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Constitutional cap proposed for state debt

The debt ceiling for Slovakia’s public finances should be set at 60 percent of GDP, while sanctions should be applied when it exceeds 50-percent, according to a constitutional law proposal introduced on Tuesday, October 4, by the parliamentary finance committee. The highest sanction will be a confidence vote in the government, the TASR newswire reported.

The debt ceiling for Slovakia’s public finances should be set at 60 percent of GDP, while sanctions should be applied when it exceeds 50-percent, according to a constitutional law proposal introduced on Tuesday, October 4, by the parliamentary finance committee. The highest sanction will be a confidence vote in the government, the TASR newswire reported.

If state debt exceeds a permitted limit by 10 percent, the finance minister will have to send a letter to parliament in which he or she explains why the public debt is so high and proposes corrective steps. At the moment the limit is set at 40 percent. Moreover, if it reaches 53 percent, the government would be obliged to adopt a package of measures and freeze ministerial salaries. At 55 percent, expenditure could not be increased the following year. At a level of 57 percent, the government would have to prepare a balanced budget. If these measures did not work and debt still reached the 60-percent ceiling, the government would have to hold a confidence vote.

There would be three exceptions to the sanctions: a deep recession, a bail-out for banks, or in tackling the effects of a major catastrophe.

The draft law proposes to keep the limit of 60 percent only until 2017. It would then be gradually lowered to 50 percent. It also suggests establishing an independent council consisting of 15 members that will supervise financial management of the state.

Experts from both coalition and opposition parties confirmed that the law could pass with a constitutional majority, the Sme daily reported. Opposition Smer party MP Peter Kažimír said that if the law passes, it would be an extraordinary political project. He added that the proposed law would be amended since it does not currently contain sanctions for municipalities, Sme wrote.

Sources: TASR, Sme

Compiled by Radka Minarechová from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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