Transcript | 8. lecture: The second Róbert Fico’s government, 2012 – 2016 (Ivan Mikloš) - University for modern Slovakia

While in previous lectures of the first trimester of our university’s third year I wrote about past happening, in this concluding part we will prognosticate a bit. Of course, making prognoses is a tricky matter. I know what I am talking about; I studied this specialisation at the beginning of the eighties. In that time I read many prognoses related to a magical date of the year 2000. Almost all I remember stayed unfulfilled. For example, there was a supposition that Japan would be economically most advanced country in the world in the turn of millenniums. It didn’t happen. Trickiness of prognoses is best described by a sentence: “It is difficult to prognosticate, especially the future.”

In spite of it I will undergo the risk, because I think we can foresee many situations related to the Fico’s government in the following years with an acceptable extent of uncertainty.

At the beginning, it is important to mention one essential thing. Fico will finally have to govern because he actually has not governed so far. Of course, he has governed for four years, but from the point of view of whether or how he determined a direction of the country, he actually hasn’t governed. As we mentioned in previous lectures, Slovakia’s direction after 1998 was determined by two Dzurinda’s governments and Fico basically changed nothing in this direction in 2006 – 2010. He didn’t have to. There was such an increase of public sources to disposition, as nobody before him had had, neither after him would have, and it allowed him basically to do nothing. Please try to mention any big reform or any more fundamental change made in that time. Apart from a completion of launched processes of an entry to Schengen Area and to the eurozone, he did nothing. As we mention in last lectures, the growth of public expenditures during the Fico’s government was double an average of the EU. While in the EU it was 18% on average, in Slovakia almost 35%. It was caused by a record-breaking growth of the economy and public revenue in first two and a half years and then during years of the crisis, 2009 and 2010, due to a record-breaking growth of the deficits and debt.

Today the situation is tremendously different. We can’t wait any record-breaking economic growth and a space for high deficits and a debt increase fortunately doesn’t exist. It is so thanks to European, but as well home, strict rules. So Fico will finally have to govern, there will be no possibility to do nothing just to be lead.

We don’t exactly know what he will do and therefore I interestedly expected the government programme. Unfortunately, I didn’t get much knowledge. There is everything, so there is actually nothing. Certainly, we may positively assess a fact that the government openly and strongly claimed to reduce the deficit and to consolidate public finances. However, there are two problems in this area. The first is that you will not find any statement in this programme about how the government want to achieve it. There are some indications but no details. Another problem is that the government, on the one hand, want to consolidate public finances and decrease the deficit, but, on the other hand, they promise everybody everything. In other words, a deep and fundamental conflict is set in the government programme between the chapter of public finances and other chapters. To illustrate this, only in the chapter of agriculture there is a phrase “the government will support” present 19 times. I am asking: Wherefrom? I would not be the Minister of Finance now.

The true reason of this conflict I understood in a debate to the government programme. The PM Fico said that the government programme was created by wide discussions with employers, deputies of trade unions, churches, science and non-profit organizations. He also said that the number of such meetings was approximately a hundred. At the same time he repeats that one of the key priorities is to keep social conciliation and finding a wide society agreement on all changes, which would be realized by government. When we put all this together and when we notice links there, it is immediately apparent why the government program looks as it looks. Simply it is written to meet all demands. They wanted to have their cake and eat it too. But there is a hitch in it – it cannot work in such a way. Respectively, some time it can, but sooner or later the truth will be revealed – either the government will not consolidate the public finances or they will not fulfil promises they gave.

In a debate on the government programme, in a finance department, the Minister of Finance Kažimír said a very truthful and important fact. He said that no government so far have clearly defined what the public sector should and shouldn’t do; wherefrom the government should gain money for sustainability. Basically, I agree with him, but at the same time I have to say that governments in which I was the Minister of Finance at least tried it and to some extent they fulfilled it as well. The problem of the Fico’s government is that this conflict will not be decreased, at least according to the contents of the government programme, but, on the contrary, it will be increased.

From a point of view of public finances we can quite unambiguously claim that temporary sustainability is endangered. In other words, most likely there is a great threat that Fico will keep the obligation of a deficit reduction under 3% in 2013 and its following decreasing about a half a percent annually, but at the same time he endangers long-lasting sustainability of the public finances. He endangers it in two ways. Firstly it seems he will decrease the deficit in a way that momentarily brings more money into the budget, but in the long-term point of view he endangers a growth of prices and competitiveness. It especially concerns cancelling the flat tax or a reduction of fees into the second pillar. The second way is related to this, by which he will endanger long-lasting sustainability of public finances. He will not only weaken the second pillar, neither he is about to make changes, concerning the first pillar, necessary for long-lasting sustainability of public finances.

Slovakia has a problem. The problem is that in following decades our population will quickly get older, much more quickly than in the majority of other countries. While nowadays there are six people in a productive age falling on one pensioner, in fifty years, there will be only 1,5 people in the productive age. Due to this reason as well as to the reason of high actual deficits, Slovakia was in 2009 classed by the European Commission in third, most risk group of European countries from a point of view of long-lasting fiscal sustainability.

The Radičová’s government were conscious of this fact and made up their mind to accept necessary measures in order to be reclassified into the first, least risk group. Along with actual deficit decrease (which is avowed by the Fico’s government) we prepared such changes in the pension system, especially in the first pillar, which would secure problem solutions. It was a change of valorisation from a so-called Swiss (50% according to wage development, 50% according to inflation) to a valorisation according to pensioner inflation. Then it was an automatic change of a retirement age, according to a development of average life expectancy, of a decreased rate of meritiousness in the first pillar in such a way that the pensions coming from it would not be higher than an average salary. There was also an automatic change of an actual pension value, according to a change of ratio between contributors and recipients in the first pillar.

The Radičová’s government approved all those measures in government amendments and submitted them to parliament. For early elections they were not approved and it seems the Fico’s government do not intend to accept them. By the end of April 2012 the Fico’s government approved two essential documents which are a part of the so-called European trimester and they are obligatorily processed by all the countries of the eurozone – the National Programme of Reforms and the Stability Programme. In those documents from 2011, the Radičová’s government avowed to the mentioned measures above in order to secure long-lasting sustainability of public finances. When you will read these documents approved by the Fico’s government in April 2012 you will realize that parts of the mentioned measures above have been lost. The government generally avow to securing long-lasting fiscal sustainability also by changes of the pension system. However, the way how they want to do it is not mentioned. If the government announces anything; it is the measures that endanger achieving that target, such as decreasing fees into the second pillar.

So to sum up and conclude, my expectations are not so optimistic. On the one hand, it is positive that Fico most probably doesn’t want to perform such rolls and escapades as Viktor Orbán in Hungary; on the other hand, it seems that Slovakia will not do everything she may and can, in order to be the most successful country in a sharpening global competition. Basically, we may say the global competition is the competition of winning and keeping two key factors – a capital and talents. For winning the first one you need the best possible business environment. Announced measures in happenings or the Labour Code are a proof of the fact we will not go a wise way. For bringing up or gaining talents we need markedly improve education, science and research. Here are two problems at least. The first one is an unpleasant starting basement; the second one is a fact that not only reasonable policies in this area, but also sources that are conditioned by a success in the first area are necessary for a change in the competition for the capital.

To conclude, Slovakia is at a crossroad. From 1993 to 1998 it was the government of Vladimír Mečiar which determined a direction of Slovakia. Since 1998 up to now it has been governments of Mikuláš Dzurinda in the lead, in spite of a fact that Róbert Fico governed within this period in 2006 to 2010. We may think anything about those fourteen years and this direction of Slovakia. It was not certainly simple to do it without mistakes. I am sure Slovakia was changed to the better, especially considering the economy and the foreign policy. Slovakia launched the economy thanks to the policy of the Dzurinda’s governments in such a way that since 2000 till now we constantly have had the highest cumulative economic growth among all countries of the EU27.

We are now at the crossroad. Róbert Fico will have to do a real policy, solve serious problems and realistically form country’s future. The beginning isn’t the happiest at all, we will see and gain firsthand experience of the results he will have.

I wish you all the best, thank a lot for the cooperation and for the time you have paid to my lectures and to the University for Modern Slovakia.