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EDITORIAL

All bets are off as the crisis hits home

SO THIS IS the crisis: business giants shorten their working week; demand for goods and services shrivels; international organisations repeatedly trim their predictions of economic growth; forecasts lose all trace of false optimism; and people reconsider their investment and career plans in the best cases, and face real problems in the worst.

SO THIS IS the crisis: business giants shorten their working week; demand for goods and services shrivels; international organisations repeatedly trim their predictions of economic growth; forecasts lose all trace of false optimism; and people reconsider their investment and career plans in the best cases, and face real problems in the worst.

European Central Bank (ECB) governor Guy Quaden was quoted, by Reuters newswire at the end of January 2009, as saying that Europe’s economy faces a recession worse than those of the 1970s and 1980s and that he had never witnessed such a sharp decline in economic growth.

Yet such statements are no longer just gloomy news items emanating from the other side of the Atlantic: now they are local, and fill the cover pages of newspapers and prime-time TV news here.

More than 10,000 Slovaks are in fact already feeling the direct effects of what many are calling the greatest economic chill since World War II. Observers of the labour market suggest that there will be many more joining the ranks of the unemployed soon.

US company Molex, which had been touted as a shining example of green-field investment in eastern Slovakia’s Kechnec industrial park, said it is shutting up shop and will leave its entire workforce of 1,000 people behind. It says its departure is a response to the fall in demand in the automotive sector, which also happens to be one of the major pillars of Slovakia’s economy.

Companies like Kronospan, the Železiarne Podbrezová steel mill, Trens, PPS Group, Way Industry Krupina and Immea have also announced they will be sending many workers home for good.

This is a harsh blow to the people involved, but it also represents the first really serious economic blow to the government, which less than a year ago announced a decisive return to what it calls socially oriented policies.

If there were a chronicle of bleak periods for Slovak governments, January 2009 would certainly be added, in bold. The year started with the Russians turning off the gas taps to European countries supplied via Ukraine, as part of a price spat with their western neighbour. After a couple of days filled with evaporating promises and mounting edginess from the Slovak government - which was forced to announce a state of emergency because of rapidly disappearing gas reserves - it became clear that the gas dispute was neither a bilateral concern for Ukraine and Russia, nor likely to be solved for good in a week or two.

Then in the last days of January, there was a major shift in the rhetoric of the Slovak government.

Allusions to the fact that Slovakia could remain one of the fastest growing economies of the European Union have grown fewer and less adorned with superlatives.

“As of today we are entering a crisis mode in which everything can be modified,” Finance Minister Ján Počiatek said.

Quite a strong message, and one can only guess at this point how much the Fico government will be forced to give up some of its declared goals.

When thousands of people are being laid off, “blame it on the crisis” tactics are not going to work for long.

The government should perhaps try to get all relevant opinions about what needs to be done to soften the blows from the crisis. Opposition parties, however, complain that it has so far given them the brush-off.

While the governing coalition and the opposition agree that maintaining employment should be a priority, they differ on how it might be achieved.

The opposition parties urge cuts in direct taxes and relaxation of the labour laws to bring immediate relief to the economy. The instinct to cut taxes comes quite naturally from the Slovak Democratic and Christian Union (SDKÚ), which when it was part of the government gave Slovakia its flat tax.

But tax cuts for now remain blacklisted by the government. The Fico team does seem somewhat more receptive towards softening some provisions of the labour code.

This will not be an easy sell to trade unions, which have gained strength under the present government. By making the code more flexible Fico would undoubtedly please the World Bank, which has been critical of recent revisions which turned hiring and firing employees into a more complicated process.

No one doubts any more that the economy will be at the very core of next year’s election debate, yet observers hesitate to guess how these developments will affect the popularity of Fico, who until now has been topping all the charts with an approval rate far above his political opponents.

He himself is obviously aware of the pedestal on which he risks being placed: “Do not measure the activities of the government through approval rates; it is stupid, stupid, stupid,” he recently remarked.

“I do not care about popularity, do not bother me with preferences anymore,” Fico added, as quoted by the Sme daily. The population of this country dearly hopes that this is really how it is and that the government has experts who know what they are doing. Otherwise the economic crisis might turn out to be a very bitter experience for us all.


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