Budget drama in Slovakia. Why Prime Minister Fico is rushing to adopt the ‘right’ budget
Photo: AFP via Getty Images
Amidst this backdrop, it is likely that Fico will call early elections in order to form a more convenient coalition. However, to do so, he needs to pass the ‘right’ budget to guarantee himself a decent result.
Fico's constitutional victory
On 26 September, the National Council voted for amendments to the Constitution of the Slovak Republic, with two amendments prohibiting adoption by unregistered couples and surrogacy. This may seem like an insignificant event. However, it is worth noting that the ruling coalition (Smer + Hlas + SNS) could not have passed these amendments without the support of other parties, as 90 votes are required, while the coalition only has 79.
These amendments were discussed back in the summer, when it became known that the opposition Christian Democratic Movement (KDH), which has 11 seats, would support them. At the time, this caused a wave of rejection among opposition circles – and within the KDH party itself. During the vote, one of the KDH MPs abstained and it failed, as it was one vote short.
The re-vote was postponed until autumn. This turned out to be the right decision for Fico. It was expected that the second vote would also fail, as one Hlas MP and two KDH MPs did not vote. However, three MPs from former Prime Minister Igor Matovič's Slovensko movement voted in favour, allowing the amendments to be adopted.
In the photo, opposition KDH MPs are in the foreground, while coalition SNS MPs applaud in the background after the amendments are approved. Foto: TASR
Matovič is quite a figure: the winner of the 2020 elections, he is known for his odious behaviour, which is why he only served as prime minister for one year. It is therefore not surprising that other opposition parties prefer to avoid him. But such disputes play into Fico's hands, as they create cracks in the opposition.
The KDH is not in the best situation. Although other parties do not particularly criticise it, as they will have to form a coalition with it in the event of elections, the successful vote allowed Fico to enter the electoral field of the Christian Democrats. Now Fico will be able to show conservative voters these constitutional changes, which were adopted on his initiative. From the very beginning, the KDH had no choice but to vote for such changes, but their failed attempts allowed them to save face – after all, they did vote, but were one or two votes short.
In addition to the new electoral field and quarrels within the opposition, Fico has gained another important thing. The amendments include a point about abolishing the priority of European law over Slovak law, and it is unclear how the Slovak government will use it in the future.
Fico has successfully completed the first part of his plan to prepare for the likely parliamentary elections. Now all that remains is to pass the right budget.
Between a balanced and unbalanced budget
The financial issue is a sore point for Fico. Recently, the government had to consolidate the budget in order to reduce its deficit. Consolidation involves raising taxes – for example, VAT from 19% to 23% on certain foods and beverages with high sugar content – as well as freezing wages for most public sector employees (except teachers and healthcare workers), postponing infrastructure maintenance and administrative rationalisation. All members of the coalition supported the consolidation, except for one MP – Hlas member Jan Ferenčák voted against it. As a result, Hlas parliamentary club leader Robert Puči stated that Ferenčák had lost the trust of Hlas.
The consolidation led to protests organised by the opposition parties Progresívne Slovensko, SaS, KDH and Demokrati.
Protests against the consolidation in Bratislava. Photo: Ivan Majersky
In order to enter the next year, which may be an election year, Fico needs to pass the right budget. This is much more difficult than it may seem. Fico must do this by 21 November.
According to the constitutional law on budgetary and financial responsibility, if all five sanction zones (50-53% of GDP, 53-55% of GDP, 55-57% of GDP, 57-60% of GDP) of the debt brake are exceeded, the government is obliged to submit only a balanced state budget to parliament. This constitutional law provides for a two-year exemption, which takes effect from the moment the government's programme of activities is approved on 21 November 2023. Meaning, Fico does not have much time to pass a budget that will satisfy voters. In previous years, the budget was passed in December.
The subsidisation of energy prices for households and the reform of the pension system, which began with the tightening of conditions for early retirement, remain open questions. Fico is benefiting from the trade agreement between the US and the EU, which resulted in a lower, than initially announced, customs tariff, which was ultimately reduced to 15% and also applies to car exports to the American market, which is good news for the Slovak automotive industry and related industries.
However, that is where the good news ends. The consolidation proposed by the government was already the third in two years of coalition rule. Therefore, the government has to look for additional sources of savings. The 2026 budget is being formed in conditions of weak economic growth. The initial estimate for this year was 1.9% of GDP, but in June this forecast was lowered to 1.3%. The latest data indicate even slower growth.
The unfavourable picture is compounded by inflation of around 4%. Its growth is primarily due to rising service prices and an increase in indirect taxes.
Public debt is growing faster than the approved budget forecast. This year, it could reach €84 billion, or 61.6% of GDP. Thus, each citizen already owes approximately €15,500, which is €1,200 more than last year.
The picture looks extremely bleak for the government, as under such conditions a balanced budget will be a death sentence for the coalition members. Due to the need to cut spending, the social component will inevitably suffer. The government understands this, which is why Finance Minister Ladislav Kamenický announced in March that he wanted to have the state budget for 2026 approved by 21 November so that the government could avoid the obligation to submit a balanced budget.
According to the law, the draft budget must be submitted to the National Council by 15 October. Parliament usually makes its decision at its last regular session in late November or early December. Fico will likely try to organise an extraordinary session before 21 November to have time to pass a suitable budget. The deadlines are very tight if he really wants to pass a budget that will allow him to compete for the top spot in the event of early elections. While the opposition is arguing, now it may be a good time to strike.
Early elections may also take place due to conflicts within the coalition. Sometimes it may seem that they are intentionally stimulated. The main victim of these attacks is Hlas. Andrej Danko's SNS criticises President Peter Pellegrini for wanting to meet with Fico and the finance minister to discuss consolidation before signing.
At the same time, Robert Fico has already said that the Hlas parliamentary club could fall apart due to Ferenčák's unwillingness to vote together. Hlas chairman Matúš Šutaj Eštok responded that this was not true. This is not the first time Fico has attacked Hlas. Back in August, he claimed that the partner party had become too close to Progresívne Slovensko. Šutaj Eštok had to debunk this claim back then.
The latest attack came in the form of a statement by former Hlas MP and currently the Minister of Investment - Samuel Mihal, who claimed that President Pellegrini was planning to bring down Fico's government and replace it with a technocratic cabinet. Mihal is formally independent, but he was nominated for the post of minister by Fico's Smer party.
Conclusions
Robert Fico managed to pass constitutional amendments, even though this was considered unlikely. Thanks to this, he managed to divide the opposition, creating a favourable environment for the adoption of the state budget for 2026, but the time for its adoption is limited. The government will not be able to adopt a budget that is both balanced and favourable to itself – economic indicators do not allow this. Therefore, in order not to ask parliament for a vote of confidence for an unbalanced budget, Fico must hurry, as he does not have much time.
Fico now has three possible options for the future:
The first is that he manages to pass an unbalanced budget. In this case, Fico should hold early elections to achieve better results, because later he will not have this opportunity.
The second is that if Fico fails to do this and still has to work on a balanced budget, then he should still hold early elections. After all, two consecutive years of budget cuts in social spending could have a much worse impact on Smer than one.
The third is that if he fails to pass the necessary budget, he will have to wait until 2027, hoping for an improvement in the economic situation. However, this is the worst option for Fico in the long run.
Analytical article prepared by Ostap Denysenko, commentator on Slovak politics, exclusively for Resurgam.
You may be interested
