BRATISLAVA, February 24, (WEBNOVINY) – Financial markets trust the Slovak government’s consolidation plans, according to a strategy of the state debt administration for 2011 to 2014, which the Cabinet is to discuss. “It is a pleasing fact that Slovakia’s risk surcharge has not grown together with the PIIGS countries [Portugal, Ireland, Italy, Greece, and Spain- editor’s note] since the fall of 2010, but, in contrary, moderately decreased. It indicates that financial markets accepted the consolidation plan with confidence,” writes the material from the workroom of the Finance Ministry, which underwent interdepartmental review.
Compared with Slovakia’s neighbors from the Visegrad Group, only bonds of the Czech Republic are on a lower level, while bonds of Poland and Hungary bring much higher yields. Even if risk surcharges might fall with regressing crisis, there is a risk of a counter-movement of rates on German bonds. A part of this increase has already started occurring this year, the material further states.
During the crisis, absolute yields from Slovak 10-year bonds did not grow. The growth of risk aversion is documented by a growth of spreads towards German bonds, which are considered to be a comparative risk-free investment. Risk surcharges to Slovak bonds in 2008 grew by as much as two percent from pre-crisis levels of around 0.5 percent and at present are about 1.25 percent.
The Slovak government has approved a consolidation plan based on which the deficit of public funds should gradually decrease from last year’s 7.8 percent of GDP to 4.9 percent in 2011, 3.8 percent in 2012 and 2.9 percent in 2013. The gross public debt should culminate in 2012 closely bellow 47 percent of GDP, and gradually start decreasing afterwards.
SITA
