Vol 1, No 25
13 December 1999
S L O V A K I A:
Questions at Home
Michael J Kopanic
The year 1999 will not be looked upon as a great year by most people in Slovakia. Unemployment vaulted forward to 17.7 percent, which ranks among the highest rate in Central Europe, prices rose sharply and the standard of living of the average citizen declined. According to the most recently released figures, year-on-year inflation reached 13.9 percent as of November 1999 (Sme, 10 December 1999).
But the year 1999 does mark a turning point. After having assumed power at the end of October 1998, Prime Minister Mikulas Dzurinda has led the country on a path of domestic reforms, some of which are hardly popular because of the belt-tightening state budget.
More importantly, his government has realigned Slovakia's foreign policy in a way that pleases the United States and most Western democracies - supporting the NATO mission in Kosovo by allowing NATO flights over Slovakia (even though 75 percent of Slovak citizens disapproved). It has mended fences with its neighbors and is building a new bridge across the Danube at Sturovo which has been awaiting reconstruction since its destruction during the Second World War. Slovakia even negotiated a settlement over a long-standing dispute with the Czech Republic concerning the division of former Czechoslovak federal property.
The biggest news in foreign affairs, however, came toward the end of the year: the Slovak government achieved its most sought after foreign policy goal for the year as it moved a giant step closer to joining the European Union. At the EU Summit in Helsinki on 10 December, the organization invited Slovakia to participate in entry talks along with several other aspiring countries - Romania, Bulgaria, Lithuania, Latvia and Malta. That was no small achievement.
In all, Slovakia's tarnished image has been polished on the international stage, even though work remains to be done. Hillary Clinton and Secretary of State Madeleine Albright have had kind words to say about these very positive developments; however, pleasing the majority of Slovak citizens remains to be done.
All is not grim by any means; democracy continues to grow, and definite political reform has been developing. Democratic institutions have been strengthened, and the division of powers among the three branches of government has improved. A new President and a new set of judges on a clearly independent judiciary bodes well for the future. The government has gone after corruption in the Interior Ministry and at enterprises such as the Eastern Slovak Iron Works. And, for the most part, it has all happened without any major incidents or violence.
The government got off to an early start. Already in January 1999, the Parliament (the Slovak National Council) approved a change in the Constitution which allowed for the direct election of the President of the Slovak Republic. And the new law worked. In mid-May, the first round of the elections saw the slate narrowed down to two candidates - Vladimir Meciar and Rudolf Schuster.
While the election campaign was not without a few sharp exchanges, it remained relatively civilized and orderly, and voter participation was around 85 percent. When the ballots were finally counted, Schuster took home the victory and was inaugurated as Slovakia's first popularly elected President in the country's history. That is no small achievement.
In its first full year in office, the Dzurinda-led Slovak Democratic Coalition (SDK) somehow managed to keep itself intact despite the turbulent waters which threatened to sink it on several occasions. Dzurinda's SDK has withered away as even his own party, the Christian Democrats, bowed out of joining the SDK in the next elections. Yet primarily due to a mutually agreed fear of former Prime Minister Meciar's return, Dzurinda has still managed to keep the SDK's affiliated parties cooperating.
Corruption scandals over the impending privatization of Nafta Gbely led to the resignation of several cabinet members in August and October, including that of former Minister of the Economy Ludovit Cernak and two heads of the National Property Fund, which is in charge of managing and divesting state assets.
To add fuel to Dzurinda's domestic troubles, it was recently revealed that the German firm Siemens and the Slovak company TV Com helped finance his ruling Christian Democratic Party (KDH). Subsequently the company received contracts for putting new lighting and an incinerator in Bratislava despite the fact that a French firm offered a lower bid for the job (CTK, 6 December 1999). Thus, corruption and payoffs seem to be something even the reformist parties find hard to resist in Slovakia.
While all these have taken their toll on Dzurinda's popularity ratings (which dipped below 20 percent by summer), he has managed to string along the other parties for lack of an alternative. Even the Hungarian coalition party (SMK) has stayed the course despite its reservations over the new minority language law passed in July. While the law pleased EU officials and facilitated success at Helsinki this month, ethnic Hungarians argued it did not go far enough in ensuring their cultural rights.
The Romani issue continues to remain a thorn in the side of the Slovak government. Unemployment among the group remains astronomical in many Eastern Slovak villages (as high as 90 percent in some places). The lack of job opportunities has led many to flee to the West, which, in turn, has created a foreign relations problem. Last autumn, Britain and Iceland began requiring visas to stem the tide of Romani immigrants from Slovakia. Finland, Norway and later Denmark followed suit between July and November of this year, when over a thousand Roma sought refuge in Scandinavia. Solving the Romani issue may very well become a key question to resolve as Slovakia seeks to enter the EU.
President Schuster's "political independence"
Sensing that the political winds could change, the new President, Rudolf Schuster, has distanced himself from close ties to any political party, including his own Party of Civic Understanding (SOP). In a 2 November "State of the Nation" speech, Schuster criticized the high unemployment rate and rising social discontent and connected it with the "political egotism" of the ruling parties' leadership. The move is hardly surprising since Schuster, a former top Communist himself, has shown he can swiftly change coats if the political realities warrant it in order to stay in office.
According to political scientist Lubos Kubin of the Slovak Academy of Sciences, Schuster was calculating how to preserve his own position should governments change in the future. While he serves a five-year term as President (until May 2004), the current government has less than three years before the next regularly scheduled elections. Even the opposition Movement for a Democratic Slovakia (the HZDS, Meciar's party) heaped praises on Schuster for his politically independent stand.
Domestic reform and discontent
The political accomplishments in the realm of domestic reform were sure to please the EU and many in the West, but this offered little solace to those Slovaks who found themselves out of work or increasingly worried that they would be out of work. Long-term unemployment remains one of the most difficult problems in the transition to a market economy.
The Slovak government is planning to form specialized teams at regional labor offices to help young people obtain jobs and start careers. It also plans to introduce public-service work for the unemployed and hopes to cut down on those working illegally who still collect unemployment benefits. But the real key to reducing unemployment over the long term lies in increasing investment in new businesses, and that requires a healthy dose of investment, including foreign capital. Thus far it is slow in coming to Slovakia.
Many Slovaks are disillusioned with the economic changes that have followed the Velvet Revolution and look back on the Communist period as "the good old days," when one did not have to worry about a job. An October public opinion poll conducted by the Institute for Public Affairs (IVO) revealed that 41 percent of those surveyed believed that the Velvet Revolution of 1989 had served little or no purpose. The government is convinced that such negative feelings are just a temporary setback before it will reap the benefits of its reform programs (Central Europe Online, 19 November 1999).
In September and December, organized labor literally took to the streets to express its dissatisfaction with the government's approach to economic change. Most recently, on 8 December, about a thousand union members staged a protest in front of the Slovak Parliament in order to register their complaints. Led by the Confederation of Trade Unions of the Slovak Republic (KOZ SR), the protesters demanded a decrease in taxes and a ten-percent wage increase (CTK, 8 December 1999). Trade union president Ivan Saktor has pledged that the demonstrations will continue until workers' legitimate demands are satisfied, and he has even threatened to call a general strike if warnings go unheeded.
While individuals might be hurting in their pocketbooks, the macroeconomic picture for Slovakia looks much more promising. In the first three quarters of 1999, Slovakia's economy grew at a rate of 1.8 percent, not stellar by any means, but at least in the right direction. Investments grew while consumption fell, and exports have continued to increase (CTK, 9 December 1999). At the same time, the budget deficit has ballooned over last year's numbers. While November's budget decreased 0.6 billion Slovak crowns from October's figures, the country is expecting a 19 billion crown deficit (USD 447 million) compared with 15.7 billion crowns in 1998. The state is hoping to trim next year's deficit by selling state assets worth as much as 40 billion crowns, or about USD 940 million (Slovak Spectator, 6-12 December 1999).
Finance Minister Brigita Schmognerova believes that the economic reforms put in place this year will check inflation and decrease interest rates in the year 2000 (Narodna obroda, 10 December 1999). The restructuring of Slovakia's banks, which will raise capital requirements, should also help make them more viable and better prepared to assist investors as privatization proceeds on course (Reuters, 8 December 1999). These measures should help revitalize Slovakia's economy if all goes according to plan.
Overall, Slovak businesses institutions have made great strides over the past several years. With training and more practical experience, managers have learned to be much more professional and sophisticated in their understanding of how free markets work.
According to Citibank's representative in Bratislava, David Francis, reforms have stabilized the macroeconomic situation. The challenge ahead lies in restructuring individual companies and banks so that the right decisions are made. Organizational reform, transparency in financial dealings and the improved gathering and management of information could go a long way toward improving performance. Future growth is expected to come from small- to medium-sized companies rather than the large enterprises which have led economic expansion over the past several years (Slovak Spectator, 6-12 December 1999).
Is Meciar still waiting in the wings?
While former Prime Minister Vladimir Meciar still claims he has retired from public life to focus on the business world, his departure from politics can still be reversed; Meciar would like nothing better than to see the current government fall flat on its face. In order to keep its head above the rising tide of dissatisfaction, Dzurinda and company need to improve their ability to convince their own citizens that the situation in Slovakia will surely improve if the medicine they have administered is allowed to run its course. They also need to realize, however, that their time is limited. If a significant turnaround is not obvious by the regularly scheduled elections in 2002, Dzurinda's gang may share the same fate as Meciar's people and be watching from sidelines.
Success abroad, questions at home
The year 1999 will be remembered for one great triumph for Dzurinda's government in foreign policy, but the domestic agenda still requires attention. In the wake of Helsinki, the government can enjoy the holiday spirit and toast to the new year as it celebrates its EU triumph.
But for his coalition to be strong over the next few years, Dzurinda's team will have to overcome much higher hurdles. They will have to guide the economy on a path to prosperity and assist in the creation of much needed jobs. Also, critically, the leadership must convince people that things will improve - and then make it so.
If a significant turnaround is not obvious by the regularly scheduled elections in 2002, Dzurinda's gang may share the same fate of Meciar's people.
Michael J Kopanic, Jr, PhD, 12 December 1999
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