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Analysts say government permits overpriced public procurement

Maintaining the public finance deficit below three percent of GDP is the government's priority in the economic area, according to a draft of the Programme of Stability for Slovakia for 2008-12 that has been submitted for inter-ministerial comment, reported the TASR newswire.

Maintaining the public finance deficit below three percent of GDP is the government's priority in the economic area, according to a draft of the Programme of Stability for Slovakia for 2008-12 that has been submitted for inter-ministerial comment, reported the TASR newswire.

However, analysts who were asked for comments by TASR are sceptical as to whether the Cabinet will manage to meet this Maastricht criterion. According to Radovan Ďurana of the Institute for Economic and Social Studies (INESS), drops in tax revenues could only be offset by savings amounting to billions of euros.

“However, I'm sceptical about the government's ability to find such huge savings. Unless they are at the expense of large-scale infrastructure projects, the reserves would have to be made at the expense of wages in the public sector and in the area of public procurement,” said Ďurana.

ČSOB bank analyst Silvia Čechovičová said that public procurement in Slovakia is overpriced without good reason. It is questionable, however, whether in these times of expected recession the state should insist on fulfilling the Maastricht criterion regarding the public finance deficit.

“As long as increasing the deficit leads to strengthening the economy's competitiveness, then it makes sense. However, if the deficit goes up as a result of pouring funds into inefficient enterprises or subsidising one sector at the expense of another, then it's a negative thing,” said Čechovičová, who expects that Slovakia's public deficit in 2009 will stand at 3.8 percent of GDP.

Finance Minister Ján Počiatek has recently admitted that the objective of keeping the public finance deficit under three percent of GDP may not be met.

“If the fall in the EU and the entire world is much higher than currently expected, then we'll have to re-evaluate these goals, too. Views concerning this issue are developing and the attitude of the (European) Commission to the three-percent threshold may be partially modified,” said Počiatek. TASR

Compiled by Zuzana Vilikovská from press reports
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