BRATISLAVA, November 8 (WEBNOVINY) — The draft bill on a so-called brake on public debt is definitely bound for parliament. Representatives of all six parliamentary parties have submitted the draft constitutional bill on budgetary responsibility to parliament after one-month long public discussion on Tuesday. Parliamentary parties underscore that the general political support to the proposal sends a clear message that Slovakia approaches management of public finances responsibly and refuses setting out for a road of high indebtedness.
“After a long time, we have an economic bill that has won broad political support,“ stated co-author of the draft Ludovit Odor at a press meeting on Tuesday. He went on to say that in this time of uncertainty on financial markets, it is necessary for Slovakia to dispatch a clear signal that it is serious about responsible management of public finances. “The draft bill proves that this is not just the way how bills should but how it can be drafted,“ added KDH MP Anton Marcincin.
Representatives of other parliamentary parties have also appreciated agreement of all political parties and expressed confidence that considering the broad political agreement, all MPs will support the draft constitutional bill at the parliamentary plenary session.
The draft constitutional bill concerns four main areas, namely the so-called debt brake, setting a constitutional cap on the public debt, establishment of an independent Budget Responsibility Council, regulations for transparency in public finances as well as regulations and restrictions in financial management of municipalities.
The blueprint introduces an automatic sanction mechanism that would be launched the moment the general government debt achieves 50 percent of GDP. After reaching this cap, the finance minister would have to explain the increased debt to parliament and propose measures to reverse the growth trend. If the debt is 53 percent of GDP it would be the signal for the Cabinet to adopt an austerity package and freeze their salaries. Fifty percent would mean binding of 3 percent of budgetary expenditures and freezing expenditures in the next year’s budget but co-financing of Euro-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. Last year, Slovakia’s public debt rose from 35.4 percent of GDP to 41 percent.
The draft also counts on establishment of the Budget Responsibility Council. The main task of the independent institution should be boosting transparency of the budget process. The council should annually compile and publish 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 bill is expected to take effect as of March 1, 2012 with the exception of some provisions concerning municipalities.
SITA