The European Commission (EC) believes that Slovakia is on the right path toward reining in its excessive deficit. This follows from a set of recommendations that the EC unveiled for EU member countries on Wednesday, May 29. The document, quoted by the TASR newswire, writes that Slovakia can garner additional resources by broadening the tax base, curtailing the leeway for tax evasion and making more extensive use of taxes that do not dampen growth – such as property and environmental taxation.
Thanks to major consolidation efforts, Slovakia cut the public-finance deficit from 7.7 percent of GDP in 2010 to 4.3 percent last year, notes the Commission. The EU's executive branch views this as a feasible macroeconomic scenario in which to underpin the budget projections.
"Compared to the Commission's forecasts, the authorities assume similar growth rates of GDP with a slightly different composition," reads the document. As for Slovakia’s steps in cutting the fiscal deficit, the EC reports that the average annual fiscal effort in 2010-2013 amounts to 1.4 percent of GDP, which is "well above the required effort of 1 percent of GDP recommended by the Council. A large part of the expenditure savings in 2013 is expected from local governments and other general government units over which the central government does not have a direct influence," read the Commission's findings.
The EU's executive body also warns of the impact of fiscal austerity measures on areas such as innovation, education and transport infrastructure.
The recommendation stressed unemployment as one of the major problems plaguing the Slovak economy. The Commission also suggests that "the provision of social assistance should be better linked to activation, and there is a need to remove disincentives in the tax-benefit system for those taking up a low paid job". Increasing the ratio of women and older people on the labour market would also help boost the overall employment rate and the country to attain the 2020 national employment target of 72 percent.
The document also cautions that "Slovakia has one of the highest youth unemployment rates in the EU... and the school-to-job transition remains difficult and the education system does not respond readily to labour-market needs". It makes mention of the fact that marginalised communities, most notably the Roma, face substantial barriers when seeking jobs or entering the education system.
Compiled by Zuzana Vilikovská from press reports
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30. May 2013 at 10:00