BRATISLAVA, December 14, (WEBNOVINY) — President Ivan Gasparovic signed into law the constitutional bill on budgetary responsibility on Wednesday that the Slovak Parliament adopted last week. The law establishes a debt brake, i.e., the constitutionally set public debt ceiling, which will take effect as of March 1, 2012. The law implements an automatic sanction mechanism that will be launched already at the debt limit of 50 percent of GDP. The Finance Minister would then be obliged to clarify the increase to MPs and suggest measures to reverse the growth.
At a debt level of 53 percent of GDP, the Cabinet would be obliged to pass a package of measures to trim the debt and freeze its wages. At 55 percent, 3-percent binding of budget expenditures would be launched automatically and next year’s budgetary expenditures would be frozen, except for co-financing of the EU 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 to 41 percent of GDP.
The draft counts on more measures to upgrade the quality and transparency of Slovakia’s fiscal policy, for instance, establishment of an independent Budgetary Responsibility Council. The council should annually compile and publish reports on 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.
SITA