Petőcz Kálmán (szerk.): National Populism and Slovak - Hungarian Relations in Slovakia 2006-2009 (Somorja, 2009)
Zsolt Gál: Argentina on the Danube - Populist Economic Policy as the Biggest Enemy of Sustainable Economic Growth
Argentina on the Danube... growth that accompanied the first half of the Robert Fico administration’s term in office is hardly an excuse for any budgetary holes. During such ‘good years’, the state budget should be at least balanced if not producing a surplus. It is also possible to rephrase the question slightly: If 10 percent is not enough, how high must economic growth be to allow the government to pass a balanced state budget? With the commencement of 2009, the fat growth years are over and Slovakia’s economy expects to drop by 6% of GDP due to global economic crisis; although budgetary revenues dropped significantly, the incumbent administration has been unable - or rather unwilling - to cut back expenditures. It was most probably deterred by ‘serious’ political reasons (i.e. presidential elections followed by elections to the European Parliament and regional elections) that will continue to exist in 2010 (i.e. parliamentary elections followed by municipal elections). It is highly improbable that the incumbent administration will embrace restrictive fiscal policy in the election year; but if it doesn’t, public finance deficit may climb to 6-8% of GDP and public debt to 40% of GDP in 2009-2010. Other measures adopted by the incumbent administration also document existence of the new populist cycle: halting most structural reforms (even destruction of already reformed health service system and permanent attempts to destroy the pension reform) and privatization that pose further threats for the public finance sector. State enterprises keep posting losses and public institutions keep running on deficit budgets, i.e. they will continue to require rescuing from state budget funds. The country’s health service again began to pile up implicit public debt and the program of highway construction through public-private partnerships (PPP) brings immense risks of creating further implicit debts; in PPP contracts, government agreed to make annual payments to highway developers and operators for periods of 20 to 30 years). Should excessive deficits be sustained even after 2010, along with implicit debts they might bring the country’s public finance system to the verge of collapse by 2014 (like in Hungary in 2008 or in Slovakia a decade earlier). The only available solution is to reduce expenditures and launch further structural reforms, an idea the incumbent administration is highly unlikely to embrace before the end of the current electoral term. Public opinion polls continue to suggest very high popularity of Premier Robert Fico and his party; it is very likely that the new administration formed after the 2010 elections will again be dominated by SMER-SD. It is very unrealistic that such an administration will embrace restrictive fiscal policy or structural reforms; on the contrary, it will try to increase budget213
