Government stabilizes public finances: progress worth seeing!

Government stabilizes public finances: progress worth seeing!

Governments in Europe often face the challenge of stabilizing public finances, especially in times of crisis. A recent example of such efforts is the activities of the current government in Slovakia. Since taking office in 2023, the government under Prime Minister Robert Fico has gradually stabilized public finances. These measures are particularly important as the country's finances were previously considered the worst in the entire European Union, as [dersi.stvr.sk] reports.

Prime Minister Fico said on May 21, 2023 that a balanced budget for the government was unrealistic at the moment. The main goal of this government is to hand over the financial framework to its successors in a “normal” state. This is seen as particularly challenging as Fico's Smer-SD cabinet handed the new government a €1 billion deficit in 2020. The direct transition to an 8.5 billion euro deficit in 2023 illustrates the severity of the financial situation.

Debt growth and public debt

Public debt has increased from 45 billion euros to 70 billion euros over the period. Critical voices, including former Prime Minister and Finance Minister Igor Matovič, accuse the government of increasing debt by a total of 12 billion euros in just three years of crisis. Matovič also said that the current Finance Minister Kamenický had increased the debt by 12 billion euros in just 1.5 years, despite the absence of crisis situations. This raises questions about the sustainability of fiscal policy in Slovakia and reflects a broader European dilemma, also addressed in various economic studies, such as the reports by Auerbach et al. (1994) and Bofinger (2020) illustrate

The challenges facing Fico's government are not isolated. There is growing concern in the European debate about public debt and its impact on government finances. As several experts note in their works, many countries are faced with the need to rethink their debt policies in order to be fair to future generations.

The path to stabilization

To stabilize financial conditions, the Slovak government intends to promote strategic savings sites and more efficient policy measures. The assumption is that reducing the debt burden would be beneficial for both current and future governments. A review of the economic framework conditions described in the work of Blanchard et al. could also be helpful. (1990) and Kelton (2020) are discussed. These studies emphasize the need for stable fiscal policy measures and a conscious management of public debt.

Overall, it remains to be seen whether the Slovak government can achieve its goals while facing the challenges of an ever-changing economic landscape. Efforts to stabilize finances could be important not only for the Slovak population but also for the entire region.

For more information about the political and economic environment in Slovakia, read more at [link.springer.com].