On September 19, 2024, in Bratislava, Prime Minister Robert Fico (Smer) met with representatives from retail chains at the Government Office to discuss reducing VAT on essential food items. (source: TASR)
One of the biggest puzzles of recent weeks and months has been whether and how the fourth Fico government intends to consolidate public finances. Several reasons contributed to the uncertainty in this area.
Consolidation as a puzzle
Firstly, the government has been in power for nearly a year, and public finances were in a dire state when it took office. During its first year, the government not only failed to consolidate but did the opposite. Its flagship policy was the introduction of the 13th pension. Every politician and economist knows that the best (for both political and economic reasons) time to consolidate is as soon as possible.
The second reason for uncertainty was that the now four-time prime minister firmly stated that increasing VAT was out of the question. While politicians might accept this, economists struggled to see how consolidation, to the extent Slovakia needs, could be achieved without raising VAT.
