A POSSIBLE fiscal union, which was expected to be discussed by European Union leaders at a summit in Brussels on December 9, is not something Slovaks should fear, said the country’s finance minister, Ivan Mikloš. The summit, due to take place after this edition of The Slovak Spectator went to print, was supposed to produce a remedy to calm the edginess of financial markets by pushing eurozone countries towards stricter fiscal discipline. Prime Minister Iveta Radičová left for Brussels on Thursday, December 8, with a mandate to give Slovak backing to measures designed to achieve tougher budgetary rules and automatic sanctions for countries that violate spending limits.
However, Freedom and Solidarity (SaS), formerly a member of the ruling coalition and now part of the current interim government, said that if the changes agreed on in Brussels resulted in curbs on the budgetary sovereignty of Slovakia then it would push for a referendum.
Mikloš said that rejecting the solutions proposed by German Chancellor Angela Merkel and French President Nicolas Sarkozy would mean the de facto end of the euro project.
“Saying no means that we are done,” said Mikloš, as quoted by the SITA newswire. “I am not talking about some notional currency; we are talking here about our currency, in which Slovak citizens have their savings.”
Before her departure, Radičová, whose mandate was supported even by the opposition Smer party, said that the measures need to be implemented as soon as possible. Nevertheless, SaS and the opposition Slovak National Party (SNS) abstained from the vote that granted Radičová her mandate for the summit. That mandate empowers her to support a shorter adoption process for the permanent European bailout scheme, among other things.
On December 6, Radičová said that the situation was so serious that it was almost impossible for European leaders to fail to reach an agreement.
“It is the only option that we currently have,” Radičová said, as quoted by SITA.
International ratings agency Standard & Poor’s laid some additional pressure on eurozone leaders when it put Germany, France and 13 other eurozone countries, including Slovakia, on review for a downgrade on December 5. The ratings agency said that the failure of EU leaders to agree on remedies for the debt crisis was harming their financial stability, SITA reported. Standard & Poor’s said that it planned to complete the review as quickly as possible, perhaps after the EU summit ends.
Debt brake sails through
Meanwhile Slovakia on December 8 passed a constitutional debt-ceiling law that should force future governments to exercise better budgetary discipline. In the 150-seat house all 147 deputies present, bar one, voted in favour.
The law sets an initial limit on public debt at 60 percent of GDP, with a gradual reduction of 1 percentage point per year after 2018 until it reaches 50 percent of GDP. If a future government hits the 60-percent debt ceiling, it will face an automatic no-confidence vote in parliament. The law also triggers a series of preliminary steps as debt approaches the limit. The finance minister has to table a sound explanation when debt reaches 50 percent of GDP, along with proposed solutions for its reduction. If the debt then grows to 53 percent, the government will be obliged to adopt a package of measures to reduce it, as well as to freeze state salaries. At 55 percent, spending would be frozen in the next fiscal year. If the debt were to reach 57 percent of GDP, the government would be obliged to table a balanced budget.
The law also sets out the establishment of a Council for Fiscal Responsibility, an independent three-member body, which would be financed by the central bank, the National Bank of Slovakia (NBS), according to SITA.
The law also includes provisions that pertain to the operation of local government.
Mikloš said it was very good news for Slovakia that such legislation had been passed.
“It is the fulfilment of the obligation which will, in a softer form, be discussed in Brussels, so in some sense we are [ahead of] the joint solutions,” Mikloš said, as quoted by SITA.
Is a referendum required?
SaS boss Richard Sulík said on December 6 that he would consider the creation of a fiscal union and the cancellation of eurozone members’ right of veto a significant curb on the sovereignty and independence of Slovakia. If something like this emerges it should only be agreed via a referendum, he said.
According to Sulík, his party would propose a referendum on the future functioning of the European Union and the eurozone to be held on the same day as the forthcoming general election: March 10, 2012.
The general election, which is being held more than two years ahead of schedule, was prompted by the Radičová government losing the confidence of parliament in October. The fateful vote occurred when proposed changes to the eurozone bailout fund where tied to a confidence vote, and SaS refused to back them.
The prime minister has argued that a referendum is necessary as the measures being discussed in Brussels are only short-term in nature and are being pursued in order to address the current financial crisis.
“If it were to become a fiscal union where a really significant part of [Slovakia’s] authorities were being shifted via the preparation of a new treaty, then the question of a referendum would be justified, but not in association with the adoption of these short-term solutions,” Radičová said.
Slovakia has a decidedly patchy record when it comes to holding referendums. Only one such vote in its modern history has attracted enough participants for the result to be valid: the plebiscite on entering the EU. Slovakia’s most recent referendum, initiated by SaS, took place on September 18, 2010, and failed to attract enough voters for the result to be declared valid. At least 50 percent of eligible voters must turn out for a referendum in Slovakia to be binding.
Aside from SaS, only the Slovak National Party (SNS) and independent MP Igor Matovič, leader of the Ordinary People faction, have voiced support for the idea of a referendum.
Political analyst Marek Rybář of Comenius University said that SaS’ call for a referendum over eurozone changes was premature and in any case just part of its election campaign.
“We do not yet have anything to run a referendum about,” Rybář told The Slovak Spectator, adding that no one knew at that point whether the summit scheduled for December 8 and 9 would produce any results. “There is no agreement yet, not even the contours [of one].”
According to Rybář, even if they agree that the measures must take the form of a treaty, then ratification might take up to a year and a half. He also pointed out that if anyone wants to have a referendum over this issue, then there should first be some debate.
“But there cannot be any debate, because it will happen during the election campaign,” Rybář said. “If the intention really were to give citizens a chance to have their say, which in itself is very difficult because this is a very technical issue, but in principle is possible, then I see no reason, other than the motivation of the election campaign, to hold it on March 10.”
Political analyst Miroslav Kusý said he regards the plan to call a referendum as a populist move since, in his opinion, SaS needs to present something to its voters.
“They have not delivered anything from their programme, while blaming their ruling coalition partners,” said Kusý, who believes that the issue of eventual fiscal union will become a topic of the SaS election campaign.
Rybář expressed some doubt about whether fiscal union would become a strong topic in the election campaign, but agreed that it would be a topic for SaS.
8. Dec 2011 at 19:00 | Beata Balogová