| Slovak govt makes Unconditional Commitment to Euro |
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| Monday, 31 July 2006 | |
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The new Slovak government will aim "without conditions" to adopt the euro in 2009 and balance socially-oriented policies with the need to cut the budget deficit, the cabinet's programme said on Monday. Slovakia aspires to be the first of the four largest new EU members in central Europe to adopt the euro, but investors feared the leftist agenda of Prime Minister Robert Fico could derail the ambition set by the previous centre-right government. Fico will present the programme to parliament on Tuesday. Deputies are expected to hold a vote later in the week on the agenda, and with it on confidence in the government which includes Fico's leftists, far right nationalists and the party of former ruler Vladimir Meciar. A copy of the programme posted on the government's Web site said all policies, such as changes in the tax system or budget revenue and expenditure measures, would be closely coordinated with the central bank to achieve euro adoption in 2009. "The Slovak government commits directly, and without conditions, to meet criteria to enter the euro on January 1, 2009," Fico told reporters. Fico was ambiguous about the euro before he won a June 17 election, but has shifted to unconditional support of the timetable after his stance spooked investors into dumping the crown, forcing the central bank to defend it with interventions. The crown has since stabilised, trading at 38.115 to the euro at Monday midday, on the strong side of its 38.455 parity rate within the pre-euro ERM-2 currency band. BENEFITS FOR POOR, TAXES FOR THE RICH The government agenda revealed few details and many economic aims were listed as intentions rather than hard targets. The programme included plans for several measures aimed at improving living conditions, such as support for young families, more money for the poorest pensioners, and cancellation of unpopular fees for visiting a doctor. The government plans to introduce lower value added tax (VAT) rate for selected goods and services. Investors will closely watch details of the plan as the move will reduce budget income at the time when Slovakia needs to cut the total fiscal deficit to 3.0 percent of GDP in 2007, from a 4.2 percent ceiling set for this year. Fico said concrete details of the lower VAT bracket and other government steps, such as a one-off Christmas benefit for pensioners, would depend on availability of state budget funds given the deficit limit set by the euro adoption criteria. "We think we are able to take care of people better than the previous government," Fico said. "We have economic growth and we are going to take significant savings measures in spending on state administration." The programme sees a higher income tax rate for wealthier Slovaks, moving away from the flat tax system introduced by former Prime Minister Mikulas Dzurinda, but in line with Fico's election campaign promises to bring more solidarity into the tax system. The corporate tax will remain at 19 percent, Fico said, although special tax measures may apply to dominant utilities if the planned tighter regulation rules prove to be an ineffective tool to secure better protection of customers. The government programme sets a ban on sales of any state companies that the cabinet will list as strategic, effectively killing privatisation plans worth over a billion of dollars outlined by the previous cabinet. source: Reuters � |
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