By Martin Santa
BRATISLAVA, Dec 1 (Reuters) - Slovakia's centre-right
coalition is expected to win parliamentary approval for its
first budget in the coming days despite holding only a slim
majority.
The cabinet of Prime Minister Iveta Radicova, in power since
July, approved a draft of the 2011 state budget in October that
aims to cut the fiscal deficit to 4.9 percent of gross domestic
product (GDP) from an expected gap of 7.84 percent this year.
The euro zone member's unions had objected to the
1.75-billion-euro austerity package and staged rare protests in
October, but Radicova's cabinet stood firm. []
Below are key political risks to watch.
SMALL MAJORITY, COALITION SQUABBLES
The coalition, which took power in July, has had several
internal clashes over policy, including opposition to tax hikes
by the liberal SaS party.
The parliament is due to elect a new attorney general on
December 2 after weeks of political in-fighting.
The SDKU party's plan to endorse re-election of the outgoing
attorney general, supported also by the strongest opposition
party SMER of ex-Prime Minister Robert Fico, triggered the most
serious rift within the coalition to date.
The SDKU, however, backed off and agreed with its partners
to nominate a new and joint candidate.
What to watch:
-- Rising tension in the coalition. The coalition's thin
parliamentary support, at 79 out of 150 deputies, makes any
disruptions dangerous.
SLOVAKS ON EURO ZONE DEBT PROBLEMS
Slovakia, which adopted the euro last year, hoped to find a
safe haven in the single currency area, but has faced calls to
bail out its richer peers instead, triggering public dissent and
calls for more prudent fiscal policies by the cabinet.
Slovaks torpedoed a 816-million-euro bilateral loan to
Greece, part of the euro zone's 110 billion euro aid package,
and drew harsh criticism from Brussels and its European Union
fellows, raising the threat Bratislava could face some kind of
political isolation in the future [].
Most recently, Slovakia endorsed a collective decision to
provide 85 billion euros to debt-ridden Ireland, in cooperation
with the IMF and the European Commission, but called for tougher
fiscal and debt restructuring rules.
What to watch:
-- Slovaks position on the European Stabilisation Mechanism
(ESM), a special financial vehicle set to become effective in
the half of 2013 when the current European Financial Stability
Facility (EFSF) expires.
-- With their record of rejecting Greece, Slovakia's
position towards any future bailouts will be watched.
UNHAPPY UNIONS, OPPOSITION
The government is facing union resistance against the
approved cuts in public spending, tax hikes and labour code
changes.
Thousands of union workers protested against the austerity
package, but the cabinet is highly unlikely to step back. Fico
accused the government of loading pensioners with additional
taxes and triggering a rise in consumer prices.
What to watch:
-- a debate on an amended labour code could deliver more
clashes between employers and unions.
SLOVAK-HUNGARY RELATIONS
The two neighbours have a history of dissonance, with
Hungary accusing the Slovaks of oppressing its ethnic kin and
Bratislava bristling at former imperial master Budapest's
efforts to promote Hungarian culture in Slovakia.
Radicova's coalition includes the Most-Hid party of mostly
ethnic-Hungarians who are seen as a moderating influence on the
fractious relationship between Bratislava and Budapest.
What to watch:
-- Slovaks on Sept. 24 softened a law that stipulated that
only the Slovak language could be used in public by saying it
only applied to public offices and by halving the fine
[].
-- There is also a plan to amend a law which strips citizens
of their Slovak nationality if they take the citizenship of
another country.
CORRUPTION, BUSINESS CLIMATE
The government wants to improve business climate, crack down
on corruption and boost law enforcement -- major concerns for
investors under the previous leftist cabinet.
Transparency International's latest corruption perception
index showed Slovakia ranked 59th-61st place in 2010, being the
worst performer among its Central European neighbours Poland,
Hungary and the Czech Republic.
What to watch:
-- The is a pledge to increase the transparency of public
procurement projects, publish government tenders on the Internet
and enhance the functioning of the courts to reduce delays.
-- The government also plans to ease labour market
regulation, boost market flexibility to increase employment and
lure new foreign direct investments.
For political risks to watch in other countries, please
click on []
(Editing by Sonya Hepinstall)
