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 proposal that is part of a draft constitutional law that was submitted jointly by all six parliamentary parties to MPs on November 8, the TASR newswire reported.
Slovakia’s current public debt stands at over 40 percent of GDP. According to the proposed law on budgetary responsibility, when debt exceeds 50 percent, the Finance Ministry will have to send a letter to parliament in which it explains why this has happened. Moreover, it will also have to propose remedial measures.
If debt reaches 53 percent, the government will be obliged to adopt a package of measures and freeze ministerial salaries. Above 55 percent, expenditures increases in the following year will be prohibited. At 57 percent, government will have to prepare a balanced budget. If these measures do not work and the debt reaches the 60-percent ceiling, the government will have to initiate a confidence vote.
Moreover, a new independent council consisting of 15 experts will be established to oversee the financial management of the state.
The constitutional law proposal also contains a provision stating that the 60-percent threshold should only be applied until 2017, after which it will be lowered gradually to 50 percent.
There are three exceptions, under which sanctions would not be applied: a deep recession, a bailout for banks and the need to tackle the effects of a major catastrophe.
The bill should be debated at the upcoming parliamentary session, which is set to begin at the end of November. If it is approved, the measures would come into effect as of March 2012.
Meanwhile, regional governments announced that they would support the draft law.
“We unequivocally support this activity as well as everything associated with the stabilising of the public finances,” said president of the Trnava Self-Governing Region, Tibor Mikuš, adding that local politicians do not expect the debt brake to have any significant influence on the finances of the regions since their debt is relatively low.
Compiled by Radka Minarechová from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.
9. Nov 2011 at 10:00