A stabilising factor of Slovakia’s financial sector got into crisis

Despite ini­tial esti­mates in late 2008 that did not expect very con­sid­er­able influ­ence of the finan­cial cri­sis on Slovakia’s econ­o­my, Slo­va­kia record­ed a deep dip in its eco­nom­ic per­for­mance in 2009. In addi­tion, the Euro, which brought com­pa­ra­ble sta­bil­i­ty to Slovakia’s finan­cial sec­tor with the final­i­sa­tion of Slovakia’s Euro­zone entry, was sud­den­ly in a cri­sis caused by the dire eco­nom­ic and finan­cial sit­u­a­tion in Greece. In 2009, Slo­va­kia fol­lowed the path of oth­er Euro­zone coun­tries when it intro­duced the unlim­it­ed deposit guar­an­tee imme­di­ate­ly after the pro­pos­al by the Euro­pean Com­mis­sion. Although sev­er­al pos­si­bil­i­ties were dis­cussed as alter­na­tives to the unlim­it­ed deposit guar­an­tee, the over­pow­er­ing expla­na­tion for the unlim­it­ed deposit guar­an­tee were the sim­i­lar reac­tions of oth­er EU coun­tries and thus an attempt at sus­tain­ing Slovakia’s com­pet­i­tive edge.11SME: Garan­cia sú na papieri. Banky sú zdravé, 9 Jan­u­ary 2009.

In 2010, Slo­va­kia react­ed with a lot more cau­tion to pro­pos­als which were to deal with the eco­nom­ic cri­sis. With its par­lia­men­tary elec­tions held on 12 June 2010, Slovakia’s gov­ern­ment, led by Prime Min­is­ter Fico, agreed to the frame­work deci­sion on the finance pack­age for Greece, but left the final stamp of approval on the country’s bilat­er­al loan to Slovakia’s new par­lia­ment. How­ev­er, at least three of the four polit­i­cal par­ties that are to form Slovakia’s new gov­ern­ment and hold new par­lia­men­tary major­i­ty have either reject­ed or been scep­ti­cal toward the adop­tion of the pack­age. These include the Slo­vak Demo­c­ra­t­ic and Chris­t­ian Union (SDKÚ-DS) of Slovakia’s new­ly des­ig­nat­ed Prime Min­is­ter Ive­ta Radičová and two new par­ties (the lib­er­al Slo­bo­da a Sol­i­dari­ta, Free­dom and Sol­i­dar­i­ty – SAS, and the new Hun­gar­i­an par­ty Most-Híd – Bridge). Their argu­ments were main­ly twofold: that such loan would under­mine the already unhealthy state of pub­lic finance in Slo­va­kia and that it is irre­spon­si­ble to lend more mon­ey to the noto­ri­ous­ly irre­spon­si­ble Greek state (espe­cial­ly artic­u­lat­ed by Free­dom and Sol­i­dar­i­ty). Only the Chris­t­ian Demo­c­ra­t­ic Move­ment (KDH), the fourth par­ty of the expect­ed coali­tion, has been will­ing to con­sid­er sup­port­ing the finance pack­age for Greece. Hence, Slovakia’s sup­port for its bilat­er­al loan to Greece in the con­text of the finance pack­age for Greece is ques­tion­able and at the moment it does not look like­ly that Slo­va­kia will lend mon­ey to Greece, though once the win­ners of the par­lia­men­tary elec­tions take over their gov­ern­men­tal respon­si­bil­i­ties, they may also recon­sid­er their ini­tial­ly firm posi­tions.

Sim­i­lar­ly, the out­go­ing Prime Min­is­ter Robert Fico artic­u­lat­ed his sup­port for the cre­ation of the Euro­pean Sta­bil­i­sa­tion Mech­a­nism, but he is leav­ing the bind­ing deci­sion to the par­ties of the new gov­ern­ing coali­tion. The point is that Slovakia’s sig­na­ture is nec­es­sary in order to acti­vate this new sta­bil­i­ty mech­a­nism and both in the run-up to and right after the par­lia­men­tary elec­tions on 12 June 2010 the major­i­ty of the win­ning par­ties (SDKÚ-DS, SAS and Bridge) reject­ed the pro­posed Euro­pean Sta­bil­i­sa­tion Mech­a­nism. Only the KDH indi­cat­ed luke­warm sup­port for the new mech­a­nism, though the par­ties of the new gov­ern­ment have been less will­ing to com­ment on their posi­tions toward the sta­bil­i­ty mech­a­nism since elec­tions took place, argu­ing that they need more time to study the details and impli­ca­tions for Slo­va­kia. In the lat­ter half of June 2010, it looked a bit more like­ly that Slo­va­kia would ulti­mate­ly sign up to the new Euro­pean Sta­bil­i­sa­tion Mech­a­nism, though it might not dis­perse its bilat­er­al loan to Greece.22See Euractiv.sk: Sloven­sko zati­aľ nemá jas­né stanovisko k pôžičke Grécku, 17 June 2010, avail­able at: http://www.euractiv.sk/buducnost-eu/clanok/slovensko-zatial-nema-jasne-stanovisko-k-pozicke-grecku-015338 (last access: 29 June 2010).

In Slo­va­kia, the main les­son of the cur­rent cri­sis for the Sta­bil­i­ty and Growth Pact is a shared call to become seri­ous and con­se­quen­tial about the exist­ing rules. Also, Slo­va­kia in prin­ci­pal accept­ed the pro­posed role of the Euro­pean Com­mis­sion, which puts it in con­trol of the mem­ber states’ nation­al bud­gets. The State Sec­re­tary of the Min­istry of Finance Peter Kažimír even wel­comed this new role for the Euro­pean Com­mis­sion, though he also sug­gest­ed that the Com­mis­sion would have to under­go reform in order to take up this con­trol­ling func­tion effec­tive­ly.33Euractiv.sk: Peter Kažimír: Kon­tro­la rozpoč­tov nie je ohrozením suv­eren­i­ty, avail­able at: http://www.euractiv.sk/ekonomika-a-euro/interview/kontrola-rozpoctov-nie-je-ohrozenim-suverenity-015131 (last access: 29 June 2010). There was lit­tle dis­cus­sion of the Europe 2020 Strat­e­gy in Slo­va­kia, though two points are worth stress­ing. Slovakia’s rep­re­sen­ta­tives called for the replace­ment of the term “pover­ty” with the word “cohe­sion”, since, accord­ing to Euro­stat num­bers, Slo­va­kia has the fourth low­est lev­el of pover­ty in the EU, yet wages and social stan­dards are low­er than in most oth­er EU mem­ber states. More­over, the erad­i­ca­tion of pover­ty should be one of the by-prod­ucts of the Europe 2020 Strat­e­gy whose main goal should be enhance­ment of eco­nom­ic growth.44Euractiv.sk: Ivan Korčok: Východ­ná Euró­pa žia­da férové zastúpe­nie v Európskej zahraničnej službe, avail­able at: http://www.euractiv.sk/obrana-a-bezpecnost/interview/vychodna-europa-ziada-ferove-zastupenie-v-europskej-zahranicnej-sluzbe-014799 (last access: 29 June 2010). Sec­ond, it is a long-term strat­e­gy whose lan­guage is not as extrav­a­gant as that of the Lis­bon Strat­e­gy, but whose over­all goals are hard­ly real­is­tic from Slovakia’s cur­rent per­spec­tive.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained there­in.