COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and stability programme for SLOVAKIA Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Slovakia's 2012 national reform programme and delivering a Council opinion on Slovakia's updated stability programme, 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Roma, Slovakia, administrative transparency, budget deficit, economic situation, fight against unemployment, labour market, pension scheme, public expenditure, social integration, tax system, teaching quality

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 326 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and stability programme for 
SLOVAKIA 

Accompanying the document 

Recommendation for a  

COUNCIL RECOMMENDATION 

on Slovakia's 2012 national reform programme and delivering a Council opinion on 
Slovakia's updated stability programme, 2012-2015 

{COM(2012) 326 final} 

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CONTENTS 

Executive Summary ................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 4 

Economic developments and challenges...................................................................... 4 

Recent economic developments and outlook............................................................... 4 

Challenges .................................................................................................................... 6 

Assessment of the policy agenda ................................................................................. 7 

Fiscal policy and taxation............................................................................................. 7 

Financial sector .......................................................................................................... 14 

Labour market, education and social policies ............................................................ 15 

Structural measures promoting growth and competitiveness..................................... 19 

Modernisation of public administration ..................................................................... 21 

Overview table ........................................................................................................... 24 

Annex ......................................................................................................................... 28 

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EXECUTIVE SUMMARY 

Economic growth in Slovakia is expected to decelerate to 1.8% in 2012, largely in response to 
weaker  external  demand.  The  situation  in  the  labour  market  remains  challenging  and 
unemployment is foreseen to remain high at around 13% in 2012 and to decrease only slightly 
in 2013.  

Slovakia  has  introduced  a  set  of  reforms  to  strengthen  the  fiscal  framework,  improve  the 
sustainability  of  the  pension  system  and  increase  transparency  of  the  judiciary  and  public 
procurement.  In  other  areas,  reform  efforts  have  so  far  been  limited,  particularly  as  regards 
labour market and education. 

Slovakia  faces  a  number  of  challenges:  unemployment,  particularly  among  the  young  and 
vulnerable groups, is very high, long-term unemployment remains the highest in the EU and 
the  quality  of  the  education  and  training  system  continues  to  be  low.  The  tax  wedge  is 
relatively  high  for  low-income  workers  and  a  non-negligible  proportion  of  jobseekers  have 
little incentive to move from social assistance to a low-paid job. The budget deficit remains 
high  in  light  of  the  medium-term  objective.  Continuing  consolidation  and  improving  the 
quality  of  fiscal  measures,  also  by  addressing  inefficiencies  in  the  tax  system  and  tax 
collection, remains a key challenge. Finally, public administration suffers from high turnover 
of staff and insufficient capacity building. 

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1. 

INTRODUCTION 

Procedural aspects 

In June 2011 the Commission proposed six country specific recommendations for economic 
and structural reform policies for Slovakia. In July 2011 the Council of the European Union 
adopted  these  recommendations  which  concerned  public  finances,  the  taxation  system,  the 
fiscal  governance  system,  the  pension  system,  the  labour  market,  education,  public 
procurement,  and  the  judicial  system.  In  November  2011,the  Commission  published  its 
Annual Growth Survey for 2012 in which it set out  its proposals for building the necessary 
common understanding about the priorities for action at national and EU level in 2012.  

Against  this  background,  Slovak  Republic  presented  its  national  reform  programme  and 
stability programme in April 2012. These programmes give details of the Slovak Republic’s 
progress since July 2011 and of its future plans. This Staff Working Document assesses the 
implementation  of  the  2011  country-specific  recommendations  and  the  Annual  Growth 
Survey  2012  priorities,  identifies  current  policy  challenges  and,  in  this  light,  examines  the 
country’s latest policy plans. 

The policy plans submitted by the Slovak Republic are relevant. The policies presented in the 
national  reform  programme  are  integrated  in  a  broad  social  and  economic  context.  The 
stability programme confirms the main fiscal policy objective of the Slovak authorities which 
is in line with the Stability and Growth Pact. 

Overall assessment 

The  headline  deficit  in  2011  was  significantly  reduced.  No  action  has  been  taken  on 
strengthening  tax  compliance  and  reducing  tax  evasion  and  real  estate  and  environmental 
taxation. The fiscal framework has been strengthened through the adoption of a constitutional 
law on fiscal responsibility and a political debate has been launched on the law on expenditure 
ceilings. A reform of the fully funded pension pillar has been adopted but a draft proposal of 
the  adjustments  to  the  pay-as-you-go  pillar  has  been  withdrawn  from  the  parliament.  While 
several  reforms  have  been  proposed  in  the  area  of  labour  market,  no  changes  have  been 
adopted in the end. A number of measures were taken to increase labour market relevance of 
higher  education  and  a  political  debate  was  launched  on  measures  increasing  quality.  Steps 
were adopted to increase transparency of the judicial system and public procurement. 

Slovakia faces the most pressing challenges in public finances, the labour market, the taxation 
system, education and the public administration. The budget deficit remains high in the light 
of  the  medium-term  objective.  The  efficiency  of  taxation  is  low  given  the  scale  of  tax 
avoidance  and  weak  tax  compliance.  Unemployment,  particularly  among  the  young  and 
vulnerable groups, is very high and the quality of the education and training system continues 
to  be  very  low.  Finally,  there  is  significant  scope  to  increase  the  efficiency  of  the  public 
administration. 

2. 

ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

After  swiftly  rebounding  in  2010,  the  Slovak  economy  continued  to  expand  in  2011 
underpinned  by  export  growth.  Real  GDP  exceeded  pre-crisis  levels  in  the  first  half  of  the 

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year  and  grew  by  3.3 %  in  2011,  one  of  the  best  performances  in  the  EU.  Positive 
developments  in  industrial  production  were  fuelled  by  demand  from  the  country’s  main 
trading  partners,  notably  Germany,  with  which  the  domestic  production  of  durable 
manufacturing  goods  is  strongly  linked.  The  large  gains  in  productivity  and  value  added  in 
manufacturing more than offset the declines registered in other sectors of the economy (e.g. 
construction, wholesale and retail trade and agriculture). 

Domestic demand remained virtually flat in 2011 as moderate investment growth was offset 
by  a  combination  of  stagnant  household  consumption  and  a  significant  contraction  in 
government spending, both partly reflecting the major fiscal consolidation effort embarked on 
by  the  authorities  during  the  year.  After  two  years  with  a  public  deficit  at  around  8 %,  the 
government adopted several consolidation measures for 2011 with somewhat more emphasis 
on  the  expenditure  side  than  on  the  revenue  side.  The  headline  deficit  was  significantly 
reduced to 4.8º% of GDP in 2011. 

Private  consumption  remained  flat  for  a  third  consecutive  year,  reflecting  persistently  low 
consumer  confidence  and  the  protracted  decline  in  wholesale  and  retail  trade  since  2009. 
Whereas  gross  disposable  income  grew  at  an  average  rate  of  about  10 %  in  the  five  years 
preceding the crisis, it only grew by 3 % on average in the last three years. It actually declined 
in  real  terms  in  2011,  as  inflation  spiked  at  around  4 %  after  lingering  for  two  years  below 
1 %. The profitability of non-financial corporations, on the other hand, has remained among 
the highest in the EU, underpinning a moderate pick-up in investment. Several firms, notably 
in  the  automotive  industry,  have  announced  projects  to  further  expand  production  capacity 
depending on the global economic environment. 

Despite positive signs in the first half of 2011, the labour market remains weak. Following a 
sharp  rebound  in  hours  worked  and  productivity  in  2009-10,  the  crisis-induced  process  of 
labour  shedding  came  to  a  halt  in  2011  when  employment  growth  resumed  after  having 
declined for two years. Correspondingly, after peaking at 14.4 % in 2010, the unemployment 
rate declined to 13.5º% in 2011 but remains 4 percentage points above the pre-crisis level. As 
in  2010,  one  third  of  the  youth  remains  unemployed  (the  third  highest  figure  in  the  EU), 
nearly twice as many as in 2008. 

Despite a strong fourth quarter in 2011, real GDP growth is expected to slow down to 1.8 % in 
2012  on  the  back  of  weaker  external  demand  and  a  gradual  pick-up  in  economic  activity 
towards  the  end  of  2012.  Reflecting  uncertainty  concerning  the  economic  environment, 
business  and  consumer  confidence  indicators  point  to  cautious  decisions  on  investment 
projects,  many  of  which  are  expected  to  be  put  on  hold  in  2012,  with  private  consumption 
remaining subdued. After spiking in 2011, overall HICP inflation is forecast to slow down to 
2.9 % in 2012, reflecting a significant base effect and weak wage pressures in the context of a 
sluggish labour market. 

The Slovak government submitted the 2012 national reform programme and the 2012 stability 
programme to the European Commission on 30 April 2012. The documents describe measures 
implemented  since  July  2011  and  a  revised  set  of  reform  measures  planned  by  the  new 
government,  which  was  formed  after  the  March  parliamentary  elections.  The  policies 
presented  in  the  programmes  are  integrated  in  a  broad  social  and  economic  context  but  are 
sometimes  not  sufficiently  underpinned  by  clear  and  detailed  measures  to  achieve 
commitments  and  also  required  to  assess  the  relevance,  ambition  and  credibility  of  the  key 
policies.  The  expected  impacts  of  the  planned  measures  and  the  trajectories  to  reach  the 
national targets by 2020 are not included in the 2012 national reform programme. 

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2.2. 

Challenges 

The  key  post-crisis  structural  challenges  for  Slovakia  remain  largely  unchanged  from  last 
year: addressing imbalances in public finances and ensuring full utilisation of the economy’s 
labour potential. 

The general government deficit remains high despite a marked reduction in 2011. With no or 
limited progress expected to take place in 2012 under unchanged policies, additional measures 
are  necessary,  including  a  rebalancing  of  the  consolidation  effort  to  safeguard  growth-
enhancing expenditure. 

Given the diminishing scope for further expenditure cuts and the need to support continuing 
convergence  through  expenditure  in  key  areas  such  as  education,  innovation  and  transport 
infrastructure,  measures  aimed  at  broadening  the  tax  base,  limiting  the  scope  for  tax 
avoidance  and  improving  tax  compliance  would  be  of  significant  help.  In  the  context  of 
population  ageing,  further  adjustment  to  the  pension  system  is  required  to  ensure  the  long-
term sustainability of public finances. 

Despite  some  mild  improvements  in  2011,  the  situation  in  the  labour  market  remains 
challenging and continues to be aggravated by the exclusion of marginalised communities, in 
particular  the  Roma,  who  also  face  significant  barriers  when  it  comes  to  integration  in  the 
mainstream education system. While the problem of long-term unemployment is complex and 
dates back to the early years of the transition, the recent surge in joblessness is related to the 
poor performance of the labour market since the crisis of 2008-09. 

As  joblessness  persists  amid  grim  labour  market  prospects,  the  recent  cyclical  surge  in 
unemployment  risks  turning  structural,  with  youth  being  among  the  most  affected.  The 
capacity of the public employment service remains low and active labour market policies and 
training schemes are plagued by low effectiveness. The tax wedge, including all compulsory 
payments, is relatively high for low-income workers and a proportion of jobseekers face low 
financial  incentives  to  move  from  social  assistance  to  a  low-paid  job.  The  impact  of 
parenthood on the employment of women is also very high. 

Given the strong regional dimension of the unemployment problem, which is largely centred 
on  the  less  developed  regions  of  central  and  eastern  Slovakia,  additional  challenges  are  to 
rapidly  improve  the  efficient  use  of  the  remaining  EU  structural  funds  for  the  period  2007-
2013 and to  propose a  comprehensive development strategy with  clear  investment priorities 
for the next programming period 2014-2020. 

The low quality of the general and tertiary education system is holding back Slovak growth 
potential. Rising tertiary education attainment has not been coupled with increased quality of 
higher  education  and  research,  while  continuing  underperformance  in  the  PISA  tests  also 
points  to  broader  challenges  in  the  general  education  system.  Moreover,  the  persistence  of 
skill  mismatches  and  the  very  low  employment  rate  among  the  low-skilled  suggest 
considerable weaknesses in the system of vocational education and lifelong learning. 

Despite  the  recent  adoption  of  several  measures  enhancing  the  transparency  of  public 
procurement and the judiciary, recent experience of public procurement for the EU Structural 
Funds suggests that problems remain. Furthermore, weaknesses persist in the functioning of 
public institutions and the business environment: the political cycle has a high impact on staff 
turnover,  a  clear  framework  regulating  lobbying  activities  is  missing  and  sufficiently 
developed capacities for evidence-based policy making are not in place. 

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3. 

ASSESSMENT OF THE POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The stability programme defines the overarching goal of the Slovak fiscal policy as ensuring 
the long-term sustainability of public finances. The intermediate steps intended to reach this 
are rigorous implementation of the 2012 budget and reduction of the headline deficit  below 
3º% of GDP in 2013, the deadline set by the Council under the Excessive Deficit Procedure. 
The original medium-term budgetary objective (MTO) of a close-to-balanced budget has been 
revised  to  a  structural  deficit  of  0.5º%  of  GDP.  The  new  medium-term  objective,  although 
lower  than  the  previous  one,  adequately  reflects  the  requirements  of  the  Pact.  The  2012 
stability  programme  does  not  envisage  achievement  of  the  MTO  within  the  programme 
period. 

In  2011,  the  general  government  deficit  declined  markedly  to  4.8º%  of  GDP  from  7.7º%  of 
GDP a year earlier. This slightly better outcome than the deficit of 4.9º% of GDP envisaged in 
the  2011  stability  programme  reflected  mainly  the  impact  of  the  2011  austerity  programme 
(see  Box  1).  The  final  budgetary  outturn  was,  however,  also  influenced  by  positive  and 
negative  factors  on  both  the  expenditure  and  revenue  side,  which  included  several  one-off 
measures1.  Despite  slippages,  the  2011  budget  was  implemented  in  line  with  the  2011 
recommendation on budget implementation. 

The general government balance is expected to improve further in 2012, but the target for the 
headline deficit was raised from 3.8º% of GDP in the 2011 stability programme to 4.6º% of 
GDP  in  the  current  stability  programme.  The  revision  reflects  primarily  the  fact  that  no 
measures  were  adopted  to  counter  the  additional  revenue  shortfall  due  to  the  successive 
downward adjustments in the  outlook for economic growth following the submission  of the 
2011  stability  programme.  The  Commission  services’  2012  Spring  forecast  projects  the 
headline  deficit  at  4.7º%  of  GDP  in  2012,  close  to  that  forecast  in  the  2012  stability 
programme.  This  notwithstanding,  building  on  comparable  underlying  macroeconomic 
scenarios,  the  deficit  projections  for  2012  differ  in  terms  of  their  composition.  Revenue 
consolidation  measures  are  fully  included  in  the  Commission  services’  projection.  By 
contrast,  the  expenditure  cuts  constituting  the  bulk  of  the  fiscal  consolidation  measures  are 
only  partly  accounted  for  in  the  Commission  services’  2012  Spring  forecast.  The  expected 
moderation in the public wage bill can be difficult to achieve, given the worse than budgeted 
outturn  in  2011  and  increasingly  reduced  scope  to  resort  to  easier  options  such  as  the 
cancellation  of  unfilled  posts,  the  use  of  early  pension  schemes  and  incentives  for  the 
retirement  of  those  above  the  statutory  retirement  age.  Moreover,  planned  savings  in  the 
compensation  of  public  sector  employees  may  not  materialise  given  the  adoption  of  non-
budgeted salary increases of some 0.15º% of GDP for healthcare personnel. 

While the 2012 stability programme targets a deficit of 2.9º% of GDP in 2013, and a further 
reduction to 2.3º% of GDP and 1.7º% of GDP in 2014 and 2015, respectively, it contains only 
a partial set of measures underpinning these targets and lacks detailed quantification of their 

1 

The  positive  factors  included  lower-than-budgeted  EU  co-financing,  interest  payments,  social  and 
health  care  expenditures,  extra  non-budgeted  revenue  from  dividends  and  a  sale  of  telecom  licences, 
and  better-than-expected  management  of  local  governments.  The  negative  factors  consisted  of  tax 
revenue  shortfalls  due  to  less  tax-rich  growth,  postponement  of  the  sale  of  excess  CO2  quotas  and 
increases  in  non-budgeted  expenditures  following  assumption  of  past  debts  of  hospitals  and  railway 
companies. 

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expected impact. The measures included in the already approved General Government Budget 
Framework  for  2013-20152  —  namely  further  savings  in  the  public  wage  bill,  goods  and 
services  and  capital  spending  —  would  bring  the  headline  deficit  down  only  marginally  to 
4.5º%  of  GDP  in  2013.  Taking  into  account  these  measures,  the  Commission  services  2012 
Spring forecast projects the 2013 deficit at 4.9º% of GDP, assuming unchanged policies. 

In  the  2012  stability  programme,  the  incoming  government  acknowledges  the  need  for 
additional measures to reach the 2013 target and to continue thereafter with fiscal adjustments 
towards  the  medium-term  objective.  The  2012  stability  programme  suggests  several 
measures, especially on the revenue side, which the government will consider after 2012 (see 
Box 1), but these lack specification and quantification of their impact on public finances. In 
addition, the reform of the pay-as-you-go pension pillar is expected to be used to facilitate the 
ongoing consolidation3, together with improved efficiency of tax collection, especially value 
added tax, reflecting the 2011 recommendation to improve tax collection efficiency. 

The rebalancing of the consolidation effort proposed in the 2012 stability programme, with a 
stronger emphasis on the revenue side, is warranted in view of sharp expenditure cuts in 2011. 
However, the suggested revenue measures could fall short of securing the resources necessary 
to  adequately  support  the  consolidation  and  reach  the  deadline  under  the  Excessive  Deficit 
Procedure. Meeting the deadline would be conditional on full implementation of a series of 
small-scale  measures.  Moreover,  Slovakia  has  a  history  of  significant  ex  post  revision  of 
deficit targets. Taking some of the measures already in 2012 would increase the credibility of 
the consolidation strategy. 

Some envisaged measures are neither sustainable, over a medium- to long-term perspective, 
nor  advisable.  Further  across-the-board  cuts  could  be  inefficient  as  they  could  negatively 
affect  the  functioning  of  the  public  sector.  A  more  targeted  cost  reduction  supported  by 
appropriate  analyses  could  be  beneficial.  The  two  stated  key  priorities  of  the  incoming 
government  —  education  and  transport  infrastructure  —  are  in  line  with  the  2011 
recommendation  and  the  Annual  Growth  Survey  priorities,  which  call  for  safeguarding 
growth-enhancing expenditure. However, while the infrastructure projects are to be financed 
through  EU  resources,  the  government’s  own  capital  expenditure  is  expected  to  continue 
falling.  As  regards  the  financing  of  public  investment,  alternative  forms  of  funding  (e.g. 
through public-private partnerships) represent implicit liabilities and would not offer a viable 
solution for sustainable public finances in the medium to long term. 

The government’s average annual fiscal effort in 2010-2011, as measured by the change in the 
recalculated  structural  balance4,  stood  at  1.3º%  of  GDP.  Based  on  the  stability  programme 
targets, over the adjustment period for 2010-2013, the implied fiscal effort of 1.3º% of GDP 
on average would be above the adjustment of 1º% of GDP required by the Council under the 
Excessive  Deficit  Procedure,  with  a  larger  adjustment  occurring  in  2013,  which  however  is 
not  yet  underpinned  by  sufficient  measures.  Assuming  no  change  of  policies  in  2013  and 
somewhat  favourable  cyclical  conditions,  the  implied  annual  structural  effort,  based  on  the 

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4 

This is the base document for the budgeting process presenting headline deficit targets, which should 
later be worked out in the triennial general government budget. It was adopted on 27 April 2012. 
While  not  explicitly  mentioned  in  the  stability  programme,  the  measures  directly  impacting  public 
finances  could  include  basing  the  indexation  of  pensions  only  on  inflation,  re-introducing  voluntary 
participation in the fully funded pension pillar, and re-routing part of the pension contributions from the 
fully funded to the pay-as-you-go pension pillar. 
Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology. 

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Commission  services’  projection  for  2010-2013,  stands  at  0.8º%  of  GDP.  The  envisaged 
structural improvement in the outer years of the programme period falls short of the required 
annual improvement of 0.5º% of GDP for countries not at the MTO. Nevertheless, the growth 
rate of government expenditure, taking into account discretionary revenue measures, is in line 
with the expenditure benchmark of the Stability and Growth Pact after 2013. 

Box 1. Main measures 

The  2011  consolidation  package  included  cuts  in  the  public  wage  bill,  a  reduction  in  intermediate 
consumption, an increase in the standard value added tax rate of 1 percentage point, and a broadening 
of the tax base for personal income tax and social contributions. For 2012, only measures agreed in the 
2012 budget are envisaged, including a further freeze in spending on goods and services, investment 
and public wages on the expenditure side and a broadening of the tax base for corporate income tax, 
the introduction of a bank levy and higher excise duties on tobacco on the revenue side. 

  Main budgetary measures 

Revenue 

2011 

Expenditure 

  •  Broadening of tax base for personal income 
tax and social contributions (0.3º% of GDP) 

•  Cut in public wage bill (-0.2º% of GDP) 

•  Savings on goods and services and subsidies 

•  Increases  in  value  added  tax  and  excise 

(-0.5º% of GDP) 

duties (0.5º% of GDP) 

•  Reduction  of  capital  expenditure  (-0.1º%  of 

•  Other revenue measures (0.3º% of GDP) 

GDP) 

2012 

  •  Broadening of tax base for corporate income 

•  Cut in public wage bill (-0.1º% of GDP) 

tax (0.1º% of GDP) 

•  Savings  on  goods  and  services  (-0.3º%  of 

•  Bank levy (0.1º% of GDP) 

GDP) 

•  Other revenue measures (0.1º% of GDP) 

•  Capital expenditure cuts (-0.1º% of GDP) 

2013 

•  n.a. 

•  Savings  by  local  governments  (-0.2º%  of 

GDP) 

•  Cut in public wage bill (-0.2º% of GDP) 

•  Savings  on  goods  and  services  (-0.3º%  of 

GDP) 

•  Capital expenditure cuts (-0.6º% of GDP) 

  Note:  The  budgetary  impact  in  the  table  is  the  impact  reported  in  the  programme,  i.e.  by  the 
national authorities. A positive sign means that revenue/expenditure increases as a consequence 
of  this  measure.  The  degree  of  detail  reflects  the  type  of  information  made  available  in  the 
stability programme and a multiannual budget.  

The  2012  stability  programme  also  suggests  several  additional  measures  on  the  revenue  side  (e.g. 
increasing  the  progressivity  of  income  taxation,  excise  taxes  and  gambling  taxes,  increasing  the 
recently  adopted  bank  levy,  introducing  new  taxes  on  luxury  and  taxes  to  address  negative 
environmental externalities, and the elimination of differential taxation of various employment types) 
as  well  as  on  the  expenditure  side  (e.g.  better  targeting  of  social  benefits,  more  savings  through 
transparent public procurement) which the incoming government may take after 2012. However, the 

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programme does not specify details of these intended measures. 

General government debt has increased significantly since the crisis, reaching 43.3º% of GDP 
in 2011. This trend is also projected to continue in the coming years, driven largely by high 
headline deficits. According to the 2012 stability programme, public debt is forecast to reach 
50.2º%  of  GDP  in  2012,  broadly  in  line  with  the  Commission  services’  projection.  A  large 
part  of  the  increase  is  due  to  Slovakia’s  participation  in  the  European  Financial  Stability 
Facility  and  European  Stability  Mechanism  and  expected  replenishing  of  drawn-down  cash 
reserves in 2011. The debt-to-GDP ratio should stabilise at around 53º% by 2014 according to 
the  2012  stability  programme.  Since  the  debt-to-GDP  ratio  is  below  the  reference  rate,  the 
debt reduction benchmark is not applicable. 

Long-term sustainability 

The  long-term  change  in  age-related  expenditure  is  above  the  EU  average.  The  initial 
budgetary  position  compounds  the  long-term  costs.  Under  a  no-policy-change  assumption, 
debt would increase to 73.2º% of GDP by 2020. The full implementation of the programme 
would  not  be  enough  to  put  debt  on  a  downward  path  by  2020.  The  focus  should  be  on 
containing  public  spending  trends  in  order  to  diminish  the  sustainability  gap.  Ensuring 
sufficient primary surpluses over the medium term and further reforming the pension system, 
so as to curb the projected substantial increase in age-related expenditure, would improve the 
sustainability of public finances. 

Pension system 
Costs related to a rapidly ageing population5 represent a major burden on the sustainability of 
public  finances  in  the  long  term.  The  primary  contributor  to  this  is  pension  expenditure, 
which, according to the estimates of the 2012 Ageing Report6, is projected to increase by 5.2 
percentage  points  of  GDP  in  2010-2060.  Despite  the  pension  reform  of  2004,  the 
sustainability of the pay-as-you-go pillar remains an issue. The generous pension regimes for 
special  categories,  such  the  armed  forces,  were  left  unchanged7.  The  fully  funded  pillar  has 
been subject to frequent ad hoc changes. With the exception of rules tightening conditions for 
early retirement, no measures have been taken to promote longer working lives. 

The adjustments to the pay-as-you-go pillar envisaged in the 2011 stability programme, and 
upheld by the 2011 recommendation on the long-term sustainability of public finances, have 
not been adopted and the 2012 stability programme does not fully reiterate the original plans. 
The proposals in the 2011 stability programme included introducing a legislative link between 
life expectancy and the retirement age, incorporating a sustainability factor in the calculation 
of the new pensions to reflect the change in the ratio between payers and beneficiaries, and 
changing the indexation of pensions to a purely inflation-based index. Efforts on these fronts 
would mitigate the negative impact of population ageing on public finances. 

In September 2011,  Slovakia  adopted a law introducing several changes to the  fully funded 
pension  pillar,  thereby  implementing  the  relevant  part  of  the  2011  recommendation  on  the 
long-term  sustainability  of  public  finances.  Among  the  most  important  were:  (i)  the 
introduction of default participation by new labour market entrants in the fully funded pillar 

5 

6 

7 

The 2011 census shows that Slovakia’s population is ageing rapidly as the age groups 55-59 and 80+ 
recorded  the  fastest  growth  over  the  last  decade,  supporting  the  Eurostat  projections  of  population 
developments which serve as underlying assumptions for forecasting the long-term costs of ageing. 
European  Commission  (DG  ECFIN)  and  Economic  Policy  Committee  (Ageing  Working  Group) 
(2012), ‘The 2012 Ageing Report: Economic and budgetary projections for the 27 EU Member States 
(2010-2060)’, European Economy, No. 2. 
The measures envisaged in the 2011 national reform programme have not been adopted. 

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with an opt-out period of two years, (ii) the elimination of guarantees from fund types that do 
not  invest  exclusively  in  bonds  or  money-market  instruments,  with  extension  of  the 
benchmarking  period  for  the  purely  bond-based  funds,  (iii)  the  introduction  of  an  indexed 
investment  fund,  and  (iv)  reduction  of  the  minimum  contribution  period  to  10  years.  The 
changes  create  a  better  environment  for  more  risk-seeking  behaviour  by  the  pension 
management companies with a view to delivering adequate pensions in the long run through 
higher returns. The fully funded pension pillar was subject to frequent significant changes in 
the  past,  which  entailed  non-negligible  adjustment  costs  and  introduced  uncertainty.  In  this 
context, steps to ensure the stability of the system would reduce the risk of further adjustment 
costs, and ensure a more stable and transparent environment for decision-making. 

Fiscal frameworks 

In  December  2011,  the  Slovak  Parliament  adopted  a  constitutional  law  on  fiscal 
responsibility,  which  entered  into  force  on  1  March  2012,  thus  implementing  a  part  of  the 
2011  recommendation  on  the  fiscal  framework.  The  main  features  of  the  law  are  the 
establishment  of  an  independent  Fiscal  Council,  and  the  introduction  of  a  system  of  early 
corrective measures and a range of sanctions triggered by the level of the public debt-to-GDP 
ratio — thus establishing a debt rule for the whole general government. 

Although the upper limits on debt are stricter than those agreed at EU level, their impact in 
preventing negative public finance developments is limited, as they are assessed only ex post. 
The constitutional law introduces the concept of expenditure ceilings, which could provide ex 
ante operational targets, but falls short of defining them precisely; this is to be addressed in a 
separate  law.  Under  the  current  proposal  still  under  review  within  the  administration,  the 
expenditure ceilings8 would  be calculated  by  the Fiscal  Council on the basis of the planned 
reduction  in  the  long-term  sustainability  indicator9  declared  by  each  new  government. 
Ceilings are to be determined for a period of four years and adjusted by the Fiscal Council on 
an annual basis in line with rules specified by the law. Failure to observe a ceiling in a given 
year  does  not  trigger  any  sanctions,  apart  from  reputational  risk  for  the  government.  Both 
laws can contribute to more prudent fiscal policies in Slovakia. 

Tax system 

With  its  low  tax  burden  on  capital,  an  average  tax  burden  on  labour  and  relatively  high 
consumption  taxation,  Slovakia  has  a  relatively  growth-friendly  tax  structure.  However,  the 
low tax-to-GDP  ratio of 28 % —  some  12 percentage points below the EU average —  is in 
part a consequence of inefficient taxation design and tax collection, especially in the case of 
the value added tax. The very low taxation of real estate also results from not reflecting the 
actual  value  of  property.  The  low  level  of  environmental  taxes  continues  to  suggest 
suboptimal  taxation  on  associated  negative  externalities.  There  has  been  no  progress  on  the 
tax-related  part  of  the  2011  recommendation  on  public  finances,  which  recommended 
improvements in these areas. Moreover, effective taxation varies among the different types of 
employment.  Improvements  in  the  field  of  taxation  could  not  only  underpin  the  fiscal 
consolidation  but  would,  from  a  longer-term  perspective,  support  growth-enhancing 

8 

9 

A  single  consolidated  expenditure  ceiling  on  an  accrual  basis  would  be  defined  each  year.  It  will  be 
adjusted for the economic cycle and tax expenditure. The limit excludes local governments and several 
types of expenditure, including EU-related financing and interest expenditure. 
The constitutional law defines the long-term sustainability indicator as the difference between the actual 
value of the structural balance and that which is sustainable in the long term, expressed as a percentage 
of GDP. The constitutional law further specifies the factors that need to be considered when calculating 
this indicator. The methodology itself is to be determined by the Fiscal Council. 

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expenditure  with  a  view  to  Slovakia’s  ongoing  convergence  process,  without  hurting  near-
term growth prospects. 

Slovakia applies a standard 20 % value added tax to the majority of goods and services with 
the  exception  of  a  limited  number  of  goods  taxed  at  10 %.  The  value  added  tax  gap,  which 
measures actual value added tax revenues compared to theoretical proceeds, was estimated at 
28 % in 200610 (equivalent  to  some 3 % of GDP), well above  the EU25 average of 12 %. A 
2012  Ministry  of  Finance  study11  confirms  these  findings,  suggesting  potentially  large 
revenue losses due to fraud and tax evasion (mostly related to cross-border trade) as well as 
tax avoidance. The macro estimates are supported by evidence on the ground. Inspections by 
the tax authority point to a sharply increasing trend in the value of value added tax liabilities 
identified ex post in  recent  years, up to 0.6 % of  GDP in 2010. Only a  fraction  of these tax 
liabilities is ultimately collected. 

Under-collection of value  added  tax  is closely related  to  the  more  general  problem  of  weak 
tax  governance  and  administration.  Competences  for  revenue  collection  are  split  among 
several  agencies.  The  fragmented  system  makes  the  administrative  costs  of  tax  collection 
among the highest in the EU (2.4 % of total revenues in 2007 and prevents cross-checking of 
tax, social contributions and  healthcare declarations. The  UNITAS  project, which  envisages 
unifying all revenue collection within a single institution — the Financial Administration — 
aims to address this issue. The first phase launched in January 2012 unifies the collection of 
taxes  and  customs.  In  a  later  phase,  further  integration  of  the  system  is  envisaged  by 
transferring  responsibility  for  the  collection  of  social  and  healthcare  contributions  to  the 
Financial Administration12. These measures could effectively reduce the compliance costs of 
paying taxes and are a precondition to tackle fraud and tax avoidance, but the issue cannot be 
addressed  by  these  measures  alone.  Current  audits  appear  to  concentrate  predominantly  on 
large  taxpayers.  Broadening  the  scope  of  inspections  to  smaller  and  unincorporated 
businesses,  targeted  through  more  sophisticated  risk  analysis,  could  have  a  considerable 
deterrent effect. The strategies adopted by the government to fight value added tax fraud and 
evasion  in  the  area  of  labour  taxation  lack  concrete  implementation  measures.  The  stability 
programme is silent on the means to improve the efficiency of tax collection. 

Revenues from real estate taxes are considered to be among the least harmful to growth. In 
Slovakia they constituted only 1.3 % of overall tax receipts in 2008 compared to 5.4 % in EU 
Member States belonging to the OECD. In the absence of transaction taxes, current property 
taxation  consists  of  a  land  tax  and  a  tax  on  buildings  and  apartments.  While  the  former  is 
based on the value of land as fixed by regulation13, the latter reflects only the surface area14, 
which  can  amplify  the  volatility  of  house  prices,  as  the  effective  tax  rate  is  negatively 
correlated with the value of property. Currently, the largest average tax rate tends to apply to 
property used for business activities. Introducing a link between the tax base and the market 
value  of  property  can  contribute  to  reducing  distortionary  pro-cyclical  house  price 
developments. 

10 

11 

12 

13 

14 

Reckon  LLP  (2009),  ‘Study  to  quantify  and  analyse  the  value  added  tax  gap  in  the  EU-25  Member 
States’, Report for DG Taxation and Customs Union, September 2009. 
Novysedlak  and  Palkovicova  (2012),  ‘Estimated  losses  from  VAT  revenue  income’,  Institute  for 
Financial Policy. 
However, as this step was conditional on the reform of the tax and social security contributions system, 
which was not adopted, its implementation is questionable. 
The standard tax rate is 0.25 % of the tax base, but this is usually changed by the local municipalities, 
and different rates generally apply to different types of land, within certain limits. 
The standard tax rate of EUR 0.033/m2 applies to ground space occupied by the finished buildings and 
surface of apartments. It can be adjusted (within specified limits) by the local governments. 

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The  ratio  of  environmental  taxation  stood  at  1.9 %  of  GDP  in  2010,  some  0.7  percentage 
points  below  the  EU  average  and  the  third  lowest  in  the  EU.  Over  80 %  of  environmental 
taxes come from transport fuel taxes, the rest from non-fuel taxes on transport and charges on 
air and water pollution. A declining trend in revenues from environmental taxation points to a 
growing gap in addressing negative externalities. 

Under the existing framework for taxing labour income in Slovakia, effective taxation varies 
among  the  three  different  types  of  employment  (see  Box  2),  with  dependent  work  being 
subject  to  the  highest  tax  burden.  Unequal  taxation  of  similar  activities  and  tax  arbitrage 
among various employment types lead to a shift from dependent employment to the two more 
flexible job arrangements15 with negative short-term (e.g. fiscal revenue shortfall) and long-
term  implications  (e.g.  low  pension  contributions  by  the  self-employed  may  result  in  low 
pensions in the future, which may need to be topped up from public resources). 

The  main  weaknesses  of  the  current  system  of  self-employment  taxation  are  a  generous 
formula  for  calculating  the  base  for  social  security  contributions,  wide  scope  for  declaring 
deductible  expenditure  (defined  as  any  expenditure  related  to  obtaining  and  maintaining 
income),  coupled  with  weak  controls,  and  a  lack  of  caps  on  lump-sum  and  itemised 
deductions. Work by agreement is limited in terms of monthly work time but not in terms of 
the maximum monthly income. Broadening the tax base by increasing the taxation of flexible 
job contracts can lead to some job losses in the short term, but would have a beneficial impact 
in  the  longer  term  by  reducing  the  size  of  the  grey  economy  and  addressing  the  distortive 
incentives  that  lead  to  a  disproportionate  tax  burden  on  dependent  workers  (including  all 
compulsory  payments).  The  availability  of  the  less  costly  ‘work  by  agreement’  contracts 
could  be  one  of  the  reasons  for  the  low  utilisation  of  part-time  work.  While  the  stability 
programme  recognises  that  the  current  taxation  framework  potentially  leads  to  lower  tax 
revenue  due  to  tax  optimisation  behaviour,  it  does  not  envisage  any  measures  to  tackle  this 
issue. 

Box 2: Comparison of the taxation of various employment types in Slovakia 

In Slovakia there are three employment types (dependent employment, self-employment and 
‘work  by  agreement’  (dohoda)),  with  different  tax  regimes.  In  contrast  to  dependent 
employment, the self-employed are subject to: 

•  A  lower  assessment  base  for  social  contributions:  the  self-employed  pay  social 

contributions on about a half of their gross profits. 

15 

The  number  of  self-employed  more  than  doubled  over  the  last  decade  and  their  share  in  total 
employment is above the EU average (15.8º% vs 13.8 % in 2010). 

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•  A lower tax base for personal income tax: to calculate their gross profit (i.e. total revenue 
less tax deductibles), the self-employed can choose one of two options to determine their 
expenses: 

o  a 40 % lump-sum deduction of expenses without any ceiling; 

o  an itemised deduction: the system governing claimable tax expenditures is generous, 
enabling  the  self-employed  to  deduct  any  expense  connected  with  obtaining  and 
maintaining their income. No guidance is provided on how to account for assets used 
for  personal and  business purposes. As a result,  in  2009, the  total costs  claimed by 
the self-employed amounted to 98 % of declared revenue. 

Consequently, calculations show that, in a situation of equal labour costs, the taxes and social 
contributions  paid  by  a  self-employed  person  who  applies  the  40 %  lump-sum  deduction 
amount to less than half of those of a dependent worker. 

Moreover, Slovak legislation provides for another type of employment contract — work by 
agreement  (dohoda)  —  permitting  even  more  flexible  work  arrangements  with  a  cap  on 
monthly  hours  worked.  This  is  intended  to  facilitate  the  employment  of  specific  categories 
such  as  students.  Although  internationally  comparable  data  are  not  available  for  this  group, 
the  figures  from  the  Social  Insurance  Agency  suggest  that  their  number  increased  by  some 
30 % in 2005-2010. The tax and social contributions burden for this type of contract is very 
low  since  no  social  contributions  are  levied  on  income.  There  is  also  no  cap  on  maximum 
monthly salary, which leads to misuse of such contracts. 

3.2. 

Financial sector 

Macro-prudential  indicators  point  to  a  stable  and  sound  financial sector  overall  in  Slovakia. 
Bank capitalisation and profitability remain high and increased in 2011 (see Table VII in the 
Annex)  also  due  to  conservative  banking  strategies,  which  ensured  that  no  government 
support was required during the crisis. The loan-to-deposit ratio, though increasing, remains 
below 100 % in the context of moderate but rising credit expansion. The increase in credit risk 
since  2009  has  translated  into  a  moderate  deterioration  in  loan-book  quality,  but  non-
performing  loans  have  stabilised  at  8 %  and  5 %  for  non-financial  corporations  and 
households, respectively. 

The  weaker  economy  and  increased  credit  risk  have  also  affected  the  ease  of  access  to 
financing.  The  rate  of  rejected  loan  applications  and  unacceptable  loan  conditions  went  up 
from 7.6 % in 2009 to 24.7 % in 201116. Nevertheless, the number of small and medium-sized 
enterprises using debt financing increased in the same period from 61º%to 74 %. Although the 
amount of loans to non-financial firms17 followed the downward path of the economic cycle 
in  2009,  with  the  subsequent  recovery  it  grew  at  a  moderate  pace  in  2010–2011.  Due  to  an 
underdeveloped  stock  exchange  and  venture  capital  market,  equity  financing  remains  very 
limited, with less than 1 % of Slovak small and medium-sized enterprises having access to it 
in 2011. 

16 

17 

Commission/ECB  Survey  on  small  and  medium-sized  enterprises  access  to  finance,  August-October 
2011. 
National Bank of Slovakia — Statistics on granted loans (by sectors). 

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3.3. 

Labour market, education and social policies 

Despite some positive signs since the crisis of 2008–2009, the situation in the labour market 
remains challenging, in particular for vulnerable groups. The unemployment rate remains well 
above the EU average at 13.4 % in 2011, particularly for youth and the low-skilled. The long-
term unemployment rate remains the highest in the EU, signalling the importance of structural 
issues and skills mismatches. From a broader perspective, reform of the education system and 
better  aligning  it  with  labour  market  needs  are  important  to  ensure  that  labour  productivity 
does not fall behind. 

The  situation  of  vulnerable  groups  in  the  labour  market,  particularly  youth,  women  and  the 
low-skilled,  remains  difficult.  Finding  work  for  youth  is  challenging  with  the  youth 
unemployment rate (33.6 %) being among the highest in the EU and remained unchanged in 
2011. Similarly, the share of young people who were neither in employment nor in education 
or training was relatively high (14.1 % vs 12.8 % EU average in 2011). Support for training by 
firms  is  limited  and  an  evaluation  of  the  existing  ‘graduate  practice’  scheme  (supporting 
young graduates up to 25) points to its limited effectiveness. Plans in the 2012 national reform 
programme to revise the scheme are welcome. 

There is scope for additional youth related actions, including by re-targeting calls planned for 
this year. The 2012 national reform programme includes plans to reallocate European funding 
to projects aimed at youth already in 2012. Reallocation will affect Operational Programmes 
for  Education  and  Employment  and  Social  Inclusion,  where  the  new  projects  are  also 
expected to support job creation for youth, improve the relevance of education and training to 
labour market needs and develop the competences of young people. Following the European 
Council of 30 January 2012, the Slovak authorities and the Commission examined measures 
for reducing youth unemployment, including through reallocation of the European Structural 
Funds.  In  mid  May  2012,  the  Slovak  Government  announced  a  reallocation  of  EUR 70 m 
(coming  from  the  EU  and  the  State  budget)  within  the  European  Social  Fund  to  directly 
support jobs in the Slovak regions most affected by youth unemployment and reorientation of 
other EUR 50 m to active labour market policies supporting also young.  Within the European 
Regional  Development  Fund  EUR 220 million  (coming  from  the  EU  and  the  State  budget) 
will  be  reallocated  to  support  technological  transfer  and  job  creation  in  small  and  medium-
sized enterprises. 

A reform of the Labour Code came into force in September 2011 and introduced options such 
as  job  sharing,  three-year  parental  leave  spread  over  five  years,  and  more  flexible  work 
arrangements  with  further  relaxation  of  employment  protection  legislation.  However, 
regulation of the minimum wage for different categories of employees was retained, meaning 
that the minimum wage level for work classified in the highest category is twice the national 
minimum wage. 

Long-term  unemployment  remains  very  high  and  started  to  increase  in  the  aftermath  of  the 
crisis, reaching 9.2º% in 2011. No specific measures have been taken to address this and the 
2012  national  reform  programme  also  lacks  specific  measures  to  tackle  long-term 
unemployment  among  mainly  the  low-skilled.  Previous  measures  were  mostly  aimed  at 
supporting labour demand for this group rather than addressing supply-side issues, including 
the skills mismatch. 

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The  Slovak  tax  and  benefits  system  seems  to  provide  weak  incentives  to  take  up  low-paid 
work and burdens low-paid jobs with relatively high taxes and social contributions. According 
to the calculations of the Ministry of Labour and Social Affairs, the marginal effective tax rate 
is  very  high18  when  a  recipient  of  ‘benefit  in  material  need’  with  an  activation  allowance 
moves  from  inactivity  to  minimum  wage  employment  (see  figure  above  for  the  marginal 
effective  tax  rate  of  different  household  types)19.  In  2011,  the  number  of  recipients  of  the 
‘benefit in material need’ with an activation allowance was 49 491 (32.6 % of all ‘benefit in 
material  need’  recipients).  The  2011  strategy  for  the  reform  of  tax  and  social  contributions 
included  measures  to  increase  the  level  of  earnings  disregarded  for  the  calculation  of 
entitlement  to  ‘benefit  in  material  need’  in  order  to  increase  the  total  income  of  low-paid 
workers.  However,  it  was  not  adopted.  No  progress  has  been  made  on  the  2011 
recommendation  on  reducing  the  relatively  high  tax  wedge20  for  low-paid  employees.  The 
existing  in-work  benefit  (employee  bonus)  was  adopted  in  2009,  but  has  had  only  a  very 
limited impact as it amounts to EURº7 on average per month and is paid out annually. 

No  progress  has  been  made  in  implementing  the  2011  recommendation  on  improving  the 
administrative  capacity  of  the  public  employment  service.  As  part  of  fiscal  consolidation 
efforts, the number of labour office workers was reduced in 2011, significantly increasing the 
ratio  of  registered  jobseekers  to  front-line  local  office  staff  in  placement  and  counselling 
services (432 per caseworker in 2011). A recently proposed but not adopted reform to active 
labour market policies included a minor measure aimed at reducing the administrative burden 
of the public employment service. A further proposed measure envisaged the outsourcing of 
employment  services  to  external  private  providers,  but  lacked  relevant  details  on  how  fees 
would be linked to performance and how wider competition would be ensured. 

No substantial measures have been taken to improve the targeting, design and evaluation of 
active  labour  market  policies,  as  advised  in  the  2011  recommendations.  The  spending  on 

18 

19 

20 

The marginal effective tax rate is the fraction of any additional employment income that is ‘taxed away’ 
by the combined effects of taxes and benefit withdrawals. 
The labour ministry calculations do not include the entitlement to activation allowance for the first six 
months  of  work,  which  is  available  for  the  long-term  unemployed,  and  the  single  parent  alimony 
provided  by  the  state  (received  by  4.6%  of  benefit  in  material  need  recipients).  For  the  maximum 
benefit in material need entitlement, the labour ministry includes the activation allowance. 
In the Slovak case, it is more appropriate to compare the OECD compulsory payment wedge indicator, 
rather than the OECD tax wedge indicator, which does not include payments to the fully funded pension 
pillar. 

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activation  programmes  is  low21  and  is  expected  to  decline  under  the  2012  state  budget. 
Cutting  the  budget  for  active  labour  market  policies  without  a  comprehensive  efficiency 
assessment  can  reduce  access  to  activation  programmes  for  the  most  vulnerable  groups. 
Active  labour  market  policy  support  is  mainly  provided  to  the  new  self-employed  and  as 
employment  incentives,  to  firms  and  jobseekers,  while  direct  job  creation  has  declined. 
Support  for  new  self-employed  persons  is  substantial22  and  the  conditionality  is  not  very 
strict,  with  more  than  half  of  the  new  self-employed  receiving  the  support.  The  Act  on 
Employment Services entitles jobseekers to support from activation programmes if they meet 
the legal criteria for almost all programmes, and the labour office caseworkers have limited 
flexibility to decide which jobseekers should participate in  individual  programmes.  Funding 
for  these  discretionary  activation  programmes,  which  includes  training,  is  limited  and  the 
2012  national  reform  programme  mentions  plans  to  increase  it  only  in  the  medium  term. 
Progress on the systematic evaluation of activation programmes is limited23 and also hindered 
by data availability issues. The 2012 national reform programme promises progress on both 
issues. 

Moreover, the impact of parenthood on female employment is very high (32.5 % vs 12 % in 
the EU in 2010) and the female employment rate is quite low (55º% in 2010). A number of 
policies could be contributing to this. Total postnatal paid leave is relatively long (36 months) 
in  Slovakia,  whereas  the  availability  of  childcare  for  smaller  children  is  very  limited24. 
Participation  in  non-parental  care  is  one  of  the  lowest  (enrolment  rates  in  formal  care  for 
children below 3 years was 3º% compared to the EU average of 29.2º% in 2008). Also, second 
earners face a relatively higher tax burden than single individuals25. 

Very  high  youth  unemployment  and  the  persistence  of  skills  mismatches  point  to  the  low 
quality and relevance of the education and training system to labour market needs. Spending 
on education was below the EU average as a share of GDP (3.59º% vs. 5.07º% in 2008) but 
above  average  as  a  share  of  total  government  spending  (11.2 %  vs  10.8 %  EU  average)  in 
2010.  The  wages  of  teachers  are  relatively  low26,  which  reduces  the  attractiveness  of  the 
teaching  profession  to  young  talent.  Teachers’  pay  was  marginally  increased  in  201127  and 
further increases in pay could be linked to improved performance and individual assessment. 

The 2012 national reform programme mentions some limited measures in general education 
in  particular,  while  reiterating  plans  for  more  substantive  measures.  Adopted  measures 
include a reduction in the administrative burden, a project aimed at sharing best practices in 
teaching,  and  expansion  of  the  compulsory  study  of  English.  The  planned  reform  of  the 
financing  of  general  education  has  not  been  adopted,  and,  while  the  2012  national  reform 
programme  reiterates  the  objective,  it  provides  only  limited  details  as  to  how  this  would 
improve the quality of education. Several projects financed by the European Social Fund have 

21 

22 

23 

24 

25 

26 

27 

It  is  below  the  EU  average  as  a  share  of  GDP  (0.15º%  vs  0.55º%  in  2009)  and  also  in  terms  of 
expenditure per participant (EURº150 vs EURº620 in 2009). 
The level of support for new self-employment depends on the region and amounts to up to about eight 
times the average total monthly labour costs (EURº5500 in 2012) over a two-year period. 
A methodology for evaluating effectiveness of active labour market policies was prepared by the labour 
ministry in December 2011. 
According to the OECD, only 3 % of children younger than 3 years of age received formal childcare in 
2008 (compared to 29.2 % in the EU). 
An  additional  allowance  is  given  to  the  principal  earner  in  respect  of  a  spouse  living  in  a  common 
household if the spouse earned no more than EUR 4 025.7 in 2009. 
In 2010, the average wage in education was 73 % of GDP per capita, one of the lowest ratios in the EU 
(data not available for all 27 Member States). 
In 2011,  the  salaries  of  teachers were  increased by  5.7 %  on  average  and  a  cap  on  teacher pay  in  the 
private sector was removed. 

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been  launched  to  help  schools  develop  their  own  curricula  and  to  support  the  professional 
development  of teachers,  but  further  investment and measures to increase quality of  teacher 
training are not specified.  

Only  limited  steps  have  been  taken  to  improve  the  low  quality  of  tertiary  education  as 
recommended in the 2011 recommendation on education. More substantive measures outlined 
in the 2011 national reform programme have not been adopted, in particular the accreditation 
reform  aimed  at  strengthening  quality  assurance,  measures  to  enhance  the  quality  of  top 
academics  and  professors,  and  the  introduction  of  a  new  differentiation  system  for 
universities.  The  2012  national  reform  programme  reiterates  these  plans  and  includes 
additional measures with the potential to improve the quality of university teachers and part-
time  study  but  without  a  detailed  timeline.  Adopted  measures  include  the  publication  of 
information  on labour  market  outcomes of  graduates by school, changes  in  the financing of 
universities related to doctorate students, and the allocation of research funds.  
Tertiary  education  attainment  has  been  increasing  from  a  low  level28.  The  number  of  new 
students  in  tertiary  education  has  risen  rapidly  and  Slovakia  is  making  good  progress29 
towards  the  tertiary  education  attainment  target.  In  contrast  to  other  EU  countries,  where 
bachelor degrees are labour-market-relevant and a cost-effective alternative to master degrees, 
only  a  small  share  of  students  in  Slovakia  enters  the  labour  market  with  just  a  bachelor 
degree30. Vocationally oriented bachelor degrees are missing in the Slovak higher education 
system.  

No  further  progress  has  been  made  to  strengthen  the  link  between  the  labour  market  and 
vocational  education  and  training.  While  the  legislative  changes  in  2009  provided  a 
framework  for  the  active  involvement  of  employers  in  the  organisation  of  vocational 
education  and  training,  the  proportion  of  work-based  learning  in  such  training  remains  low. 
Similar to the 2011 national reform programme, the current programme only states the aim of 
increasing apprenticeship-like vocational training with the greater involvement of companies 
but without providing detailed plans as to how to achieve this objective. The updated strategy 
for  lifelong  learning  was  adopted  in  October  2011  and  a  new  law  on  lifelong  learning  is 
expected to be launched in spring 2012. Although the strategy refers to incentives for the low-
skilled,  no  particular  incentives  for  employers  to  engage  low-skilled  people  in  lifelong 
learning have so far been introduced. To help identify skill levels and skills gaps, Slovakia has 
joined the OECD’s Programme for the International Assessment of Adult Competencies and 
is building a National System of Occupations classification to define occupational profiles for 
professions  on  the  labour  market.  This  project  will  be  complemented  by  the  National 
Qualifications  System  and  National  Qualifications  Framework  to  ensure  labour-market 
relevant qualification, quality and assessment standards in the overall education and training 
system. 

The share of people at risk of poverty or social exclusion was 20.6 % in 2010, below the EU 
average.  In  2011,  the  administrative  burden  for  social  benefit  payments  was  reduced  and 
entitlement  to  the  activation  allowance  was  expanded  to  participants  in  activation  works.  A 
specific  strategy  for  integration  of  the  Roma  was  adopted  in  January  2012.  However,  the 
measures proposed are not supported by adequate administrative and budget resources, which 
are essential for effective implementation. 

28 
29 
30 

In 2010, the tertiary attainment rate was 22.1 %, below the EU average (33.6 %). 
In 2009, according to OECD data, the graduation rate at tertiary level in Slovakia was 62.1 %. 
In 2009, according to OECD data, the graduation rate in Slovakia for tertiary-type B programmes was 
only 0.7 % compared to rate for tertiary-type A programmes of 61.4 %. 

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While  the  statistical  coverage  of  socially  excluded  communities  in  Slovakia  is  limited,  the 
Roma  in  particular  face  significant  barriers  to  integration  in  the  labour  market  and  the 
education system, even though they account for more than 9 % of the population. Inactivity is 
estimated to be very high and entrenched, as 80 % of adult Roma are outside work and have 
been inactive for seven years on average, according to the 2010 UNDP survey31. The Roma 
employment gap is the highest in the region, which is particularly worrying given that 13 % of 
new  labour  market  entrants  are  low-educated  Roma  and  their  share  is  likely  to  increase 
further. 

Most  Roma  receive  inadequate  education:  only  one  in  five  18–24  year-olds  has  completed 
secondary, post-secondary or vocational education. Access to pre-school education is limited 
and pre-school enrolment among Roma children is very low (18 % vs the national average of 
72 %  in  2011)32.  Moreover,  the  education  system  fosters  segregation,  e.g.  by  putting  Roma 
children  in  schools  designed  to  cater  for  the  mentally  challenged  or  in  segregated  classes33. 
Expanding  pre-school  education  by  an  additional  two  years  for  children  from  socially 
disadvantaged communities and providing more teaching assistants in compulsory education 
who speak the Romani language would help integrate them into mainstream education. 

3.4. 

Structural measures promoting growth and competitiveness 

In Slovakia, total factor productivity gains over the past decade have been among the highest 
in  the  EU.  Institutional  and  economic  reforms,  substantial  capital  inflows,  attractive  wage 
levels and direct access to the EU single market have all contributed to the productivity surge. 
Yet, as wages grew broadly at the same pace across sectors during this period, productivity 
dynamics varied widely. A sustained increase in productivity in the manufacturing sector was 
not matched by a comparable improvement in other sectors, notably services, with indicators 
also pointing to a loss in cost-competitiveness. 

Furthermore, in the medium to long term, prices and wages are expected to continue to rise 
along with further convergence. This underlines the importance of improvements in non-price 
competitiveness  as  an  adjustment  mechanism.  The  alternative  would  be  domestic  cost  and 
price adjustments. Against this background, key challenges will be to set up an institutional 
and  regulatory  framework  conducive  to  improving  the  non-price  competitiveness  of  Slovak 
businesses,  specialising  in  less  price-elastic  products  —  including  services  and  innovative 
products — and further diversification of the economy. 

Research, development and innovation policies 

The R&D intensity of the Slovak economy is one of the lowest in Europe (0.63 % in 2010) 
and  is  characterised  by  low  levels  of  both  public  and  private  R&D  investment.  Large  and 
highly  productive  multinational  companies  operating  in  Slovakia  mainly  run  their  R&D 
activities  abroad  and  interact  only  to  a  limited  extent  with  Slovak-based  research  facilities. 
Similarly,  domestic  companies,  mainly  small  and  medium-sized  enterprises,  specialise  in 
activities with a low R&D intensity and are thus also characterised by low R&D expenditure. 
The  implementation  of  the  JEREMIE  initiative  to  support  access  to  risk  capital  and  loan 
guarantees has suffered from delays, but is expected to start in 2012. As a result, innovation 

31 

32 

33 

The  report  on  the  FRA/UNDP  survey  on  Roma  (and  non-Roma)  households  living  in  areas  with 
concentrated Roma populations, published in April 2012. 
According to the World Bank survey on Access to kindergarden and pre-school among Roma in Eastern 
Europe, 2011. 
According  to  a  Roma  Education  Fund  report  ‘School  as  ghetto’  (2009),  around  60 %  of  pupils  in 
schools  designed  to  cater  for  the  mentally  challenged  and  86 %  of  pupils  in  special  classes  at  regular 
primary schools are Roma in Slovakia. 

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and  productivity  gains  continue  to  be  mainly  driven  by  the  diffusion  of  innovation  through 
capital inflows and technology imports. 

A  basic  prerequisite  for  building  innovation  capacity  in  Slovakia  remains  the  supply  of  an 
adequately skilled workforce that could invest or be employed in relevant sectors. As noted in 
the previous section on education, the quality of tertiary education in Slovakia remains low. 

As partly highlighted in the 2012 national reform programme, the governance of the research 
and innovation system is also characterised by complex rules, weak coordination between the 
responsible public authorities, lack of transparency of the procedures for allocating funds, and 
fragmentation  of  funding  over  too  many  priorities.  Introducing  transparent,  internationally 
benchmarked  and  excellence-driven  mechanisms  for  the  evaluation  of  higher  education  and 
research  institutions  and  the  allocation  of  funding  to  these  institutions  would  enhance  the 
quality  of  research  activities.  Against  this  background,  Slovakia  adopted  ‘Minerva  2.0’  in 
2011,  a  comprehensive  strategy  for  education,  research  and  the  knowledge-based  economy 
putting forward a sectoral research and innovation agenda. The strategy proposed a range of 
measures to raise the quality of higher education and research. The successful implementation 
of the strategy should support innovation capacity and could feed into the ongoing preparation 
of a strategy for investing in smart innovation during the next seven-year programming period 
of the EU Structural Funds (2014-2020). Against this background, it needs to be noted that the 
availability of broadband communication in rural areas and the overall broadband take up are 
among the lowest in the EU. 

Transport infrastructure 

The  2012  national  reform  programme  recognises  the  importance  of  improving  the  existing 
transport  infrastructure.  In  eastern  Slovakia  in  particular,  the  lack  of  adequate  transport 
infrastructure  remains  an  obstacle  to  growth  and  to  fully  reaping  the  benefit  from  the 
catching-up  process  already  evident  in  the  Bratislava  region  and  the  western  part  of  the 
country.  Between  2010  and  2011,  the  government  defined  priority  motorway  and  railway 
projects,  and  committed  additional  national  resources 
to  co-finance  EU-sponsored 
infrastructure  projects.  The  replacement  of  previously  launched  public-private  partnerships 
for motorway development with traditional state budget financing, together with the effects of 
the financial crisis, allowed significant price savings in motorway-related public procurement 
launched  in  2011.  However,  significant  difficulties  with  applications  for  EU  co-financed 
transport  projects  remain,  for  instance  high  prices,  public  procurement  issues  and 
environmental aspects. 

Slovakia  is  currently  working  on  a  long-  and  medium-term  transport  master  plan.  The 
medium-term  strategy  should  be  ready  in  2012  and  will  serve  as  a  basis  for  determining 
transport  priorities  for  the  post-2013  programming  period,  including  railway  infrastructure. 
Currently,  approximately  one  third  of  annual  transport  infrastructure  expenditure  is  on  the 
railways, while limited previous investment has resulted in significant underdevelopment of 
railway  infrastructure  on  the  European  corridors  in  comparison  with  neighbouring  Member 
States. Furthermore, the market share of the incumbent in the rail freight sector remains above 
80 % and measures to facilitate market entry would stimulate competition. The 2012 national 
reform programme acknowledges shortcomings in the development of transport infrastructure 
and stresses the intention to give priority to railway transport, although measures to achieve 
this  are  not  specified  in  detail  and  main  infrastructure  development  projects  are  aimed  at 
construction of new highways. 

Business environment 

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The  2012  national  reform  programme  expresses  an  ambitious  target  for  improving  the 
business  environment,  with  Slovakia  intended  to  rank  among  the  top  15  countries  in  the 
Doing  Business  indicator  by  2020.  However,  it  does  not  present  a  sufficiently  specified 
timeframe for the implementation of the needed reforms to ensure that this target can be met. 
As from January 2012, the electronic point of single contact became operational alongside the 
physical  contact  points.  The  administrative  fees  for  electronic  filing  were  abolished.  These 
and other changes will facilitate business activity for domestic and foreign service providers 
under the Trade Licensing Act. In addition, the time taken to start a business (based on a trade 
licence) was shortened from five to three days. Limited progress has been made in promoting 
entrepreneurship  education  and  facilitating  the  creation  of  private  limited  companies.  The 
strategy  also  risks  falling  short  of  achieving  the  targeted  25 %  reduction  in  administrative 
burden. 

In July 2010 Slovakia introduced an obligatory methodology for assessing the impacts of new 
legislative  and  non-legislative  acts  on  the  business  environment,  public  finances,  social 
affairs,  and  the  environment.  This  was  underpinned  by  steps  to  strengthen  analytical 
capacities  at  some  of  the  departments  involved.  Whereas  the  actions  undertaken  go  in  the 
right  direction,  the  regulatory  impact  assessments  are  in  practice  often  conducted  only 
formally, thus hampering their quality. The 2012 national reform programme recognises that 
the process would benefit from a further boost to the analytical capacities of the departments 
involved. 

Climate change and energy 

Slovakia is projected to fall short of reaching the Europe 2020 national target on greenhouse 
gas  emissions  in  sectors  not  covered  by  the  European  trading  scheme,  both  under  the  no-
policy change scenario and assuming implementation of the announced measures. Additional 
measures  are  therefore  required  to  meet  the  target.  The  largest  emission  reduction  potential 
exists  in  the  road  transport  sector,  where  no  progress  has  been  made  so  far.  While  energy 
intensity is still significantly above the EU average, the 2012 national reform programme does 
not  put  forward  well-specified  measures  to  tackle  energy  use  and  energy  efficiency  in  all 
sectors. Moreover, there has been little progress in diverting waste from landfill, as Slovakia 
landfills more than 80 % of its municipal waste, while recycling only 4 %. 

Electricity prices for industry have remained among the highest in the EU, driven mainly by 
the level of transmission and distribution fees (system tariffs), rather than production prices. 
The third Internal Energy Market package has not been fully implemented and barriers remain 
in  the  electricity  and  gas  markets.  Price  regulation  continues  to  exist  for  household  and 
industrial consumers. The 2012 national reform programme restates the objective from a year 
earlier to enhance transparency and improve the regulatory framework for network industries 
in  the  energy  sector,  but  no  substantial  steps  have  been  adopted  in  this  regard  and  a 
sufficiently  detailed  timeframe  has  not  been  presented.  Greater  transparency  in  the  price 
setting  mechanism  and  the  overall  regulatory  framework  would  reduce  entry  barriers  in 
network industries and be beneficial in lowering energy prices. 

3.5.  Modernisation of public administration 

As  acknowledged  in  the  2012  national  reform  programme,  recent  indicators  suggest  that 
Slovakia’s  business  environment  and  growth  potential  would  benefit  from  stronger 
institutions and a more efficient public administration. The Global Government Effectiveness 
indicator34  ranks  Slovakia  19th  among  27  EU  Member  States,  whereas  its  score  has  been 

34 

Worldwide Governance Indicators 2010. 

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21 

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sliding since 2006. In 2011, Slovakia adopted a number of measures with strong transparency-
enhancing elements envisaged in the 2011 national reform programme. However, the overall 
functioning of public administration is still impaired by  weaknesses in analytical capacities, 
policy  implementation  and  the  delivery  of  public  services,  as  well  as  in  the  area  of  internal 
governance and human resource management. This cross-cutting weakness is recognised as a 
strategic challenge in the 2012 national reform programme, which pledges to address quality 
of  public  administration  by  a  comprehensive  institutional  reform.  However,  a  detailed 
timeframe for the implementation of the measures as well as plans to institutionally underpin 
this agenda are lacking. 

Slovakia has taken several measures that have significantly enhanced the transparency of the 
judicial system, in line with 2011 recommendation on public administration and judiciary. As 
of  January  2012,  all  court  decisions  in  civil,  commercial,  and  criminal  cases  must  be  made 
available  on  the  internet.  The  meetings  of  the  Judiciary  Council  and  the  reasoning  for  its 
decisions  are  also  made  public.  The  Insolvency  Register  and  the  Commercial  Register  are 
available on the internet and electronic voice recordings of judicial proceedings are gradually 
being  introduced.  Moreover,  as  of  May  2011  the  recruitment  procedure  for  new  judges  has 
been  made  more  transparent  and  judges  are  also  subject  to  performance  assessments. 
Although  these  reforms  have  boosted  transparency,  positive  impacts  on  the  performance  of 
the judiciary are expected mainly in the long run. 

However,  the  duration  of  judicial  proceedings  remains  very  high  and  costly.  On  average,  a 
commercial dispute takes 32 procedures and 565 days, and costs 30 % of the value of claims, 
leaving  Slovakia  in  70th  position  on  the  World  Bank’s  2012  Doing  Business  indicator. 
Alternative  dispute  resolution  systems  (e.g.  out-of-court  settlements)  are  underutilised.  The 
existing  backlog  of  cases  in  courts  results  in  significant  delays,  thus  impairing  access  to 
effective  legal  recourse.  Appeals  against  the  decisions  of  the  competition  authority  are 
handled  by  various  court  panels,  which  are  often  not  used  to  dealing  with  competition  law 
cases and have limited awareness of the principles of EU competition law. This results in a 
lack of consistency in court rulings and undermines the effective enforcement of competition 
rules by the judiciary in Slovakia. 

In February 2011, Slovakia amended the Public Procurement Act to increase competition and 
transparency.  As  recommended  by  2011  recommendation  on  public  administration  and 
judiciary,  the  amendment  significantly  lowered  the  national  limits  for  under-threshold 
contracts,  which  were  often  abused.  The  use  of  electronic  auctions  in  certain  public 
procurement  procedures  is  now  obligatory.  Reforms  have  also  been  introduced  in  public 
reporting.  As  of  late  2010,  an  electronic  central  registry  of  contracts  and  invoices  has  been 
operational.  All  contracts  awarded  and  invoices  paid  by  public  administrations  at  all  levels 
must be published on the online registry to be legally valid. These measures should increase 
the transparency and control of public spending. 

A key challenge remains building the administrative capacity of procuring entities and their 
staff,  in  particular  for  drafting  terms  of  reference  and  tender  specifications.  Moreover,  the 
capacity of the Public Procurement Office remains week. The transparency of the post-award 
phase could also be enhanced by publishing online the justifications for awards and allowing 
for online tracking of procurement spending. 

The  use  of  modern  human  resource  management  methods  is  not  well  developed.  In  the 
absence  of  robust  rules  for  the  recruitment  of  new  staff,  practices  vary  greatly  across  each 
government department and body. Although complete data for the entire public administration 
are not available, existing governance indicators point to a high turnover of staff compared to 

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other EU countries. The political cycle has a strong impact on staffing decisions, in particular 
at  senior  level  but  also  at  lower  levels.  This  is  likely  to  have  a  negative  effect  on  capacity 
building  and  policy  continuity.  Similarly,  the  link  between  the  performance  assessment  of 
civil  servants  and  their  career  prospects  is  not  sufficiently  developed,  creating  adverse 
motivational  incentives.  Although  public  decision-makers  are  obliged  to  declare  existing  or 
potential conflicts of interest, the activities of lobbyists are not clearly regulated, as a 2005 bill 
addressing the issue has not been enacted to date35. 

While the availability of e-government services for enterprises is very close to the target, the 
availability  of  e-government  services  for  citizens  is  relatively  low  (45.8 %  vs  81 %  EU), 
undermining the progress towards the national e-government 2020 target. Implementation of 
the  e-government  projects  under  the  Information  Society  Operational  Programme,  the  main 
source  of  funding  for  e-government  and  financed  from  the  EU  Structural  Funds,  has  been 
delayed. In general, delays have been caused by the lack of strategy and coordination at the 
beginning of the programming period, and by subsequent difficulties in public procurement. 
Audits have revealed insufficient capacity on the part of the managing authorities in drafting 
tender specifications and defining the scope of expected works, as well as in establishing clear 
selection criteria. 

35 

The draft bill on lobbying included the obligation to establish a registry of lobbyists at central, regional 
and  local  government  level.  Registered  lobbyists  would  also  have  to  register  details  of  their 
appointments on a quarterly basis. The bill was eventually not enacted. 

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4. 

OVERVIEW TABLE  

2011 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

recommendations 

CSR 1: Rigorously implement both the 2011 budget 
as  envisaged  and  the  planned  specific  measures of  a 
permanent  nature  in  2012  and  2013,  to  reduce  the 
deficit  below  3 %  of  GDP  by  2013  in  line  with 
Council 
the 
excessive  deficit  and  ensure  adequate  progress 
towards  the  medium-term  objective.  Subject  to  this, 
safeguard  growth-enhancing  expenditure,  and  use 
available 
through 
environmental  and  property  taxes  and  by  increasing 
the efficiency of VAT collection. 

correcting 

increase 

revenue 

room 

on 

to 

CSR 2: Strengthen fiscal governance by adopting in 
2011  and  implementing  from  2012  binding  multi-
annual  expenditure  ceilings,  covering  the  central 
government  and  the  social  security  system.  In 
addition,  introduce  an  independent  Fiscal  Council 
and ensure timely publication of budgetary data at all 
levels of the government. 

CSR  3:  Enhance  the  long-term  sustainability  of 
public  finances  by  further  adjusting  the  pay-as-you-
go pillar of the pension system also by changing the 
indexation  mechanism  and 
further 
measures  with  a  view  to  raising  the  effective 
the 
retirement  age, 
pensionable  age 
Introduce 
incentives  to  ensure  the  viability  of  the  fully-funded 
pension  pillar  so  as  to  progress  towards  fiscal 
sustainability while assuring adequate pensions. 

in  particular  by 
to 

life  expectancy. 

implement 

linking 

for 

the 

labour  demand 

CSR  4:  Take  steps  to  increase  employment  and  to 
support 
low-skilled 
unemployed by reducing the tax wedge for low-paid 
workers.  In  addition,  introduce  measures  to  improve 
the  administrative  capacity  of  public  employment 
services  with  a  view  to  improving  targeting,  design 
and  evaluation  of  active  labour  market  policies, 
especially for the young and long-term unemployed. 

The  headline  deficit  in  2011  was  significantly 
reduced. 

No  action  has  been  taken  on  strengthening  tax 
compliance  and  reducing  tax  evasion  and  real 
estate and environmental taxation. 

has 

has 

been 

Slovakia 

recommendation 

partly 
The 
implemented. 
a 
constitutional law on fiscal responsibility featuring 
debt  limits  and  the  establishment  of  a  Fiscal 
Council.  Expenditure  ceilings  and  systematic 
publication  of  public  finance  data  have  not  been 
addressed so far. 

adopted 

has 

recommendation 

The 
partly 
been 
legislative  amendments 
implemented.  Several 
have  been  made  to  the  funded  pension  pillar, 
including  default  participation  for  new  labour 
market  entrants,  removal  of  guarantees  from 
portfolios that do not invest exclusively in bond or 
money market instruments, and the introduction of 
a  new 
intended 
adjustments  to  the  pay-as-you-go  pillar  have  not 
been carried out. 

index  fund.  However, 

the 

The  recommendation  has  not  been  implemented. 
No measures to reduce the tax wedge for the low-
skilled  have  been  adopted.  No  changes  to  the 
active  labour  market  policy  system  have  been 
adopted. 

CSR  5:  Speed  up  the  implementation  of  planned 
general  education,  vocational  education  and  training 
reforms  and  take  steps  to  improve  the  quality  of 
higher  education  and  its  relevance  to  market  needs. 
Develop  a 
for  both 
individuals and employers to encourage participation 
of the low-skilled in lifelong learning. 

framework  of 

incentives 

has 

been 

recommendation 

The 
partly 
implemented.  Some  measures  have  been  taken  to 
increase  the  labour  market  relevance  of  higher 
education,  but  a  more  substantial  reform  to 
improve quality has not been adopted. No changes 
in  vocational  education  and  the  training  system 
have been adopted and no concrete incentives for 
lifelong learning have been proposed. 

CSR  6:  Ensure  the  implementation  of  planned 
measures  aimed  at  a  more  effective  application  of 
public  procurement  rules,  a  higher  performance  and 
transparency of the judicial system. 

has 
to 

recommendation 

partly 
The 
implemented.  Measures 
the 
transparency of the judicial system and ensure the 
more  effective  application  of  public  procurement 
rules  have  been  adopted.  However, 
some 
challenges  remain,  in  particular  concerning  their 

been 
improve 

EN 

24 

   EN 

 
effective application. 

EN 

25 

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Euro Plus Pact (national commitments and progress) 

parametric 
demographic 

Pension sustainability: (a) in the first (pay-as-you-go) 
pillar,  the  link  to  earnings  to  be  weakened  and  an 
adjustment  mechanism 
automatic 
reflecting 
be 
introduced; (b) in the second (fully funded) pillar, the 
default  choice  for  new  labour  market  entrants  to  be 
the 
changed 
possibility  of  opting  out  of  the  system  for  a  limited 
period of time. 

to  mandatory  participation  with 

developments 

to 

fiscal 

responsibility 

Adoption  of  a  new 
law 
containing  six  main  provisions:  (a)  greater  emphasis 
on net worth of the state; (b) an upper limit on gross 
public  debt  (set  below  60 %  of  GDP);  (c)  aggregate 
nominal  expenditure  ceilings;  (d)  new  tougher  rules 
for municipalities; (e) rules for disclosure of data; (f) 
independent Fiscal Council. 

Reform  the  tax  and  social  contributions  system  by 
introducing  a  unified  broad  assessment  base  for 
social  and  health  contributions,  as  a  prerequisite  for 
unifying the collection of taxes, duties and insurance 
contributions  within  one 
revenue  agency,  and 
establish a common form for the annual filing of tax 
and social contributions returns. 

Commitments to increase the flexibility of the labour 
market: (a) reform of the labour code to put Slovakia 
among  the  top  ten  countries  with  the  most  flexible 
employment  protection  legislation  in  the  OECD;  (b) 
the stringency of rules regulating hiring and firing of 
workers with regular contracts to be relaxed, and the 
associated costs reduced; (c) firms to have an option 
to choose between a notice period and severance pay 
when  dismissing 
individual  workers,  (d)  rules 
governing  working  time  to  be  relaxed,  allowing 
greater flexibility in adapting to economic conditions 
as well as the requirements of individual workers. 

Commitments  focusing  on  tax  simplification:  (a) 
reform  of  the  tax  system  to  further  increase  its 
effectiveness and reduce the administrative burden on 
taxpayers;  (b)  a  unified  broad  assessment  base  for 
social  and  health  contributions  to be  introduced as  a 
prerequisite  for  unifying  the  collection  of  taxes, 
duties  and 
insurance  contributions  within  one 
revenue agency; (c) a common form to be established 
for  the  annual  filing  of  income  tax  and  social 
contributions returns 

at 

aimed 

Commitments  to  foster  competitiveness:  (a)  in  the 
next  12  months,  the  government  to  implement 
measures 
to 
entrepreneurship,  improving  the  predictability  of  the 
legal  environment  and  ensuring  the  wider  use  of  e-
government services; (b) the required basic capital to 
types  of 
be  substantially 
businesses,  when  setting  up  a  company,  and  the 

lowered  for  selected 

reducing 

barriers 

Only the reform of the second pillar has been 
adopted while the reform of the first pillar was 
proposed  but  not  adopted.  The  commitment 
has been only partially implemented. 

A new constitutional law has been adopted but 
does  not  fully  address  expenditure  ceilings, 
tougher  rules  on  municipalities  and  rules  for 
disclosure of public finance data. These are to 
be tackled in more detail in separate laws. The 
commitment has been partially implemented. 

The  tax  and  social  contributions  reform  has 
not  been  adopted.  The  commitment  has  not 
been implemented. 

The reform of the labour code came into force 
in  September  2011  and  includes  all  of  the 
proposed  changes.  The  reform  has  been  fully 
implemented. 

Reform  put  on  hold  after  the  fall  of  the 
government  in  October  2011.  The  reform  has 
not been introduced. 

Some  measures 
to  reduce  administrative 
burdens have been adopted and a strategy has 
been  introduced  (‘Singapur  initiative’).  The 
reforms have been partly implemented. 

EN 

26 

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licence  approval  period  for  small  businesses  to  be 
shortened;  (c)  the  requirements  to  apply  for  a 
business  licence  to  be  abolished  for  the  majority  of 
business  activities  or  transformed  into  a  notification 
requirement;  (d)  communication  between  natural 
persons  and  legal  entities  to be  eased  by  completing 
the network of single contact point offices. 

Europe 2020 (national targets and progress) 

Employment rate target (in %): 

72 % 

R&D target (in %): 

1 % 

Greenhouse gas (GHG) emissions target: 

+13 % (compared to 2005 emissions; ETS emissions 
are not covered by this national target) 

Renewable energy target: 

14 %  —  target  for  renewable  energy  sources  in 
overall final energy consumption; 

10 %  —  share  of  renewable  energy  in  the  transport 
sector by 2020  

Energy  efficiency  —  reduction  in  primary  energy 
consumption by 2020 (in Mtoe): 

1.65 Mtoe 

Early school-leaving target (in %): 

6 % 

Tertiary education target (in %): 

40 % 

Target for reducing the population at risk of poverty 
or social exclusion in number of persons: 

170 000 

Employment  grew  by  0.5 %  in  2011.  Out  of 
structural  reforms  that  could  help  to  achieve 
the  target  as  indicated  in  the  NRP,  only 
Labour  Code 
revision  was  successfully 
completed. 

Gross domestic expenditure on R&D (in % of 
GDP) 2010: 0.63 % 

Marginal progress has been made towards the 
achievement of the target. 

Change  in  non-ETS  GHG  emissions  between 
2005 and 2010: +0 % (this data corresponds to 
the current ETS scope) 

Slovakia  has  already  achieved  its  2011/2012 
interim  target.  Share  of  renewable  energy  in 
the  total  final  consumption  in  2009  (latest 
in 
Eurostat  data  available)  was  10.4 %, 
electricity  sector  —  17.8 %,  in  heating  and 
cooling — 8.5 % and in transport — 8.6 %). 

n.a. 

The  energy  efficiency  objectives  are  set 
according 
to  national  circumstances  and 
national formulations. As the methodology for 
the  2020  energy  consumption 
expressing 
impact of these objectives in the same format 
was  agreed  only  recently,  the  Commission  is 
not yet able to present an overview. 

Slovakia  is  the  top  performer  in  the  area  of 
early  leavers  from  education  and  training 
(4.7 %  in  2010)  and  is  doing  better  than  the 
EU  average  for  both  males  and  females  and 
migrants and natives. In particular, males have 
a  lower  early  leaving  rate  than  the  EU 
average.  

Despite 
the  progress  made  since  2000, 
Slovakia still has a low tertiary attainment rate 
compared to the EU average (22.1 % v. 33.6 % 
in  2010).  Over  the  past  3  years  (2007-2010), 
there  have  been  positive  developments  for 
both  males  and  females  and  migrants  and 
natives. 

Data  for  2011  not  yet  available.  A  risk  of 
poverty  or  social  exclusion  could  moderately 
increase  due  to  the  impact  of  crisis  on  most 
vulnerable and rising unemployment. 

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5. 

ANNEX 

Table I. Macroeconomic developments 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2008

2009

2010

2011

2012

2013

4.3
-0.4
7.2
6.2
13.1
31.1
24.8

-6.5
33.8
12.7
42.6
49.0
2.6

3.9
-2.6
7.8
3.7
18.5
26.1
21.1

-6.4
45.3
-6.9
37.5
43.9
3.3

7.8
3.8
3.2
6.8
12.6
26.0
20.9

-2.5
30.5
-6.9
33.4
35.9
1.5

-4.9
-1.6
0.9
-7.0
12.0
20.7
16.3

-8.0
35.6
-17.7
33.5
41.5
1.4

4.2
-0.8
0.7
4.1
14.4
22.2
19.8

-7.7
41.1
-25.2
32.4
40.0
1.3

3.3
-0.5
4.1
-1.5
13.5
22.4
21.9

-4.8
43.3
n.a
32.6
37.4
1.6

1.8
-1.4
2.9
1.4
13.2
22.7
22.5

-4.7
49.7
n.a
33.0
37.7
1.9

2.9
-1.1
1.9
2.3
12.7
23.3
23.1

-4.9
53.5
n.a
32.5
37.3
2.0

-4.2

0.4

-2.8

5.0

3.3

4.0

3.3

3.3

n.a
n.a
15.9
26.3

n.a
n.a
15.0
26.0

-42.4
3.9
15.9
25.9

-46.0
2.8
12.1
24.6

-53.9
-1.3
20.5
27.5

-51.5
-10.4
18.3
24.9

-57.9
-10.9
22.5
25.9

3.3
n.a
30.9
2.1
18.3
7.1

0.4
11.2
32.1
1.8
18.7
5.2

-1.5
17.3
30.9
1.3
16.0
3.9

-0.6
38.8
31.4
3.3
16.9
5.2

4.5
49.4
32.6
5.3
16.9
7.4

3.1
13.8
31.3
2.0
19.0
7.4

Net financial assets, non-financial corporations
Net financial assets, financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non-tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3 Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

-6.5
30.1
-4.5
-2.0
-0.5
53.4
36.4
6.1
105.1
98.9
108.5

-6.8
44.8
-3.0
-2.8
0.4
54.0
36.0
7.5
137.0
96.2
132.0

-2.7
49.7
-0.8
-1.6
0.8
49.3
41.6
8.9
168.1
93.3
133.9

1.6
n.a
2.7
-2.0
1.4
n.a
n.a
n.a
158.0
91.2
148.8

-2.0
49.8
-1.3
-1.4
1.6
51.9
39.0
8.7
163.1
92.7
139.9

1.3
n.a
2.6
-1.9
1.2
53.0
37.7
8.5
160.6
91.5
147.0

-6.2
6.7
-6.7
0.2
-0.3
55.7
34.2
6.0
92.3
99.0
96.6

3.2
n.a
30.2
2.0
18.0
7.1

n.a
n.a
16.5
26.8

3.5
n.a
29.6
1.9
18.0
7.2

1.6
n.a
3.2
-2.5
1.4
n.a
n.a
n.a
156.5
91.2
150.7

Source :
Commission spring 2012 forecast

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Table II. Comparison of macro-economic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2011
COM SP
3.3
-0.4
5.7
10.8
4.5

3.3
-0.4
5.7
10.8
4.5

2012
COM SP
1.1
0.0
1.6
2.2
0.7

1.8
0.2
3.2
3.1
2.7

2013
COM SP
2.7
0.7
2.1
8.2
7.8

2.9
1.6
4.8
6.1
5.5

0.4
-1.9
5.1
-0.5
1.8
13.5
1.5
4.1
1.6
0.9
1.3

0.5
-2.0
5.5
-0.4
1.8
13.5
2.1
n.a.
1.7
0.9
1.3

1.1
0.3
0.4
-1.4
0.5
13.2
1.4
2.9
2.0
2.3
1.6

0.0
-0.2
1.4
-1.9
-0.2
13.8
1.3
n.a.
2.1
3.4
1.3

2.2
0.0
0.6
-1.1
0.7
12.7
2.2
1.9
2.1
2.6
1.6

0.1
1.0
1.1
-1.9
0.3
13.7
2.5
n.a.
2.1
4.3
1.3

2014
SP
3.6
2.9
1.9
5.9
5.2

2.1
0.1
1.2
-0.9
0.5
13.5
3.1
n.a.
2.2
4.7
1.9

2015
SP
3.7
3.9
2.9
5.3
4.7

2.4
0.0
1.1
0.2
0.8
13.2
2.9
n.a.
2.3
5.6
2.3

Note:
1In per cent of potential GDP, with potential GDP growth according to the programme as recalculated by the Commission.

Source :
Commission spring 2012 forecasts (COM); Stability programme (SP).

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Table III. Composition of the budgetary adjustment 

EN 

30 

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(% of GDP)

2011

2012

2013

2014

2015

Change: 
2011-2015

Revenue8
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure8
of which:
- Primary expenditure

of which:

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically adjusted balance2
Structural balance3
Change in structural balance
Structural primary balance3
Change in structural primary balance
Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % of GDP 
from applicable reference rate
Two-year average deviation in % of GDP 
 from  applicable reference rate

COM

COM

32.6

33.0

10.4
5.6
12.5
4.0

37.4

10.5
5.6
12.3
4.6

37.7

SP

33.3

10.3
5.9
11.9
5.2

37.9

COM

32.5

10.4
5.5
12.1
4.4

37.3

SP

32.7

9.8
5.8
11.8
5.3

37.1

SP

31.7

9.7
5.9
11.6
4.5

35.9

SP

31.2

9.6
6.0
11.5
4.1

34.8

35.8

35.8

36.2

35.3

35.2

33.8

32.7

7.1
4.3
18.5
1.2
2.3
2.4
1.6
-4.8
-3.2
0.4
-5.3

-0.5

-4.7

-5.1

-3.5

7.0
4.3
18.4
1.3
2.1
2.8
1.9
-4.7
-2.8
0.1
-4.8

-1.4

-4.3

-4.4
0.7

-2.5
1.0

2.81

3.19

1.84
0.34

6.6
4.6
18.3
1.3
1.9
3.5
1.7
-4.6
-2.9
0.1
-4.7

-1.9

-4.0

-4.1
1.0

-2.4
1.1

0.39

3.19

1.84
-0.50

6.8
4.3
18.3
1.1
2.1
2.7
2.0
-4.9
-2.9
0.0
-4.9

-1.1

-4.6

-4.6
-0.2

-2.5
0.0

1.38

3.19

1.84
-0.16

6.4
4.2
18.1
1.1
1.6
3.7
1.9
-2.9
-2.5
0.0
-2.9

-1.9

-2.3

-2.3
1.8

-0.4
2.0

0.10

3.19

1.84
-0.58

6.1
4.2
18.0
1.0
1.5
3.1
2.1
-2.3
-2.1
0.0
-2.3

-0.9

-2.0

-2.0
0.3

0.1
0.5

5.8
3.9
17.7
1.0
1.2
3.0
2.1
-1.7
-1.5
0.0
-1.7

0.2

-1.8

-1.8
0.3

0.3
0.3

0.62

3.19

1.84
-0.40

1.27

3.19

1.84
-0.18

n.a.

n.a.

0.09

-0.54

-0.49

-0.29

SP

-1.4

-0.8
0.4
-1.0
0.1

-2.6

-3.1

-1.3
-0.4
-0.8
-0.2
-1.1
0.6
0.5
3.1
1.7
-0.4
3.6

0.8

2.9

3.3

3.9

-

-

-
-

-

Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically adjusted balance according to the programme as recalculated by the Commission on the 
basis of the information in the programme.
3Structural (primary) balance = cyclically adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit 
and of discretionary measures.
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have 
also been applied to the years 2014 onwards.
6The (standard) reference rate applies starting in the year following the one in which the country reached its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.
8The revenue and expenditure figures are based on the General Government Budget Framework for 2013-2015, which assumes some 
expenditure-reducing measures (i.e. a freeze of the wages for most employees financed from the central government budget, earmarking 10% of 
expenditure on goods and services, and lower growth local governments' spending) for 2013-2015. These measures, however, do not ensure 
achievement of the general government balance targets presented in this table.

Source :
Stability programme (SP); Commission spring 2012 forecasts (COM); Commission calculations.

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Table IV. Debt dynamics 

Average 
2006-10

32.9
1.4

3.2
-0.4

1.4
-1.4
-0.4
-1.4

2011

43.3
2.2

3.2
-0.4

1.6
-1.3
-0.6
-0.6

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance
2. ‘S nowball’ effect

Of which:
Interest expenditure
Growth effect
Inflation effect

3. S tock-flow adjustment

Of which:
Cash/accruals diff.
Accum. financial assets

Privatisation

Val. & residual effect

2012

2013

COM

53.5
3.8

2.9
-0.3

2.0
-1.4
-1.0
1.3

COM

49.7
6.4

2.8
0.3

1.9
-0.8
-0.8
3.3

SP

50.2
6.9

2.9
0.3

1.7
-0.5
-0.9
3.7

0.2
1.1
0.0
0.0

2014
SP

53.0
1.0

2015
SP

52.3
-0.7

2.1
-0.8

2.1
-1.8
-1.1
-0.3

0.1
1.3
0.0
0.0

1.5
-0.9

2.1
-1.8
-1.2
-1.3

0.4
0.3
0.0
0.0

SP

52.0
1.8

2.5
-0.3

2.0
-1.3
-1.0
-0.4

0.3
0.6
0.0
0.0

(% of GDP)

2011

2012

2013

2014

2015

COM/SP3

SP4

COM/SP3

SP4

SP4

SP4

Gap to the debt benchmark5, 6

S tructural adjustment7

To be compared to:
Required adjustment8

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Notes:
1End of period.
2The snowball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth 
and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual 
accounting, the accumulation of financial assets and valuation and other residual effects. 

3Assessment of the consolidation path set in the SP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the SP assuming growth follows the SP projections.
5Not relevant during the excessive deficit procedures that were ongoing in November 2011 and in the three years following the 
correction of the excessive deficit.

6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, the projected gross debt-to-GDP 
ratio does not comply with the debt reduction benchmark.

7Applicable only during the transition period of three years from the correction of the excessive deficit for excessive deficit 
procedure that were ongoing in November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State 
will comply with the debt reduction benchmark at the end of the transition period, assuming that the COM  (SP) budgetary 
projections are achieved.

Source :
Stability programme (SP); Commission spring 2012 forecasts (COM); Commission calculations.

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Table V. Long-term sustainability indicators 

SK

No-policy 
change 
scenario 

Stability 
programme 
scenario

No-policy 
change 
scenario 

EU

SCPs 
scenario

S2
of which:

Initial budgetary position (IBP)
Long-term change in the primary balance (LTC)
 of which:

pensions
health care and long-term care
other

S1 (required adjustment)*

8.6

3.5
5.1

3.5
1.7
-0.1
4.4

5.9

0.9
4.9

3.4
1.6
-0.1
0.6

2.9

0.7
2.3

1.1
1.5
-0.3
2.2

Debt, % of GDP (2011)
Age-related expenditure, % of GDP (2011)

43.3
17.7

82.8
25.8

0.7

-1.6
2.4

1.2
1.5
-0.3
-0.1

Source: Commission, 2012 stability and convergence programmes.  

Note:  The  ‘no  policy  change’  scenario  depicts  the  sustainability  gap  under  the  assumption  that  the  budgetary 
position evolves according to the spring 2012 forecast until 2013. The ‘stability programme’ scenario depicts the 
sustainability gap under the assumption that the budgetary plans in the programme are fully implemented. 
* The required adjustment of the primary balance until 2020 to reach a public debt of 60 % of GDP by 2030. 

Graph I. Medium-term debt projection 

(% of GDP)
80

Gross debt as % of GDP - SK - Medium-term debt projections

70

60

50

40

30

20

10

0

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

COM no policy change scenario
COM + Shock ( -1pp in the short-term/long-term interest rate on maturing and new debt from 2014)
COM + Shock (+1pp in the short-term/long-term interest rate on maturing and new debt from 2014)
COM consolidation scenario (0.5% per year on SB) in order to achieve MTO
COM consolidation scenario (1% per year on SB) in order to achieve MTO
SP scenario

Source: Commission, 2012 stability and convergence programmes.  

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Table VI. Taxation 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

2001

33.1

2005

31.3

2007

29.3

2008

29.2

2009

28.8

2010

28.1

1
Breakdown by economic function (% of GDP)
     Consumption

              of which:

              - VAT

             - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes 2
3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

11.0

12.3

11.2

10.5

10.3

10.1

7.2

1.0

1.7

1.0

7.9

1.5

2.1

0.8

6.7

1.7

1.8

0.9

6.9

0.9

1.8

0.9

6.7

1.1

1.7

0.8

6.3

0.4

2.5

0.8

14.7

12.2

11.3

12.1

12.1

12.2

0.3

6.3

0.8

2.0

0.0

6.0

0.7

2.4

0.0

6.3

0.6

2.1

0.0

6.1

0.6

2.0

0.0

5.7

0.6

1.9

0.0

5.1

0.6

2.7

44.2

61.0

53.4

53.6

47.6

46.7

Note: 
1 T ax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), 

T axation trends in the European Union, for a more detailed explanation.

2 T his category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 T he VAT  efficiency is measured via the VAT  revenue ratio. T he VAT  revenue ratio is defined as the ratio between the actual VAT  revenue collected and the revenue 

that would theoretically be raised if VAT  was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large 

exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See 

European Commission (2011), T ax reforms in EU Member States, European Economy 5/2011, for a more detailed explanation.

Source: Commission

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Table VII. Financial market indicators 

2007

2008

2009

2010

2011

82.9
…
…

5.7
12.9
14.2
9.3
13.7
90.3
2.9
…
49.9

88.2
72.0
…

89.4
72.1
96.1

101.6
71.6
92.8

106.0
68.2
0.0

2.5
12.8
16.6
24.7
30.3
81.9
0.0
…
47.8

2.5
11.1
16.3
16.7
26.1
81.5
0.0
…
47.3

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans) 1)
              - capital adequacy ratio (%) 1), 2)
              - return on equity (%) 1), 3)
Bank loans to the private sector (year-on-year % change)
Lending for house purchase (year-on-year % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries receiving official financial assistance  (% of GDP)4)
Private debt (% of GDP)
Gross external debt (% of GDP) 4)
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) Latest available September 2011.
2) The capital adequacy ratio is defined as total capital divided by risk weighted assets.   
3) Net income to equity ratio. Excludes foreign branches.
4) Latest data 2011Q3.
* M easured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

5.3
12.6
7.6
1.1
10.9
87.0
4.3
…
48.8

5.8
12.7
12.6
5.3
14.8
86.8
2.1
…
48.9

12.1
26.5
148.3
106.9

14.8
27.4
112.8
77.8

11.9
27.7
73.9
145.5

11.7
25.9
27.4
…

16.1
26.2
183.9
134.9

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Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)
Long-term unemployment2  (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)

2006

2007

2008

2009

2010

2011

66.0

67.2

68.8

66.4

64.6

65.1

3.9

2.4

3.2

-2.8

-2.1

1.5

57.5

58.7

60.3

58.2

57.4

57.6

74.6

76.0

77.4

74.6

71.9

72.7

33.1

35.6

39.2

39.5

40.5

41.4

2.8

4.7

1.3

5.1

13.4

10.2

26.6

2.6

4.5

1.1

5.1

11.1

8.3

20.3

2.7

4.2

1.4

4.7

9.5

6.6

19.0

3.6

4.7

2.7

4.4

12.0

6.5

27.3

4.0

5.4

2.8

5.8

14.4

9.2

33.6

Youth NEET3 rate (% of population aged 15-24)

14.4

12.5

11.1

12.5

14.1

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not 
in further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed 
(annual % change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

6.6

6.5

6.0

4.9

4.7

16.6

17.5

18.4

20.6

24.0

6.1

0.3

5.8

4.8

1.7

8.2

0.9

7.2

7.5

0.5

2.4

0.1

2.3

4.0

4.4

1.5

-3.0

-0.7

-2.3

4.9

6.9

8.2

5.8

1.5

4.2

3.9

-1.3

-1.8

Real unit labour cost growth (annual % change)

-1.2

-0.6

Notes:

4.2

5.9

2.8

6.6

13.5

9.2

33.2

:

:

:

1.5

-0.8

2.4

-0.7

-0.6

-2.2

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

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Table VIII. Labour market and social indicators (continued) 

Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

4.75
1.31
6.21
1.67
0.55
0.00
16.5
0.88

4.74
1.34
6.05
1.65
0.53
0.00
16.3
1.02

4.74
1.31
5.90
1.55
0.56
0.00
16.0
0.95

5.06
1.40
5.76
1.48
0.60
0.00
16.0
0.76

5.72
1.72
6.73
1.69
1.04
0.00
18.8
0.89

2006

2007

2008

2009

2010

27.1

21.5

20.6

19.6

20.6

30.3

25.7

24.3

23.7

25.3

27.1

11.6

23.1

10.6

21.9

10.9

19.7

11.0

16.7

12.0

2772

3365

4058

4711

4983

18.2

13.7

11.8

11.1

11.4

6.2

6.3

6.5

4.9

5.2

5.8

5.6

5.2

7.9

5.7

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

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Table IX. Product market performance and policy indicators 

Performance indicators

2002-
2006

2007

2008

2009

2010

2011

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, water 
(annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

Policy indicators

Enforcing contracts 3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

4.9

8.3

13.0

14.5

2.9

5.6

-2.5

5.6

3.0

-12.9

6.3

n.a.

22.2

-12.3

-2.7

-1.0

n.a.

n.a.

3.5

0.4

2002-
2006

n.a.

n.a.
0.5

6.6

0.3

10.6

-9.5

1.9

n.a.

0.2

n.a.

n.a.

n.a.

2007

2008

2009

2010

2011

565

27
0.5

565

18
0.5

565

18
0.5

565

18
0.6

12.7

14.8

15.8

17.6

22.1

565

18
n.a.

n.a.

4.1

3.6

3.6

n.a.

n.a.

n.a.

2005

2006

2008

2009

2010

2011

n.a.

n.a.

n.a.

n.a.

1.6

0.8

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

2.3

2.2

2.0*

n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Patent data refer to applications to the European Patent Office (EPO). They are counted according to the year in which 
they were filed at the EPO. They are broken down according to the inventor's place of residence, using fractional counting if 
multiple inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies for the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.

5 Aggregate ET CR.

*figure for 2007.

Source :

Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

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Table X. Indicators on green growth 

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39 

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Slovakia

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2001-
2005

0.75
2.01
2.55
n.a.
-5.3%
16
8.08
16.5%
7.1%

0.62

15.4
n.a.
n.a.
n.a.
9.6%
n.a.
0.83
1.98
-4.5%

64.9%
n.a.
0.25
3.9%

2006

2007

2008

2009

2010

0.62
1.64
2.46
0.48
-6.4%
19
10.6
19.7%
7.8%

0.38

17.5
0.08
0.01%
0.01%
3.8%
51.2%
0.78
1.99
-5.7%

63.9%
1.00
0.24
4.4%

0.53
1.43
2.16
0.39
-5.0%
18
0.7
18.3%
7.2%

0.31

16.6
0.09
0.01%
0.01%
13.2%
51.3%
0.65
1.72
-10.6%

68.4%
1.00
0.22
5.4%

0.52
1.36
2.35
0.32
-6.0%
17
0.2
16.5%
7.0%

0.27

15.1
0.12
0.01%
0.01%
15.8%
52.6%
0.63
1.55
-7.6%

64.6%
1.00
0.23
5.4%

0.50
1.29
2.17
n.a.
-4.4%
16
2.7
15.5%
6.8%

0.28

13.3
0.14
0.01%
0.01%
14.6%
49.8%
0.59
1.53
n.a.

66.4%
1.00
0.22
7.2%

0.51
n.a.
n.a.
n.a.
-5.8%
16
-4
n.a.
n.a.

n.a.

n.a.
0.12
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers
Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

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