SLOVAKIA is likely to be taken out of the excessive deficit procedure (EDP) programme.
The European Commission recommended on June 2 that the Council of the EU drop the EDP programme for six countries: Belgium, the Czech Republic, Denmark, the Netherlands, Austria and Slovakia.
At present 17 EU member states are under the EDP. If the council at its next session follows the recommendations of the EC to release the six countries, the total number of countries subject to this procedure will fall to 11.
A decision to release a country from the EDP is based on a "durable correction" of the excessive deficit. This is deemed to have been achieved if the reported data for the previous year (2013 in these cases) show a deficit below 3 percent of GDP and the forecast of the EC indicates that the deficit will not exceed the 3 percent of GDP referenced over the forecast timeframe (currently 2014 and 2015).
Finance Minister Peter Kažimír reacted to the news saying that Slovakia “clearly deserves” to be released from the EDP.
"I'm particularly pleased that in 2013 we have achieved these results, because last year was a very difficult one for Slovakia and for the European economy as a whole," Kažimír said, as quoted by the TASR newswire, reflecting on Slovakia's state budget deficit for 2013, which dropped to 2.77 percent of GDP from 4.5 percent in 2012.
According to him, release from the EDP will mean Slovakia will not have to pay a fine of 0.2 percent of GDP, or about €150 million.
"In the past few months Slovakia has enjoyed access to record-low interest loans for financing its debt. Staying in this procedure would mean an increase in spending on the state's debt servicing. Were we to fail in being released from the procedure, our credibility will be jeopardised," said Kažimír.
Slovakia was placed in the EDP under the first government of Robert Fico, when the deficit rose to 8 percent of GDP.
“In 2009, during the economic crisis, tax income significantly dropped, while the expenses not only did not drop, but even increased significantly,” Slovenská Sporiteľňa bank analyst Mária Valachyová told the Sme daily.
The budget income dropped by about 4 percent in 2009. Since unemployment grew, the state collected less from taxes and payroll taxes. At the same time, expenses increased in the year-on-year comparison by 12 percent.
Since then, through 2010-2013, Slovakia took several measures to decrease its deficit, among them an increase in payroll taxes, a rise in VAT, the introduction of new taxes, limits to salary increases, the consumption of goods and services, as well as cuts to capital expenses, Ľudovít Ódor from the government’s budgetary council told Sme.
Source: TASR, Sme
Compiled by Michaela Terenzani from press reports.
The Slovak Spectator cannot vouch for the accuracy of the information
presented in its Flash News postings.
3. Jun 2014 at 10:00