 With the election of the fractured, populist Smer coalition government, Slovakia’s future seems uncertain. Can the country maintain the economic momentum established by the reforms of the previous administration? JUSTIN KEAY reports
To outsiders, the decision by Slovak voters last June to eject the reformist government of Mikulás Dzurinda and install a populist, left-of-centre one headed by Robert Fico and his Smer (Direction) Party must have seemed an act of rank stupidity and extreme ingratitude. The no-nonsense reforms introduced by Dzurinda’s governments after he first took power in 1998 transformed Slovakia’s political and economic fortunes, turning it from a central European laughing stock into a well-respected member of NATO and the EU, with one of the fastest-growing, most liberal economies in the region. The list of acclaim is long indeed; in 2004, the World Bank described Slovakia as one of the best countries in which to do business, citing reforms such as the flat, 19% tax rate and streamlined procedures to establish new businesses that have been copied by other countries, while the respected Economist Intelligence Unit placed it above the Czech Republic, Slovenia, Hungary and Poland. What made Dzurinda’s departure even worse is that the Fico government, which swept to power with vague promises of improving ordinary Slovaks’ living standards, is an unwieldy coalition comprising the xenophobic Slovak National Party, which wants to make life tough for the sizeable Hungarian minority, and Vladimir Meciar’s Movement for a Democratic Slovakia, which bought Slovakia to the verge of ruin in the 1990s. The Party of European Socialists within the European Parliament was so unhappy about Fico’s bedfellows that it expelled Smer from the umbrella organisation last year. Observers warn against jumping to alarmist conclusions, however. “Developments should be seen in a regional perspective, reflecting voters’ unhappiness about broader issues,” says Marta Simonetti, political analyst at the European Bank for Reconstruction and Development. She and others emphasise that Dzurinda lost last year because his neo-liberalism failed to strike a chord with rural voters and the unemployed (some 13.5% of the population, down from 18% in 2001 but still the second-highest in the EU after Poland). The other reason was Dzurinda’s revolutionary pension reforms, which older retirees felt penalised them at the expense of younger ones and which many found overly complex. For the business community, the good news is that – so far at least – the government hasn’t dared to rock the boat, even maintaining its predecessor’s aim of joining the euro in January 2009, while the two minority parties in the coalition have been kept well away from cabinet positions of economic importance. Although the Fico government said it would review past privatisations, to date only one major asset sale has been cancelled – that of Bratislava Airport to a consortium headed by Vienna Airport, which it was feared (being just 40 km away) might not have Slovakia’s best interests at heart. “The government seems to understand that it must keep investors happy; after a slight lull after the elections, business in Bratislava in particular is once again feverish,” says David Hodgson of the Slovak British Business Council. With third-quarter figures for 2006 showing GDP growth of 9.8% (although the full-year figure is expected to be 6.5%), this seems no exaggeration. Real estate, construction and anything associated with the car industry are all major growth areas; tourism (particularly spa tourism) and high-technology micro-industry are also seeing major investment from within Slovakia and abroad. |