Cabinet Approves Budget Outline for Next Year
BRATISLAVA, May 11, (WEBNOVINY) — On Wednesday, the Cabinet approved the draft budget outlines for the next three years, which was originally scheduled for last week’s Cabinet session. Based on the Finance Ministry’s draft, the volume of funds for wages in the public sector will remain frozen next year with the exception of teachers. The ministry also proposes other measures, such as increasing rates of excise taxes and real estate taxes. The ministry fears that the measures included in the draft will not be sufficient to squeeze the budget deficit to the planned 3.8 percent of the gross domestic product, and additional measures on the side of revenues or spending will have to be adopted.
The biggest cuts should be achieved by freezing public sector wages, namely of EUR 172 million. Wages of teachers should increase by three percent as of next year.
According to Finance Minister Ivan Miklos, coalition partners have already agreed upon this step and it is directly included in the budget outlines. Also a five percent cut in the state’s operating costs, which should bring 105.3 million, and reduction of basic expenditures for the state operation, which should improve the balance by EUR 157.8 million.
The ministry furthermore proposes some thirty measures to achieve further cuts. Squeezing the budget deficit to 3.8 percent of GDP will require additional EUR 200 million. The outlines do not yet contain funding for the government priorities.
The entire list of potential measures would have positive impact on the budget balance in the volume nearly EUR 530 million. Some measures have, however met with opposition of the coalition partners. In particular increasing tax rates, which the SaS party resolutely rejects. The Finance Ministry wants to increase the excise tax on wine and beer, which would bring additional EUR 30 million, and it suggests that municipalities increase real estate taxes by fifty percent, which would mean extra revenue for them of EUR 150 million.
The ministry also suggested expenditure caps for individual budgetary chapters. Several of them should get lower volumes. Individual ministries have raised dozens of objections within interdepartmental review. They still have several months for debates on concrete form of the budget, as it should be presented to Parliament by mid October.
The general government deficit should be squeezed below the 3-percent Maastricht criterion in 2013. The biggest part of public funds’ consolidation should thus be implemented already this year, when the deficit is to shrink from last year’s nearly 8 percent of GDP to 4.9 percent. Next year, the gap should narrow to 3.8 percent and in 2013 to 2.9 percent of GDP.
SITA