Friday, August 11, 2006


Slovakia's odd coalition

Iffy and whiffy
Aug 10th 2006
From The Economist print edition

Slovakia's new government is neither mad nor bad. That's mildly reassuring

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NIGHTMARES in ex-communist politics feature populist, racist and authoritarian parties. So Slovakia's new coalition government, consisting of all three, promised sweat-drenched nights for liberal-minded Slovaks and outsiders alike. But not all bad dreams come true.

A prime bogeyman for outsiders and liberal-minded Slovaks is Jan Slota, the leader of the radical right-wing Slovak National Party. He is known for his intemperate remarks about the country's Roma (Gypsy) and Hungarian minorities. The former, he said, were a problem best approached with a “long whip in a small yard”. He once said he would like to flatten the Hungarian capital, Budapest, with a tank. His convivial lifestyle attracts attention too (he explained an anti-Hungarian remark by pleading drunkenness).

But he has been sidelined. His party, which polled 11.7% and won 20 seats in the 150-member parliament, has just three ministers, none of them important.

A second creature of the night is Vladimir Meciar. As prime minister until 1998, he made Slovakia a pariah in western eyes, and a paradise for goons and gangsters. But, like Mr Slota, Mr Meciar is not in the government. His party won 15 seats and has two ministers, neither in big jobs. Top posts in the police and the security services, magnets for power-hungry Meciarites, have gone to neutral candidates.

The third spectre is the economic populism of Smer (Direction), the main coalition party. Its leader, Robert Fico, is now prime minister. He used to talk about ending Slovakia's flat tax, stoking welfare spending and intervening more in the economy. But the government programme launched last week offered only vague and watered-down versions of these plans.

Higher spending, chiefly on education, health and pensions, plus lower VAT on some items may cost 40 billion koruna ($1.5 billion), according to the Bratislava office of ING, a bank. “Millionaires”, as the government calls those earning more than €1,300 ($1,670) a month, may pay more income tax. The net result will be a higher budget deficit, at least 2.2% of GDP by the year-end. But the government insists Slovakia will adopt the euro in January 2009.

Given the cost of propping up the koruna as the government wobbled into place, joining the common currency soon seems wise. After blowing more than €3 billion on backing the currency, the central bank last week raised interest rates by 50 basis points. Any more rude shocks would have left Slovakia looking vulnerable.

Slower privatisation, softer policies and fiddlier taxes may be regrettable in a country noted until recently for its radical reforms. But they do not spell doom. The bigger worry is competence. Few in the government have held office before. The finance minister, Jan Pociatek, is a notable lightweight, best-known as a restaurateur with a penchant for flashy motorcycles. In the parliamentary debate last week on the government programme, he repeatedly declined opposition invitations to elaborate on the spending plans.

A lacklustre team of ministers means that Mr Fico's strong personality will dominate the government. It is reassuring that he wants to keep Slovakia in Europe's political and economic mainstream. But making public finances shipshape for the euro while keeping his supporters and coalition partners happy will be hard.

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