This time we focus on Slovakia, which held early Parliamentary elections on Saturday. The left-wing Smer party defeated the rightist coalition that ruled country only less than two years. Smer gathered 44.41% of votes which means 83 out of 150 seats in the Parliament. The clear majority will lead to a onecoloured government. Smer already invited all parties to start talks about after – election collaboration. But all right wing parties said they will reject any invitation to coalition.
What can we expect on the field of economic policy? Slovakia has to decrease the public finance deficit to below 3% of GDP till the end of 2013 from current 4.6% of GDP (preliminary result). It is not an easy task and the deficit reduction by more than € 1bn will lead to unpopular measures. Smer announced typical leftist recipe like higher taxes for wealthy people, banks, highly profitable corporate companies, investment support for local entrepreneurs and return of highway PPP projects. But this alone will be not enough to consolidate public finances. The spending cuts are necessary and markets will keep a close eye on the first steps of new government. The credit markets are calm so far. We expect that the GIIPS story will be more important for small EMU countries now. But as time goes by the decisions of Smer government including the proposal of new state budget will be crucial for Slovak CDS and GB spreads.