BRATISLAVA, November 4, (WEBNOVINY) — The original plan to reduce the general government deficit to 3.8 percent of GDP next year appears unrealistic, the Finance Ministry confirmed on Friday, explaining that slower economic growth and additional legislative measures after the government collapsed would widen the gap in the budget by additional approximately EUR 600 million. Finance Minister Ivan Miklos elaborated that it would mean an increase in next year’s general government deficit to 4.6 percent of GDP. Should there be a danger that the deficit would be even higher than that, the minister has not ruled out withdrawing the draft budget bill from parliament, which would mean a provisional budget for 2012, i.e. the budget law in effect from 2011.
Besides expected slower economic growth, agreement with municipalities stipulating that they would receive additional EUR 60 million compared with Finance Ministry’s original proposal and an agreement on the proposal of the SaS party to cancel the obligation to pay health insurance contributions for the voluntarily unemployed individuals need to be calculated in the budget. “I attach most importance to the deficit growth being limited only to the necessary extent, which means consequences of the updated GDP growth prognosis and the two other issues, i.e. municipalities and proposal of the SaS party by which it conditioned its support for resolving the constitutional crisis. That is acceptable but should the approximately 4.6-percent deficit be exceeded, I would have to consider withdrawing the budget bill from parliament and hence the application of a provisional budget,” said Mikos at a press meeting on Friday.
The Finance Minister maintains that the 4.6 percent deficit instead of projected 3.8 percent of GDP still does not have to negatively affect investors’ view of Slovakia as a trustworthy debtor. This would require meeting a number of conditions. The first one is maintaining this year’s deficit at 4.9 percent of GDP, which Miklos finds realistic. The second condition is to achieve a deficit below the mentioned 4.6 percent of GDP next year, the third requirement is adoption of a strong law on the so-called public debt brake and the fourth one is to successfully complete the originally planned consolidation of public finances with a deficit below 3 percent of GDP in 2013.
“If these conditions are met, I am convinced that slashing the deficit by less than 2 percent of GDP in two years should not be a problem for any future government,” said Mikos on Friday.
The finance minister believes that had Iveta Radicova’s Cabinet not collapsed and earlier elections were not to take place in March of next year, the government would manage to meet projected next year’s deficit despite an economic slowdown, but it would require reduction in coalition-approved additional funds for priorities. He can also see space in increased collection of some taxes, for example excise tax on alcohol or real estate taxes. He believes that these measures would not negatively affect employment while on the contrary measures suggested by the opposition SMER-SD party would.
SITA