Books on Slovakia
% of GDP
Update No: 109 - (29/06/06)
Fico displaces Dzurinda
After an eight-year rule by a centre-right cabinet under the leadership of
Mikuláš Dzurinda, Slovaks have once again voted for change. This time however
it was not at the cost of HZDS leader, the populist 'rabble-rouser' Vladimír
Meciar, but Dzurinda's SDKÚ-DS. This year's symbol of "change" is
Smer-Social Democracy led by Robert Fico, which received almost one-third of all
votes cast (almost 680,000, which is about 300,000 more than in the 2002
It would seem that the route to the premiership has definitively opened for
Fico. Almost nothing would seem to be preventing Smer-sociálna demokracia from
forming the government.
The alternative, by which the three right-of-centre parties, SDKÚ-DS, SMK and
KDH, would unite with LS-HZDS came to nothing, when the Christian Democrats
refused participation with HZDS, with or without the involvement of the
controversial Meciar. "I cannot imagine that we would go into a government
with Vladimír Meciar, after having fought against him for years. This would be
rehabilitating him, in a certain sense," one of KDH's senior
representatives wisely observed. It should be well received in democratic
circles that Meciar when in power a threatening figure - threatening enough to
bring about an eight year coalition of unlikely 'bedfellows' whose original
whole raison d'etre was to keep him out - will not be returning to such
The leader of the Christian Democrats, Pavol Hrušovský, noted that the
rightist parties do not have a majority: "Today, the winner of the
elections, the Chairman of the Smer party has the key to forming a majority
government in his hands." The attempt of any other party to form an
alternative government would "seem useless" at this point in time.
SDKÚ leader Mikuláš Dzurinda tried on June 21st to unite the right, and his
offer was taken up first by SMK.
The head of the Hungarian coalition Béla Bugár confirmed SMK's interest in
continuing in a coalition with its right-wing partners. Such a three-party block
would in his opinion manage to guarantee a continuation of reforms. Bugár
immediately indicated it was now up to KDH, which however sees no reason for
such discussions - according to Vice-chairman, Vladimír Palko, there exists no
other option than a coalition of the right plus HZDS. "Differing opinions
on the participation of HZDS in the government make a joint approach by KDH and
SDKÚ-DS impossible," was his reaction for the TASR agency.
According to political commentator, Samuel Abrahám, the possibility of a
rightist coalition in cooperation with HZDS is lost for now, but not necessarily
definitively - "It still remains as the last possible option in the case
that a long-term absence of a government should occur."
SDKÚ was disappointed in the position of the Christian Democrats: " It is
a difficult situation, perhaps it today seems insoluble, but I truly believe
that we will reach accord. Perhaps tomorrow will bring a totally different
situation," reacted one of the members of Dzurinda's union. According to
information from the corridors of the parties (both SDKÚ and KDH), politicians
are beginning to believe that a coalition is not the only way forward.
Reform fatigue may affect elections
More than 13 years after its velvet divorce from the Czech Republic,
Slovakia has emerged as a model of post-communist economic transformation and a
flat-tax trailblazer in Central and Eastern Europe, Deutsche Presse-Agentur (dpa)
reported. But, as Slovaks voted for change in June 17's election, the
far-reaching economic reforms introduced by Prime Minister, Mikulas Dzurinda,
were facing an uncertain future.
At the same time, the election has raised new questions about when Slovakia
might join the Euro. Indeed Fico has signalled plans to reverse the tough
welfare cuts launched by Dzurinda and backtrack on some of his conservative
coalition's key reforms. Seriously at risk is Slovakia's 19 per cent flat tax,
which has helped draw about US$11 billion in foreign investment.
Late in the campaign, Dzurinda proposed lowering the flat tax to 15 per cent by
2010, cutting taxes on health and social insurance and shifting more investor
incentives from multinationals to small-and medium-sized businesses. This was
too strong medicine for the electorate.
"Reform fatigue among the electorate has clearly been a major reason for
the drop in the approval ratings of the Dzurinda government and a key factor
behind the surging support for populist parties," said Ivailo Vesselinov,
economist with Dresdner Keinwort Wasserstein.
Apart from the batch of labour market and pension reforms launched in recent
years, the flat tax has emerged as a symbol of the country's drive to attract
top investors, such as PSA Peugeot Citroen, Volkswagen and Kia, while also
helping to underpin solid economic growth. The win for the opposition could
"stop the reform process in Slovakia," said Stanislava Pravdova,
analyst with Danske Bank. "It will be very negative from the market
perspective." "A lot of foreign investment has come to the country
because of the flat tax," she added.
But Pravdova said the scale of changes proposed by Fico are not yet clear even
after the election; details of his government plans have yet to emerge. When
they do, they are likely to answer the crucial question of whether Fico will
stick to Dzurinda's timetable for joining the Euro. A member of NATO and the
European Union since 2004, Slovakia, via Dzurinda, has set a 2009 deadline for
adopting Europe's common currency, earlier than other new EU members.
Underscoring Slovakia's rapid-fire growth and emergence as a regional hub for
the car industry, data released in May showed the country's economy racing ahead
by a robust 6.3 per cent during the first quarter.
At the same time, unemployment fell to 14.9 per cent, its lowest level in seven
years. This followed a six per cent plus growth rate chalked up last year,
forcing the central bank on the week before last to deliver a hefty
50-basis-point increase in rates to cool Slovakia's high inflation rate, which
edged up to 4.8 per cent last month. But not even Slovakia's booming economy
Economists are concerned that the swing to the left could fuel the country's
deficit and peg it below the three per cent target for Euro membership.
Relatively high consumer prices mean Slovakia will have to work hard to meet its
2009 Euro target by cutting the inflation rate to the current 2.6 per cent
benchmark for new Euro members. Fico has described the flat tax as an unjust
benefit for foreign multinationals and the rich that burdens most Slovaks with a
high VAT on food, energy and medicine.
He has proposed hiking a monopolies tax to 25 per cent, lowering the VAT, making
healthcare free and ending privatisation.
Five carmakers want to hire people
All three carmakers located in Slovakia - Volkswagen, PSA Peugeot Citroen, and
Kia Motors - in May began new recruitment drives, and by the end of this year
want to hire 2,500 people, Slovak Spectator reported.
However, even carmakers situated in Hungary, such as Suzuki in Esztergom and
Audi in Gyor, are interested in hiring in Slovakia. "We have a cooperation
with Suzuki going back several years where about 1,200 local people work with
us. Due to high turnover, we are constantly recruiting. Whenever we find a
suitable man we send him directly to the plant for a job interview," Csila
Onodiova, director of the labour office in Nove Zamky said.
Kia finishes Slovakian plant amid scandal
South Korea's second-largest automaker, Kia Motors Corp, has finished
construction of its first factory in Europe, its affiliate Hyundai Motor Co said
recently, New Europe reported.
Kia intended to begin trial production at its one-billion-Euro plant in Slovakia
in June, Hyundai, South Korea's largest carmaker, said from Seoul.
Full production is planned for later this year, and by 2009, the plant should
employ up to 3,000 people in Zilina, about 200 kilometres north-east of
Kia, however, is embroiled in a bribery scandal at Hyundai that has resulted in
the arrest of Hyundai Chairman, Chung Mong Koo. Chung's son, Chung Eui Sun,
Kia's president, has also been questioned in the scandal.
While Kia opened its factory at Zilina as planned, the ongoing investigation
into the scandal has caused the carmaker to delay the start of construction on
its first planned plant in the United States. Hyundai has also delayed the
groundbreaking for a plant in the Czech Republic.
Members of top management at Hyundai are accused of establishing slush funds
used to bribe politicians and government and banking officials.
The Slovakian plant, which is to make compact cars and sports utility vehicles,
was built to handle an annual production capacity of 300,000 cars.
"The development of the new facility - together with its new headquarters
and design centre in Frankfurt, Germany - confirms Kia's commitment to Europe
and its determination to become an elite global automaker," Kia said in a
Slovakian officials hailed the agreement when it was made last year and said it
would help the country's economy and give impetus to more foreign direct
Meanwhile, the Slovak Building Inspectorate (SSI) has fined the Kia carmaker for
building parts of its auto plant near Zilina without permits, Slovak Spectator
SSI said that Kia built its pressroom, welding hall, assembly hall, and paint
hall, as well as a temporary construction site, without the required
construction permits. Kia, which has been in trial operations for some time, has
appealed the SSI decision. The size of the fine was not disclosed, the news
"The delays in the construction of the car plant are connected with the
delayed purchase of the land. The Slovak government is responsible for meeting
its commitments in the investment contract, but it is not meeting them on time.
We are sticking to the investment schedule," Kia Motors Slovakia spokesman,
Dusan Dvorak, said.
Construction of complex begins on Danube Riverside
J&T Real Estate has begun construction of River Park, a multi-functional
complex on the left bank of the Danube River, Slovak Spectator reported.
The complex, designed by Dutch architect, Eric van Egeraat, will consist of four
blocks of buildings. Some of the complex's buildings directly overlook the river
- therefore the project is called River Park. Apart from the first five-star
hotel in the Slovak capital, the complex will also feature offices, shops, flats
and restaurants. The height of the buildings is limited, in that they cannot
significantly disrupt the city's skyline under Bratislava castle. The project
plan counts on building a square in front of the hotel, plus an 18-metre wide
promenade with designated cycling and rollerblading routes. In addition, there
will also be new grass laid, a tree-lined avenue with shrubbery. The new
three-floor underground garages will provide 1,100 parking spots in total. The
company plans to invest around four billion Slovak crowns (117.2m Euro) in the
project, which will cover an area of 140,000 square metres.
Slovak ski resorts plan huge investments
Winter ski resorts that have joined forces and formed an association called
Slovakia Ski Region plan to invest at least 1.5 billion Euro (55 billion Slovak
crowns) in the next five years and create around 20,000 jobs, Slovak Spectator
The operators of the largest winter ski resorts in Slovakia - Tatranska (which
runs the ski resorts Park Snow Donovaly and Park Snow Vysoke Tatry), Snow
Paradise Velka Raca Ossadnica, Tatranske Lanove Drahy, and Jasna Nizke Tatry -
have also called on the government to support the development of tourism in
Slovakia, the news agency wrote.
The ski resorts also agreed on a joint marketing strategy for Slovakia. One
concrete measure of this strategy is a joint ski pass for all ski resorts for
the next winter season to entice more skiers and tourists to visit the country's
Parties promise fast work on highways
Regardless of which parties make it to parliament after the upcoming general
elections, the construction of highways should not slow down in Slovakia, Slovak
All major political parties see the completion of the D1 highway connecting
Bratislava and Zilina and further to Kosice as their priority, the news daily
reported. Only the Free Forum proposes to re-evaluate whether the construction
of the southern connection to Kosice would be more advantageous. A majority of
political parties want to complete the northern route of the D1 highway through
Zilina to Kosice by 2012, although no party has given guarantees. Political
parties promise to allocate 20-30 billion Slovak crowns per year towards highway