* Miklos served as finance minister from 2002-2006
* Earned reputation as fiscal conservative
* New centre-right government aims to fight deficit
(Adds details, background, new analyst comment)
By Martin Santa
BRATISLAVA, July 3 (Reuters) - Ivan Miklos was named on
Saturday to return as Slovakia's finance minister where he is
expected to take a hard line on the deficit after earning a
reputation as a fiscal hawk during a previous stint in the job.
A senior official of Slovakia's leading centre-right party
the SDKU, Miklos was named finance minister in the incoming
government by future Prime Minister Iveta Radicova.
Miklos, 50, previously served in the post from 2002-06, when
he oversaw the introduction of a 19 percent flat tax and helped
prepare the country to join the euro zone last year.
He will have to tackle a large fiscal deficit and a massive
drop in tax revenue, while carrying out fiscal consolidation as
requested by the European Commission.
"Miklos points toward fiscal consolidation. He has earned
credit in the past, when the public-finance deficit shrank under
his management as finance minister. And also thanks to his
effort, Slovakia was able adopt the euro," analyst Maria
Valachyova at bank Slovenska Sporitelna said.
"The government's plan to bring public finances back to a
sustainable trend will be very important for the market."
The outgoing centre-left cabinet of Prime Minister Robert
Fico abandoned the original fiscal gap ceiling of 5.5 percent on
GDP set for this year, down from 6.8 percent in 2009, due to
unfavourable budgetary trends.
The finance ministry's latest estimate saw the fiscal gap at
7 percent.
The new government will be sworn in on July 8. It is formed
from four centre-right parties that have pledged to cut the
budget deficit and improve relations with Hungary, strained
under Fico's cabinet that included anti-Hungarian nationalists.
Dzurinda was nominated to become foreign minister in
Radicova's cabinet.
CONSOLIDATION WITHOUT TOUGH AUSTERITY
The 63 billion euro ($77 billion) economy, heavily
export-reliant, should rise by more than 3 percent this year,
after a 4.7 percent contraction in 2009, but even strong growth
will provide only limited relief to weak budget revenue.
With Miklos as finance minister, the incoming cabinet plans
to adopt a constitutional law on a balanced budget in a mid-term
period and pursue a gradual fiscal tightening, but does not
intend to increase the overall tax burden or add new taxes.
Analysts said no tough austerity measures were needed to
cope with an unfavourable fiscal situation, due to a relatively
small size of public debt. But they urged reforms of the pension
system, labour market and tax system.
The euro zone's poorest member has a public debt load of
35.7 percent of gross domestic product -- half the EU average
but rising rapidly.
The centre-right parties have not shed light on how fast
they plan to consolidate or when the EU's official fiscal limit
should be met. Radicova said they will support Brussels's plan
to tighten the Stability Pact rules.
"I expect Miklos to be one of the top pro-reform hawks in
the incoming government," Eduard Hagara, senior research analyst
at ING Bank in Bratislava, said. "I expect the finance
ministry's strength to rise with Miklos's arrival."
Miklos, however, is strictly against a bilateral loan, worth
around 800 million euro, to debt-laden Greece and regards the
750-billion-euro European safety net as a bad idea.
The European Financial Stability Facility for euro zone
loans is not operational as planned on July 1 because Slovakia
has yet to approve it, but Slovakia has signalled it may unblock
its activation [].
The new government seeks no privatisation, as seen under the
second rule of Dzurinda, but will allow foreign investors to
acquire stakes in remaining major state-run companies.
(Reporting by Martin Santa; Editing by Michael Roddy)
