BRATISLAVA, December 8, (WEBNOVINY) — Slovakia will have enshrined the maximum public debt limit in its Constitution. At the parliamentary session on Thursday, legislators passed the draft constitutional bill on budgetary responsibility, with all of 147 present MPs giving the thumbs up in the 150-member parliament. The legislation will take effect on March 1, 2012, apart from some provision relevant for self-governments.
“It is very good news and a very good signal. We had such rules in our election program and we had such commitment in the government’s program statement,” Finance Minister Ivan Miklos (SDKU-DS) commented on the outcome of voting. Together with the approval of the state budget for 2012, this is another move to help preserve Slovakia’s credibility. Thanks to the new norm, the country will avoid irresponsible management and mishandling of public funds in the future. “It also is the fulfillment of the commitment, a softer form of which will be discussed even in Brussels, so in this sense we have got ahead of common solutions,” the minister elaborated.
Opposition SMER-SD leader Robert Fico noted that the bill was approved at the right time because the debt increase under the rule of Iveta Radicova was in full swing. The former prime minister also said that the approval of the budget, though a bad one, and of the constitutional bill proved that relevant political powers in Slovakia were able to agree and make decisions good for Slovakia. SMER-SD Deputy Chairman Peter Kazimir praised the debate and the way how the legislation was approved, which, in his opinion, proved that political culture in Slovakia improved.
The bill consists of four major fields: the debt brake itself, i.e., the constitutionally enshrined debt ceiling; the establishment of a Budgetary Responsibility Council; rules for transparency in public funds; and rules and restrictions governing economic performance of self-governments.
The paper envisages an automatic sanction mechanism that will be launched already at the debt limit of 50 percent of GDP. The Finance Minister would then be obliged to clarify the increase to MPs and suggest measures to reverse the growth. At 53 percent, the Cabinet would be obliged to pass a package of measures to trim the debt and freeze its wages. At 55 percent, 3-percent binding of expenditures would be launched automatically and next year’s budgetary expenditures would be frozen, except for co-financing of the EU funds. At 57 percent of GDP, the Cabinet would have to table a balanced budget. Should the debt climb to 60 percent of GDP, the Cabinet would have to face a confidence vote in Parliament. The volume of public debt reported by the EU’s Statistical Office Eurostat on an annual basis shall be the key data.
The draft counts on more measures to upgrade the quality and transparency of Slovakia’s fiscal policy. For instance, an independent Budgetary Responsibility Council, funded from the central bank’s budget, shall compile reports on long-term sustainability of public finances, fulfillment of fiscal responsibility rules and issue positions over fiscal impact of legislative proposals. Also, it shall evaluate Slovakia’s economic development in terms of public finances.
The paper also contains provisions related to self-governments. The bill’s authors and representatives of the Cabinet and self-governments have been in talks about the rules for a month. Self-governments agreed to subject to budget responsibility rules and the Finance Ministry, in return, waived the concept of a tax mix indented to overhaul the funding of self-governments. Self-governments whose debts will exceed 60 percent of real current revenue from the previous year will pay financial sanctions.
Regarding the application of the bill to self-governments, MPs also greenlighted a proposal for an audit of the public administration as a whole.
SITA