Slovakia's coalition parties agreed to support the 2007 budget after Prime Minister Robert Fico accepted some demands by his partners to raise spending while keeping the deficit below the deficit as planned.
The gap will remain at the proposed level of 2.9% of GDP, compared with 3.6% forecast by the Finance Ministry, Smer party head Fico told journalists late yesterday after meeting with the heads of the other coalition parties. They agreed to raise spending on some areas such as railway transport and housing, Fico said, without elaborating on financing. „The parties of the ruling coalition have agreed to support the budget” in parliament, Fico said. „We will keep the planned deficit at any price.” Fico's four-and-half-month old cabinet is struggling to balance a campaign promise to help the poor with a need to reduce spending enough to qualify for the euro adoption targeted in 2009.
To qualify for the switchover, the country needs to squeeze the fiscal gap below 3% of GDP next year. Meeting the 2007 budget plan would allow Slovakia to adopt the euro earlier than its neighbors, provided the nation will also succeed in reducing inflation. Neighboring Czech Republic and Hungary abandoned their targets for the switchover in 2010. Slovak lawmakers are scheduled to start the budget debate December 5. The spending plan is based on a projected GDP growth of 7.1% next year, average inflation of 3.1% and the average unemployment rate of 10%. (Bloomberg)