministry, told The Slovak Spectator that the Finance Ministry would seek solutions that keep the deficit below agreed-upon limits. He said there are three ways to meet the ministries' demands in a fiscally responsible way: Increase budgetary incomes; take money from the transportation department; or restructure debt service expenses.

Despite the coalition's failure to pass a state budget this time around, Prime Minister Mikuláš Dzurinda was optimistic about the developments. He added that ministers who request more money should also propose sources from which to get it.


Who wants what


The Christian Democratic Movement (KDH) said that it would not support Mikloš's draft budget unless substantive changes are made to its current form.

The Christian Democrats are asking that more money be given to departments led by KDH ministers. Moreover, KDH wants to increase state aid for families, which would cost the state an extra Sk4.5 billion.

The Hungarian Coalition Party (SMK) wants more money for the Agriculture Ministry and for the Environment Ministry. SMK leaders say Mikloš's budget hurts farmers the most, and that it might well bury Slovak agriculture.

SMK boss Béla Bugár did not say how the SMK would proceed if his party's demands are turned down.

The New Citizens' Alliance (ANO) wants to see an additional Sk2 billion (€50 million) flowing into the Health Ministry's coffers.

The Slovak Democratic and Christian Union (SDKÚ) is the only party not clambering for more.

"The SDKÚ has eminent interest in reaching an agreement. This is why we will not demand extra money for departments that are led by our representatives," said SDKÚ deputy Jozef Mikuš to financial daily Hospodárske noviny.

Analysts say that the budget talks have formed two camps within the ruling coalition, with the SMK and KDH on one side and SDKÚ and ANO on the other. However, ruling coalition politicians summarily dismissed the two-camp theory within the ruling block.


Law on budgetary rules another sore spot


Politicians have already started arguing about what should happen if the ruling coalition fails to pass a budget through the parliament before the start of the new fiscal year.

The Christian Democratic Movement is trying to change the law on budgetary rules that says the cabinet will define the budget if the parliament fails to get one through in time for 2005.

Branislav Jáger, a KDH spokesman, told The Slovak Spectator that the KDH does not think a cabinet's decisions should take precedence over law, even if only for a limited time.

"[The KDH] will propose a provisional budget in which monthly expenses must not exceed one-twelfth of the expenses of the previous year," Jáger said.

He added that if the KDH proposal to freeze state expenditures to match the 2004's budget does not win support, it would at least try to enforce a deadline by which time parliament must pass a draft budget as law.

The Finance Ministry considers the law on budgetary rules, which has been in place since 1995, perfectly valid.

"We consider it practical for the cabinet to decide on a budget for next year [in case the parliament fails to adopt one]. With reforms changing the political situation, the cabinet can make provisional budget decisions based on the actual economic scenario facing them," Finance Ministry Advisor Peter Papanek told The Slovak Spectator.

Some analysts agree that the existing law on budgetary rules is more practical than applying the state budget from the previous year.

"Differences between economic developments of individual years might be far too great," Tatra Banka analyst Róbert Prega told daily SME.

He said that it was likely that budgets for previous years would not match the needs of the one's ahead.

While the law appears reasonable under a benevolent ruling coalition, critics argue that a fiscally imprudent government could easily damage the economy if public finances are left up to a cabinet. They stress the importance of parliamentary control over a lone cabinet making budget decisions.

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