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Analysts: SR Can't Afford Another Violation of Eurozone Budget Rules
Wednesday 08 December 2010 Zoom in | Print page
Bratislava, December 8 (TASR) - Slovakia can't afford to violate the eurozone budgetary rules again, as it may then face a downgrade in the country's rating and a subsequent fall in market trust, several economic analysts told TASR on Wednesday.
Slovakia, which after adopting the euro in 2009 saw its debt and deficit levels exceed the so-called Growth and Stability Pact guidelines, has pledged to squeeze its public deficit under 3 percent of GDP by 2013.
"The trust of financial markets is the more important that Slovakia needs to borrow €8 billion from them next year," said Volksbank chief analyst Vladimir Vano, adding that a reduction in the rating would result in higher interests.
The Parliament on Wednesday approved the 2011 state budget, the deficit of which should be reduced from €4.54 billion (in 2010) to €3.81 billion. The public finance deficit should fall from 7.8 percent of GDP in 2010 to 4.9 percent in 2011.
Slovenska sporitelna bank analyst Michal Musak noted that the reduction of the deficit as approved on Wednesday is remarkable in current European conditions. "The goal to squeeze the deficit to 4.9 percent of GDP appears to be attainable, but if Slovakia wants to reduce the deficit under 3 percent by 2013 it will have to carry out further cuts, albeit minor ones," said Musak.
According to David Derenik of UniCredit Bank, the approved budget deserves praise for its ambitiousness and efforts to be transparent. "The Government could have saved more in expenditures, however. The transparency [of the budget] ... may win over the financial markets, which would result in cheaper financing of the deficit in the future," said Derenik.
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