% of GDP
In 1918 the Slovaks joined the closely related Czechs to form Czechoslovakia. Following the chaos of World War II, Czechoslovakia became a communist nation within Soviet-ruled Eastern Europe. Soviet influence collapsed in 1989 and Czechoslovakia once more became free. The Slovaks and the Czechs agreed to separate peacefully on 1 January 1993. Historic, political, and geographic factors have caused Slovakia to experience more difficulty in developing a modern market economy than some of its Central European neighbours.
Update No: 078 - (27/10/03)
Meciar is not yet dead
The coalition government of Mikulas Dzurinda was widely acclaimed abroad when it was re-elected last year. The main point about it was that it was not led by arch-bogy man, Vladimir Meciar. Meciar was one of the foursome of dictators in Europe in the 1990s, with Milosevic of Serbia, Tudjman of Croatia and Lukashenka of Belarus. Milosevic is in the Hague. Tudjman is dead. Lukashenka remains in power.
Meciar has been out of power since 1998 and failed to regain it last year. But his party, Movement for a Democratic Slovakia (HZDS), won the largest share of the votes,19%, in a fragmented system of parties. The very fact that he allowed himself to be voted out of office, it can be argued, shows that he is a genuine democrat. Actually, like Milosevic in 2000, he really thought that he was popular. He was and is among rural voters and the old, all in fact nostalgic for the good old days of communism. It would only need a realignment of the parties to bring him back into government. But that fortunately would not necessarily mean power.
Actually the reputation preceding him is too negative abroad for it to be a realistic option even to bring him into a coalition group for those with a long-term view on power.
Nevertheless Meciar remains leader of the opposition. He tried to make the most of what is probably a minor affair that will blow over, namely Dzurinda sacking his equivalent of the national security adviser, the head of the National Security Office, Jan Mojzis, and the defence minister, Ivan Simko, just before the former was due in Brussels. His NATO counterparts had obviously grown to like and trust Mojzis and were very disconcerted by his summary dismissal.
Meciar jumped in to say that the sackings endangered Slovakia's bids to join NATO and the EU. He re-iterated HZDS's commitment to entry to both of them. The Foreign Minister, Eduard Kukan, pointed out reasonably enough that Slovakia has received an invitation to join NATO for strategic reasons, not just that they like one Slovak official or another. At that Meciar riposted that Kukan in saying that was being a toady because he wanted Dzurinda's support for his presidential candidacy; he was "eating out of his hand."
Reform at risk
The actual president, Rudolf Schuster, has taken the opportunity of coming elections for his job to make some constructive criticisms of the government. He said it was hampered by too much internal discord.
Although he feels overall developments in Slovakia are positive, Schuster said the cabinet is divided when it comes to the reforms necessary for EU membership. "Every minister pursues his own reform without coordination with the others and without a sufficient analysis of problems," the Slovak President said.
Slovakia's ruling coalition is made up of Prime Minister Mikulas Dzurinda's Slovak Democratic and Christian Union (SDKU), the Hungarian Coalition Party (SMK), the Alliance of a New Citizen (ANO), and the Christian Democratic Movement (KDH). Schuster said too many government-sponsored bills are "ill-considered" and must be returned to parliament for re-writing. In their competition for votes, the parties put too much emphasis on unimportant issues, such as an abortion bill that has divided the coalition for months, he said. Holding an election now would be "too costly," however, and would damage the country's image as a stable democracy.
The Slovak's strictures on the internal bickering of the coalition may be justified, as also on triviality too often winning out. But his judgment that the overall balance-sheet is positive is exactly the view of Brussels and the international community generally. Pension reform is on the agenda and there are plans for a single 19% income and corporation tax next year. The idea is to simplify the system on a flat rate basis, thereby cutting red tape and complex allowance schemes. Poland is due to follow suit in 2005.
That Slovakia should now be leading the way is novel, but appropriate. As a far smaller country than Poland, without its complex agriculture or rust-belt coalmining regions, it is able to implement reforms more easily.
The state sector is less oppressive in Slovakia, with a smaller public budget deficit at 5.5% of GDP in 2002, and prospectively about the same this year.
But there is one big test-case ahead, reform of the state railways, the largest employer in the country. Innumerable categories are eligible for exemptions or reduced fares, pensioners, students, families, hikers and civil servants. It is the last two categories which are revealing. The Slovaks by and large see themselves still as a nation of country pursuits, such as hiking. The sophisticated professional people and intellectuals in Bratislava would naturally be different. But a home-spun philosophy of healthy outdoor living fits in with a tradition of peasant ways and folksy customs. Such, indeed, was the basis of Meciar's fatal appeal.
The civil servants are privileged for less exalted and rather more prosaic reasons. There are still huge vested interests in Slovakia that need to be curbed. It will probably require a boom to enable them to be tackled. That for tiny Slovakia depends on forces outside its direct control, such as EU growth. The augurs domestically are still quite good.
Two foreign car makers interested in Slovakia
Slovak Economy Minister, Pavol Rusko, officially confirmed on 6th October there were two new foreign car-makers interested in investing in Slovakia, TASR New Agency web site has reported. One of them is British car producer Rover, which plans to invest at least 400m euros in a new production facility in eastern Slovakia, according to Rusko.
The minister is due to hold talks with Rover representatives after his return from talks with representatives of South Korean Hyundai car-maker, which made its interest known some time ago.
State might sell more than 49 per cent stake in Slovak Power Plants
The state might sell more than a 49-per-cent stake in Slovak Power Plants [Slovenske elektrarne - SE], Economy Minister Pavol Rusko said, TA3 TV has reported. The amendment to the law on large-scale privatization - which makes possible the completion of privatization of strategic companies - is in parliament, awaiting an approval. Minister Rusko also confirmed tht an advertisement would be published, with a call by the privatization adviser to potential investors to show or confirm interest in power plants.
The tender for a sale of 49 per cent of shares in the SE opened in August 2002 and originally the SE were to be sold this year. However, the situation is totally different today and it cannot be ruled out that the state will be selling off more than 49 per cent:
Rusko said: "The tender might be extended. That is why the bill is going to the National Council [parliament]. Of course, we do not assume that the share to be sold off will be only 49 per cent."
Peter Golias, economic analyst of the Ineko company said that he did not think that it is of key importance whether the state will be selling 49 per cent of shares in the SE or 51 per cent. The key issue is whether the managerial rights to run this company will be transferred as well.
Rusko aded: "The power plants are far from being a luxurious raisin in the cake for us to be able to resign in advance on any other option. We want to be open and we want to consider all options. It means that we can accept offers for "all together", but we can also consider offers for a separate purchase of nuclear plants and a separate offer for the classic-type plants."
The sale of power plants and the money for the state will thus be delayed by some two years.
Rusko continued: "If we decided on the separate sale alternative, it would take longer [and the process would be completed] sometime in the middle or at the end of 2005. If the "all together" alternative was chosen, the process could be completed six months earlier."
Slovak government approves draft budget for 2004
The government has approved the draft of the state budget for the next year, which reckons on a deficit of 59.5bn korunas. The ministers from the Party of the Hungarian Coalition [SMK] did not support the draft as they demand that direct payments to farmers are topped up to the level of 55 per cent of the EU average, TA3 TV has reported.
The 2004 state budget revenue should reach 250bn korunas, expenditure should exceed 309bn korunas. The state will thus work with a budget of 59.5bn korunas. The overall public finance deficit will be 50.3bn korunas, which is 3.9 per cent of the projected GDP.
Prime Minister Mikulas Dzurinda said that the state budget should be a matter of balance, of a balanced support for all spheres, sectors and walks of our life.
The only member of the cabinet to vote against the draft state budget for 2004 was Environment Minister Laszlo Miklos.
The other SMK ministers abstained in the vote on the state budget as they demand that the direct payments to farmers are topped up to 55 per cent of the EU average. The current proposal is for 50 per cent.
Agriculture Minister Zsolt Simon said: "The SMK warned well in advance that as long as priorities in agriculture are not satisfied, the party would find if difficult to support this state budget."
In view of what it possible, all ministers - with the exception of [Environment] Minister Miklos, are satisfied with the draft budget.
The draft budget for 2004 still has to be approved by National Council [parliament] deputies. An extensive debate on the issue is expected in parliament. The fate of the budget depends first and foremost on MPs for the SMK.
Direct foreign investment shooting upward
For the first half of 2003, the direct foreign investment (FDI) for Slovakia reached 20.838bn Slovak crowns, according to the Slovak Spectator. Of that amount 19.081bn crowns will be going into the corporate sector and the rest will go into the banking sector. The aggregate volume of direct foreign investments amounted to 320.8bn crowns, it was reported in the monetary report of the National Bank in Slovakia. Arriving from Germany and Hungary were the largest shares of FDI during this period. Germany contributed 9.297bn crowns to the corporate sector and Hungary 8.029bn.
Out of the total FDI 9.36bn crowns went into the electricity production and distribution sector, 8.188bn crowns to industrial production, and 1,307bn crowns to the financial mediation sector. Consuming the largest share of the investment was the region of Bratislava, with 14,390bn with the region of Kosice following up with 5.15bn and the Trnava region with 445m crowns, the Zilina region with 330m crowns, and lastly the Nitra region with 286m crowns.
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