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
Zsolt Gál in the hands of large supranational corporations and that banks may also extend loans in foreign currencies, the room for national governments and central banks to influence economic development through monetary policy continues to shrink. On the other hand, these countries failed or were very reluctant to apply available means on the revenue side of the state budget (i.e. taxation) as well as available though limited regulatory mechanisms to prevent economy from overheating (Csaba, 2008, p. 594). 9 British economist John Maynard Keynes (1883-1946) was convinced that in the time of economic crisis (i.e. insufficient aggregate demand that is accompanied by unused workforce and free production capacities), the government should stimulate economic growth through increasing public expenditures even if it amounts to ballooning debt; however, Keynes was also aware that the state budget should be balanced in the long term as deficits produced in the time of crisis should be made up for by surpluses produced in the time of boom. In other words, Keynes and Keynesians recommend resorting to fiscal stimuli in order to help economy overcome recession and restore economic growth but they do not recommend them when economy grows and production capacities are fully used as they would overheat economy and encourage inflation. 10 In March and April 2009, the Slovak Government spent 55 million on the ‘scrap bonus’ project, i.e. state subsidy designed to encourage consumers to replace old cars with new ones. According to estimates by the National Bank of Slovakia (NBS), the project’s contribution to GDP growth was approximately 0.05%. “The NBS believes ihat the measure has had a positive impact on the economy in terms of production, firms ' profitability and employment; besides, it was a display of solidarity with other countries. The direct effect of the scrap bonus on GDP growth was low due to a high share of imported cars, " NBS Spokeswoman Jana Kováčova told TASR news agency (“NBS: Šrotovné hodnotíme pozitívne, potiahlo nás o 0,05 percenta”, Sme daily, June 26, 2009.) 11 The costs of the banking sector’s restructuring comprised the following: increasing banks’ fixed assets; transferring classified loans to specialized institutions; indemnifying clients of smaller banks that had gone bankrupt; paying interest on government bonds (transferred classified claims were converted into public debt). In need of consolidation was especially the so-called Big Three, namely Všeobecná úverová banka (VÚB), Slovenská sporiteľňa (SLSP) and Investičná a rozvojová banka (IRB) that was under forced administration by the NBS between December 19, 1997 and December 16, 1999. As of December 31, 1998, these three banks combined for approximately 85% of all classified loans accumulated within the country’s banking sector that totalled 141.6 billion Sk. These banks’ fixed assets were increased by 18.9 billion Sk in the following way: 5.7 billion for IRB, o 4.3 billion for SLSP and 8.9 billion for VÚB. As a direct result of increasing the banks’ fixed assets, the government increased its stakes in all of them and became a majority owner of VUB again. In the first stage of the restructuring scheme, classified loans totalling 74.2 billion Sk (45 billion from VÚB, 22.8 billion from SLSP and 6.5 billion from IRB) were transferred into Konsolidačná banka and Slovenská konsolidačná, a.s.; in the second stage, bad loans worth 34.2 billion Sk (12.9 billion from SLPS and 21.3 billion from VUB) were transferred. The total volume of transferred loans was 74.2 billion Sk plus 34.2 billion Sk; after discounting adjusted entries worth 3.3 billion Sk, the bottom line was 105.1 billion Sk. The NBS imposed forced administration and subsequently revoked licences from the following banks: AG Banka (December 1999), Priemyselná banka (December 16, 1999, subsequently sold to Slovenská sporiteľňa), Slovenská kreditná banka (April 2000), Dopravná banka (August 2000) and Devín banka (September 2001). Clients if these bankrupt banks were indemnified by the Fund of Deposit Protection (FOV) since deposits by natural persons up to 30-multiple of the average monthly wage (343,000 Sk in 2001) were fully protected. Total indemnification costs reached 20 billion crowns; more 218
