Post by tuftabis on May 29, 2009 2:53:34 GMT -7
Trickier times
May 26th 2009
From the Economist Intelligence Unit ViewsWire
Slovakia's prime minister could face trouble
Slovakia’s prime minister, Robert Fico, has dominated politics since coming to power in mid-2006. The lead he and his party enjoy in opinion polls has thus far held up, despite Slovakia's sharp lurch into recession. However, in recent weeks and months he has had to contend with a spate of allegations of cronyism within the ranks of his ruling coalition, which he dealt with by dismissing in quick succession two ministers from one of the junior ruling parties. Given Mr Fico's knack for populist rhetoric, and the opposition's tendency to repeatedly shoot itself in the foot, the only question ahead of the mid-2010 election appears to be who Mr Fico will team up with to form the next government. Nevertheless, events between now and then could yet erode his decisive lead, and perhaps force him into a coalition with less submissive parties than those he is currently allied to.
Allegations of crony behaviour have been levelled at the current government more or less since it came to power in July 2006. However, the government's popularity did not seem to suffer unduly, as the feel-good factor deriving from Slovakia's position as one the EU's fastest-growing economies easily swamped any moral outrage the electorate may have felt. Mr Fico dealt with these hitches in the apparently smooth running of his premiership either by shrugging them off as the rantings of an prejudiced media, or by making the occasional ministerial head roll—especially if that head belonged to a representative of one of his coalition partners, the populist People's Party-Movement for a Democratic Slovakia (LS-HZDS) or the right-wing Slovak National Party (SNS), rather than his own Direction-Social Democracy (Smer-SD) party.
However, the latest spate of allegations, which involve an opaque tender for services at the construction ministry and the sale of carbon emission quotas at the environment ministry, occurred against the backdrop of a severely slowing economy. Both ministries are controlled by the SNS. The cases were initially flagged by the media in late 2008, with the former initially grabbing most attention, perhaps because it involved about €120m worth of EU funds. Mr Fico officially backed the construction minister, Marian Janusek, until the long-awaited results of an investigation by the public procurement office (UVO) found that there had been irregularities in the tender (the notice for which had allegedly been publicised on a bulletin board in an obscure area of the ministry known only to friendly businesses), after which he forced Mr Janusek's resignation. A few days later, Mr Fico also forced the resignation of Jaroslav Chrbet, the environment minister, after his ministry was accused of selling carbon-emission quotas at below-market price to a little-known firm, Interblue Group.
A new untouchable
Mr Fico is now attempting to bolster his credentials as a corruption fighter, not least because now EU authorities are shining a brighter light on the activities of the Slovak government—particularly those involving EU taxpayers' money. Aside from giving the leader of the SNS, Jan Slota, a very public rap on the knuckles (as he had with the LS-HZDS leader, Vladimir Meciar, in late 2007 when another allegation of dodgy dealings had emerged), he has expressed his disagreement with the Constitutional Court's decision on May 20th to block the establishment of the Special Court, a body set up by the previous centre-right government to combat high-level corruption. The SNS and LS-HZDS, the latter through its justice minister, Stefan Harabin, both opposed bitterly the Special Court.
There are reasons to think that Mr Fico's anti-corruption drive is opportunistic. First, he did not oppose the appointment to the construction ministry of Igor Stefanov, who as Mr Janusek's deputy had participated in the opaque tender. Second, Mr Fico may have sensed that the electorate's forbearance towards cronyism and corruption may be waning as the economy slips deeper into recession (GDP contracted by a whopping 11% quarter on quarter and over 5% year on year in January-March 2009, after growing by 6% in 2008), and that the whiff of scandal in government would taint him and his party by association.
Third, the impression remains that Mr Fico is ever-vigilant about alleged wrongdoing among his coalition partners, but rather lax when accusations are levelled at members of his own party: over the last year and a half, the labour minister, Viera Tomanova, and the finance minister, Jan Pociatek—both of whom are affiliated with Smer-SD—became embroiled in controversy, but both are still in their posts.
It seems more likely that Mr Fico is eager to keep government corruption out of the headlines, rather than to pursue a root-and-branch effort to clean up the government. Accordingly, the SNS did not raise any serious objection to Mr Fico's stance, and intra-coalition relations now seem to be back on an even keel.
Fiscal slippage
In the first two and a half years of Mr Fico's premiership, real GDP grew by an average of nearly 10% year on year. Sceptics of Mr Fico’s economic stewardship had always stated that the true test of his mettle would be when the golden phase for the economy (high GDP growth, relatively low inflation, smooth euro entry) finished and he would actually have to drive policy rather than leave it on cruise control.
Economic trends over the last six months appear to be providing Mr Fico with just such a stern test, as the small and open Slovak economy has slipped into a deep recession in the wake of the global economic downturn. The government's attempts to counteract the downturn have been patchy, with the most successful measure to date having been two car-scrapping programmes, which helped to boost car sales in April after a dismal first quarter.
Slovak public finances entered the downturn on an apparently sound footing, although given the strength of the economy in 2006-08, the fiscal deficit could have been much lower than the 2.2% of GDP it registered in 2008. This was the result of the Fico government's continuing propensity to finance pet welfare projects, and the lack of a serious consolidation impetus. This could cost the government dearly in the wake of the economy's abrupt about-face: the Economist Intelligence Unit now forecasts that the general government deficit will reach 5% of GDP in 2009, with precious little improvement on show in 2010 as Mr Fico strives to ensure re-election. Such an outcome is not particularly bad given the scale of global fiscal deterioration as governments fight the crisis, but does not say much about Mr Fico's skills as an economic manager
An unassailable lead?
These difficulties would have been enough to severely damage a less skilled politician than Mr Fico. However, he has shown time and again that he can strike the right note with vast swathes of the Slovak electorate with his mix of fiery rhetoric and policy pragmatism. Accordingly, both his personal rankings and those of his party still hover around 40%, whereas other parties and politicians barely get into double figures. He is also helped by the opposition's inability to mount a sustained challenge to his dominance. The opposition's best hope, Iveta Radicova, who came a close second in the presidential run-off in April, had to step down from her parliamentary post shortly afterwards as it emerged that she may have breached parliamentary rules.
However, the road to recovery for the Slovak economy still looks long. Its fortunes are tied to those of its main trading partners in the euro area, which are expected to contract in both 2009 and 2010. Accordingly, at the next election Mr Fico is likely to be presiding over an economy with unemployment higher than today. Although we still believe that the next election is Mr Fico's to lose, there is a distinct possibility that he may not be able to shift the blame for the economic crisis indefinitely and that the shine might come off his poll rankings. This would then translate into a lower vote tally than current polls suggest, which could force Mr Fico into an unwieldy electoral alliance. So encumbered, the prime minister might lose some of the swagger that has characterised his premiership thus far.
May 26th 2009
From the Economist Intelligence Unit ViewsWire
Slovakia's prime minister could face trouble
Slovakia’s prime minister, Robert Fico, has dominated politics since coming to power in mid-2006. The lead he and his party enjoy in opinion polls has thus far held up, despite Slovakia's sharp lurch into recession. However, in recent weeks and months he has had to contend with a spate of allegations of cronyism within the ranks of his ruling coalition, which he dealt with by dismissing in quick succession two ministers from one of the junior ruling parties. Given Mr Fico's knack for populist rhetoric, and the opposition's tendency to repeatedly shoot itself in the foot, the only question ahead of the mid-2010 election appears to be who Mr Fico will team up with to form the next government. Nevertheless, events between now and then could yet erode his decisive lead, and perhaps force him into a coalition with less submissive parties than those he is currently allied to.
Allegations of crony behaviour have been levelled at the current government more or less since it came to power in July 2006. However, the government's popularity did not seem to suffer unduly, as the feel-good factor deriving from Slovakia's position as one the EU's fastest-growing economies easily swamped any moral outrage the electorate may have felt. Mr Fico dealt with these hitches in the apparently smooth running of his premiership either by shrugging them off as the rantings of an prejudiced media, or by making the occasional ministerial head roll—especially if that head belonged to a representative of one of his coalition partners, the populist People's Party-Movement for a Democratic Slovakia (LS-HZDS) or the right-wing Slovak National Party (SNS), rather than his own Direction-Social Democracy (Smer-SD) party.
However, the latest spate of allegations, which involve an opaque tender for services at the construction ministry and the sale of carbon emission quotas at the environment ministry, occurred against the backdrop of a severely slowing economy. Both ministries are controlled by the SNS. The cases were initially flagged by the media in late 2008, with the former initially grabbing most attention, perhaps because it involved about €120m worth of EU funds. Mr Fico officially backed the construction minister, Marian Janusek, until the long-awaited results of an investigation by the public procurement office (UVO) found that there had been irregularities in the tender (the notice for which had allegedly been publicised on a bulletin board in an obscure area of the ministry known only to friendly businesses), after which he forced Mr Janusek's resignation. A few days later, Mr Fico also forced the resignation of Jaroslav Chrbet, the environment minister, after his ministry was accused of selling carbon-emission quotas at below-market price to a little-known firm, Interblue Group.
A new untouchable
Mr Fico is now attempting to bolster his credentials as a corruption fighter, not least because now EU authorities are shining a brighter light on the activities of the Slovak government—particularly those involving EU taxpayers' money. Aside from giving the leader of the SNS, Jan Slota, a very public rap on the knuckles (as he had with the LS-HZDS leader, Vladimir Meciar, in late 2007 when another allegation of dodgy dealings had emerged), he has expressed his disagreement with the Constitutional Court's decision on May 20th to block the establishment of the Special Court, a body set up by the previous centre-right government to combat high-level corruption. The SNS and LS-HZDS, the latter through its justice minister, Stefan Harabin, both opposed bitterly the Special Court.
There are reasons to think that Mr Fico's anti-corruption drive is opportunistic. First, he did not oppose the appointment to the construction ministry of Igor Stefanov, who as Mr Janusek's deputy had participated in the opaque tender. Second, Mr Fico may have sensed that the electorate's forbearance towards cronyism and corruption may be waning as the economy slips deeper into recession (GDP contracted by a whopping 11% quarter on quarter and over 5% year on year in January-March 2009, after growing by 6% in 2008), and that the whiff of scandal in government would taint him and his party by association.
Third, the impression remains that Mr Fico is ever-vigilant about alleged wrongdoing among his coalition partners, but rather lax when accusations are levelled at members of his own party: over the last year and a half, the labour minister, Viera Tomanova, and the finance minister, Jan Pociatek—both of whom are affiliated with Smer-SD—became embroiled in controversy, but both are still in their posts.
It seems more likely that Mr Fico is eager to keep government corruption out of the headlines, rather than to pursue a root-and-branch effort to clean up the government. Accordingly, the SNS did not raise any serious objection to Mr Fico's stance, and intra-coalition relations now seem to be back on an even keel.
Fiscal slippage
In the first two and a half years of Mr Fico's premiership, real GDP grew by an average of nearly 10% year on year. Sceptics of Mr Fico’s economic stewardship had always stated that the true test of his mettle would be when the golden phase for the economy (high GDP growth, relatively low inflation, smooth euro entry) finished and he would actually have to drive policy rather than leave it on cruise control.
Economic trends over the last six months appear to be providing Mr Fico with just such a stern test, as the small and open Slovak economy has slipped into a deep recession in the wake of the global economic downturn. The government's attempts to counteract the downturn have been patchy, with the most successful measure to date having been two car-scrapping programmes, which helped to boost car sales in April after a dismal first quarter.
Slovak public finances entered the downturn on an apparently sound footing, although given the strength of the economy in 2006-08, the fiscal deficit could have been much lower than the 2.2% of GDP it registered in 2008. This was the result of the Fico government's continuing propensity to finance pet welfare projects, and the lack of a serious consolidation impetus. This could cost the government dearly in the wake of the economy's abrupt about-face: the Economist Intelligence Unit now forecasts that the general government deficit will reach 5% of GDP in 2009, with precious little improvement on show in 2010 as Mr Fico strives to ensure re-election. Such an outcome is not particularly bad given the scale of global fiscal deterioration as governments fight the crisis, but does not say much about Mr Fico's skills as an economic manager
An unassailable lead?
These difficulties would have been enough to severely damage a less skilled politician than Mr Fico. However, he has shown time and again that he can strike the right note with vast swathes of the Slovak electorate with his mix of fiery rhetoric and policy pragmatism. Accordingly, both his personal rankings and those of his party still hover around 40%, whereas other parties and politicians barely get into double figures. He is also helped by the opposition's inability to mount a sustained challenge to his dominance. The opposition's best hope, Iveta Radicova, who came a close second in the presidential run-off in April, had to step down from her parliamentary post shortly afterwards as it emerged that she may have breached parliamentary rules.
However, the road to recovery for the Slovak economy still looks long. Its fortunes are tied to those of its main trading partners in the euro area, which are expected to contract in both 2009 and 2010. Accordingly, at the next election Mr Fico is likely to be presiding over an economy with unemployment higher than today. Although we still believe that the next election is Mr Fico's to lose, there is a distinct possibility that he may not be able to shift the blame for the economic crisis indefinitely and that the shine might come off his poll rankings. This would then translate into a lower vote tally than current polls suggest, which could force Mr Fico into an unwieldy electoral alliance. So encumbered, the prime minister might lose some of the swagger that has characterised his premiership thus far.
;D