BRATISLAVA, March 21, (WEBNOVINY) — Analysts of the think tank Institute of Economic and Social Studies (INESS) claim that the planned fiscal consolidation, i.e., reduction of general government deficit below 3 percent of GDP by 2013, does not require tax hikes. This assumption comes after a consolidation study elaborated by economists Ludovit Odor and Michal Horvath, who also drafted measures for budget responsibility. INESS maintains that spending cuts can save at least EUR 1.6 billion, whereby the amount necessary to trim the deficit represents some EUR 1.2 billion.
INESS says it is worthwhile mentioning the fact that public expenses on a consolidated basis grew EUR 2.5 billion in 2009. According to data of the EU Statistical Office, the Eurostat, public spending in Slovakia increased at the fastest pace in the EU in 2008-2010 (by nearly 8 percent). Analysts recommend assessing whether reforms were passed during this period or new public services came into life or improved so much that it would correspond with the given increase. “It would be good to evaluate tax hike proposals in the context of existing public expenses,” the INESS’ paper writes.
Odor and Horvath suggested measures that would lower spending by EUR 975 million, for instance using inflation as the index to lift pensions, cancellation of Christmas bonuses provided to pensioners, freeze of pensions and benefits, cancellation of some benefits for individuals with above-standard income, a tax mix to fund self-government, etc. INESS agrees with these proposals but sees more room. “Austerity measures in the study definitely cannot be considered exhaustive; therefore, we add more potential measures worth some EUR 650 million. However, neither is this list complete; savings can be sought in all budget chapters and other public administration entities,” the institute argues. INESS has come up with additional savings on payroll and operating cost in the state budget, cuts to family-policy benefits, more effective funding of higher education, rationalization of railway transport, etc.
SITA
