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Central Bank Governor Calls for Acceleration of Fiscal Consolidation
Monday 14 December 2009 Zoom in | Print page
Bratislava, December 14 (TASR) - Even though the introduction of the common European currency in Slovakia may be deemed a great success, the euro in itself is not a cure-all for economic problems, a fact which Slovak economic policymakers should realise, said the country's central bank governor Ivan Sramko at a conference marking one-year experience in using the new currency.
"The Euro has brought us multiple advantages as early as the first year, the European Central Bank's common monetary policy is fitting for Slovakia. But the Euro is not a panacea for all economic problems. Key to accomplishing the long-term potential for the euro adoption will be correct setting of the next economic policy," said the central bank chief.
In this regard Sramko underscored that just like in other European Union countries, the economic global crisis is reflected, among other things, in significant deterioration in the management of public finances. This year should see Slovakia reach a 6.3-percent/GDP deficit, which is both three-fold of the original plan and significant crossing of the 3 percent ceiling required by the European budgetary rules.
"The Budget Plan in the ensuing years envisages a gradual consolidation of the pace in which, however, should accelerate given the anticipated increase in the economic growth. Since the importance of fiscal policy has increased after the euro introduction it would be fitting to stabilise public finances sooner than required of us by the European Commission, namely not as late as 2013," said Sramko.
The Finance Ministry has similar plans. In the budget draft for the ensuing years it projects an incremental reduction in the deficit to 5.5 percent next year, 4.2 percent in 2011, and reaching the 3 percent mark in 2012. According to Sramko, Slovak economic policymakers must carefully manage developments in order to keep the country out of problems which other Eurozone members face.
He may have been hinting at the problems with public finances and indebtedness now being experienced by Greece. This country should this year reach public finances deficit of 12.7 percent and government debt of 112.6 percent of GDP. Due to a high budgetary gap deficit and government debt, credit rating agency Fitch last week downgraded Greece's rating to BBB+ and there are media speculations about that country's possible bankrutpcy.
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