* Centre-right parties complete coalition talks
* Miklos served as finance minister from 2002-2006
* Earned reputation as fiscal conservative
* New centre-right government aims to fight deficit
(Adds completion of coalition talks, Radicova comment)
By Martin Santa
BRATISLAVA, July 3 (Reuters) - The four centre-right parties
which together won a majority in Slovakia's June 12 election
agreed on Saturday to form a coalition, with fiscal hawk Ivan
Miklos returning as finance minister.
Miklos, expected to take a hard line on the deficit after
earning a reputation as a market reformist during a previous
stint in the job, was nominated earlier on Saturday by the
incoming Prime Minister Iveta Radicova.
Both are from the strongest centre-right party the SDKU, led
by ex-Prime Minister Mikulas Dzurinda, who will become foreign
minister in the new government.
The conservative SDKU, Christian Democrats (KDH), the
liberal Freedom and Solidarity party (SaS), and the ethnic
Hungarian Most-Hid party are expected to be sworn in on July 8,
ousting the leftist cabinet of Prime Minister Robert Fico.
"SDKU, SaS, KDH and Most-Hid have reached an agreement on
the coalition deal," Radicova told reporters after meeting with
her partners. "All issues have been solved."
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 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."
Fico's outgoing centre-left government 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 and the new coalition has pledged to cut the budget
deficit, with Miklos saying it was possible to bring it below 2
percent of GDP by 2014.
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.
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 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)
