THE RULING coalition and the opposition parties have offered starkly different descriptions of the state budget for next year, which was finally approved by the Slovak Parliament on December 13. Prime Minister Robert Fico called it a “trustworthy plan”; the opposition parties labelled it “unrealistic, anti-social and unsustainable”. The state budget for 2013 assumes revenues of €13.916 billion and expenditure of €17.002 billion, with the budget gap therefore forecast to be €3.085 billion. Of the 146 deputies present, 82 voted in favour and 64 deputies voted against the budget.
“We have again shown that we assume responsibility for the country,” Prime Minister Robert Fico commented, as quoted by the SITA newswire.
However, the worsening condition of the state coffers has forced the government to significantly modify its original budget plans since they were first introduced by Fico in October.
Finance Minister Peter Kažimír reported in early December that there would be an extra €250-million gap to fill in 2013 if the state wanted to push the public finance deficit under 3 percent of GDP next year, as required by Slovakia’s commitments under the Maastricht single-currency rules. This came on top of an earlier €233-million gap which the government identified in August.
Parliament passed two amendments to the original budget draft: one to cover the expected shortfall, which among other things, emerged due to weaker-than-expected tax collection; the second to make allowance for a 5-percent pay hike for teachers in response to their nationwide strike in early December. Parliament simultaneously turned down four amending proposals tabled by opposition MPs, one of which would have provided teachers with the 10-percent pay hike they have been demanding, SITA reported.
The expected shortfall should, according to the amending proposal, be covered by using part of a reserve put aside to handle worse-than-expected economic developments, cutting the spending for some budgetary organisations, and by increasing the cash deficit.
Originally, planned revenues for 2013 stood at €14.176 billion, with spending estimated at €17.235 billion. Now the forecast deficit for 2013 has swollen from the original €3.059 billion to €3.085 billion, thereby reaching 2.94 percent of GDP, SITA reported.
The reduction in forecast revenues will most strongly affect the Transport Ministry, whose budget has been cut from its original €2.288 billion by almost €12 million. The Ministries of Justice and Interior will get €3 million less each. The Ministry of Finance will get €2 million less and the Ministry of Culture will receive €1.5 million less, according to SITA. In total, ministries will get €21 million less than originally planned.
Fico stated that his budget was a tool to achieve consolidation and push the budget deficit under 3 percent of GDP.
The state has bought a little time very expensively, Slovak Democratic and Christian Union (SDKÚ) leader Pavol Frešo said; Most-Híd’s Béla Bugár claimed that the budget plan would not prove sustainable since, in his opinion, expectations regarding tax revenues are overly optimistic.
Pavol Hrušovský, the parliamentary caucus leader of the Christian Democratic Movement (KDH), said that the budget was laying its hands on people’s wallets and forcing municipalities to save money, while at the same time the state was planning to spend almost half a billion euros more, SITA reported.
Aside from trying to shave the deficit to under 3 percent in 2013, the Budget of Public Finances for 2013-2015, which parliament adopted on December 13, projects a deficit of 2.4 percent of GDP for 2014 and 1.9 percent of GDP for 2015.
“During these uneasy times this is an ambitious goal and the Finance Ministry will do its utmost to achieve it,” the Finance Ministry wrote in a press release.
In consolidating the public finances the ministry claims that the Slovak government tried as much as possible to avoid measures that would slow Slovakia’s economy and at the same time focused on policies which would not represent a burden for the most vulnerable members of society.
“The [burden of] consolidation is being laid especially on banks, companies operating in regulated sectors and high-income citizens,” the ministry wrote, adding that transport infrastructure and education are among the government’s budgetary priorities.
The Financial Policy Institute (IFP), part of the Finance Ministry, calculates that the aggregate impact of consolidation measures will account for 3.3 percent of GDP, or €2.5 billion, in 2013. If no consolidation measures were adopted and the state were to rely solely on macroeconomic development and existing policies the deficit would be as high 6.3 percent of GDP in 2013, it said.
According to the IFP, the public administration budget for 2013 contains revenue-boosting measures accounting for €1.8 billion, or 2.4 percent of GDP. These include changes in the law on social insurance and increases in income tax: on companies by 4 percentage points, to 23 percent, and on those with high earnings by 6 percentage points, to 25 percent. Other adopted measures are the already-implemented extension to the special bank levy and another levy paid by companies operating in regulated sectors. Both of these measures are temporary. Within non-tax revenues the state expects in particular a one-off boost from the sale of radio frequencies (the so-called digital dividend) and revenues from a new system of financing the national emergency crude oil reserve.
On the expenditure side, the IFP calculates the impact of consolidation measures at €0.9 billion, or 1.2 percent of GDP. Out of these, cuts in wages and the operating expenditures of the state, and cuts in expenditures by municipalities make up the biggest portion, almost €747 million. On the other hand, the measures also include higher expenditure on education.
Based on the IFP calculation, there will be a reserve of 0.3 percent of GDP, or €230 million.