BRATISLAVA, April 4, (WEBNOVINY) — It appears likely that the new Cabinet of Robert Fico will be first to test in practice the effects of the constitutional law on the debt brake. It is probable that despite the necessary consolidation in the coming years, Slovakia’s public debt will rise above 50 percent of GDP thanks to the participation of Slovakia in the European stabilization mechanisms. The 50 percent of GDP debt is the lower limit for the start of automatic corrections pursuant to the law. The Stability Program for the years 2012 to 2015 of the Ministry of Finance that it submitted for interdepartmental review counts on this scenario. This document will be sent to Brussels to document the credibility of Slovakia’s consolidation plan.
According to the scenario based on the macroeconomic forecast from February, the Ministry of Finance counts with this year’s economic growth by 1.1 percent and expects the general government debt to rise from 43.3 percent of GDP at the end of 2011 to 53.7 at the end of 2014. But in fact, 3.4 percentage points of this increase is Slovakia’s share of guarantees to help Greece, Portugal and Ireland, through the temporary European bailout fund. Consequently, the public debt in 2015 should fall slightly to below 53 percent of GDP. These numbers are based on assumed gradual reduction of the general government deficit below 3 percent of GDP in 2013 and then to 2.3 percent in 2014 and 1.7 percent in 2015.
„Such development would lead to the launch of sanction mechanisms as defined in the constitutional law on fiscal responsibility,“ says the Finance Ministry’s paper. The 50-percent debt limits is expected to be exceeded already in 2012 and this should be confirmed by Eurostat in April 2013. According to the constitutional law on the debt brake, the Finance Ministry would then be required to send to Parliament a written explanation of the debt level, including a proposal of measures to reduce it. In the absence of additional measures, this situation would be repeated also a year later.
However, the Stability Program also counts on overstepping of another debt level defined in the law on fiscal responsibility, which is 53 percent of GDP. The debt should exceed this limit because of guarantees of Slovakia in the European bailout mechanism, which will have to be included in the country’s Maastricht debt level in 2014, as it would be confirmed by Eurostat in April 2015. „In this case, the Cabinet will have to submit to Parliament a list of measures to reduce the debt while at the same time reduce the salaries of members of the Cabinet to the level of the previous fiscal year,“ says the Stability Program.
SITA
