COMMISSION STAFF WORKING DOCUMENTAssessment of the 2013 national reform programme and stability programme forSLOVAKIAAccompanying the documentRecommendation for a COUNCIL RECOMMENDATIONon Slovakia’s 2013 national reform programme and delivering a Council Opinion onSlovakia’s stability programme for 2012-2016
Date: 2013-05-29
Institutions: European Commission
Subjects: Slovakia, administrative reform, administrative transparency, economic recession, free competition, labour market, price of energy, public debt, tax reform, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 375 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and stability programme for 
SLOVAKIA 

Accompanying the document 

Recommendation for a COUNCIL RECOMMENDATION  

on Slovakia’s 2013 national reform programme and delivering a Council Opinion on 
Slovakia’s stability programme for 2012-2016 

{COM(2013) 375 final}

EN 

   EN 

 
 
 
 
 
  
 
 
 
 
 
CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 5 

Economic developments and challenges...................................................................... 6 

Recent economic developments and outlook............................................................... 6 

Challenges .................................................................................................................... 7 

Assessment of policy agenda ....................................................................................... 9 

Fiscal policy and taxation............................................................................................. 9 

Financial sector .......................................................................................................... 20 

Labour market, education and social policies ............................................................ 21 

Structural measures promoting growth and competitiveness..................................... 25 

Modernisation of public administration ..................................................................... 29 

Overview table ........................................................................................................... 32 

Annex ......................................................................................................................... 35 

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EXECUTIVE SUMMARY 

Economic Outlook 

After holding up well in 2012, the global downturn started to take its toll on the Slovak 
economy  in  2013.  After  experiencing  one  of  the  strongest  post-crisis  recoveries  in  the  EU, 
growth slowed to 2% in 2012, held up by net exports. According to the Commission's spring 
2013  forecast,  GDP  is  expected  to  decelerate  to  1%  in  2013  before  rebounding  to  2.8%  in 
2014. The situation in the labour market is not set to improve, however, with unemployment 
expected to stay above 14% in 2013 and 2014. Inflation, which rose to 3.7% in 2012, is set to 
stabilise at close to 2% in 2013 and 2014, mainly on the back of lower domestic demand. 

Slovakia's  general  government  deficit  is  projected  to  improve,  while  the  public  debt 
remains on the rise. According to the Commission's forecast, the deficit is forecast to decline 
to 3% of GDP in 2013 from 4.3% of GDP in 2012. In 2014, the deficit would increase slightly 
to  3.1  %  of  GDP  despite  a  pick-up  in  economic  activity.  The  structural  budget  deficit  is 
projected to fall from 4.1% of GDP in 2012 to 3% in 2013 and 2.4% in 2014. In 2010-2013 
the  adjusted  annual  average  fiscal  effort  is  estimated  to  have  reached  1.4%  of  GDP  a  year 
(above the 1% of GDP recommended under the EDP). Slovakia confirmed its medium-term 
objective  at  -0.5%  of  GDP  in  structural  terms.  The  government  debt  is  forecast  to  remain 
below the 60% reference value, reaching 54.6% in 2013 and 56.7% in 2014. 

Key Issues 

Slovakia  is  at  a  crossroads.  For  well  over  a decade,  its  growth  rates  were  amongst  the 
highest in the EU and it experienced one of the speediest recoveries from the financial 
crisis.  But  with  real  GDP  growth  rate  expected  to  remain  below  the  pre-crisis  levels  and 
persistently high unemployment, it must strengthen domestic production and diversify sources 
of  growth,  whilst  building  on  progress  made  in  terms  of  structural  reforms  and  public 
finances. 

In the last year, Slovakia has made progress on fiscal and structural policies. The budget 
deficit is on a downward path after the adoption of a sizeable consolidation package.  There 
was  a  major  pension  reform  to  increase  the  statutory  retirement  age  in  line  with  life 
expectancy.  An  action  plan  to  combat  tax  fraud  was  also  adopted.  Reforms  to  boost 
employment and growth have been launched but remain at an initial stage, particularly those 
that  tackle  public  administration  reform,  vocational  education  and  public  employment 
services. 

Despite the progress made, more needs to be done in the medium to long term to bolster 
growth  potential  and  ensure  that  public  finances  are  sustainably  managed.  Further 
progress  is  needed  on  labour  market,  energy  and  public  administration.  The  efficient  use  of 
EU  structural  funds  will  be  crucial  in  financing  key  reforms  to  increase  growth  potential  in 
many areas. 

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•  Public  finances:  Considerable  progress  was  made  in  recent  years  in  terms  of  fiscal 
consolidation,  though  some  measures  are  temporary  or  one-off  and  will  need  to  be 
replaced.  Much  can  be  gained  by  broadening  the  tax  base,  improving  tax  collection 
and making expenditure more efficient, especially healthcare expenditure. Despite the 
positive  effects  of  the  recently  adopted  pension  reform,  there  is  still  a  gap  between 
revenue and future age-related spending. Building on the recent adoption of an action 
plan to reduce tax fraud, efforts need to continue in this area and be underpinned by a 
comprehensive  tax  compliance  strategy  going  beyond  VAT.  An  expenditure  review 
could  reduce  inefficiencies  and  reallocate  spending  to  areas  with  greater  growth 
potential.  

•  Labour market: The steep increase in unemployment in the wake of the crisis (14% 
in 2012) requires action to strengthen education and ensure that unemployed people – 
especially young unemployed people (34% in 2012) – are helped back to work. Long-
term  unemployment  is  amongst  the  highest  in  the  EU  at  9.4%  of  the  labour  force, 
while employment rates for low-skilled workers are among the lowest. Despite some 
recent  improvements  in  the  design  of  the  Slovak  tax  and  benefits  system,  the  tax 
wedge  for  the  unemployed  taking  up  a  low-paid  job  remains  large.  The  shortage  of 
good  quality,  affordable  early  childhood  education  and  care  is  an  obstacle  to  female 
participation in the labour market (which stood at 57.3% in 2012). The integration of 
the Roma population into the labour market is very limited (the Roma unemployment 
rate is between 2 and 8 times higher than the non-Roma unemployment rate) and the 
participation  of  Roma  children  in  early  childhood  education  and  care  is  very  low 
(77.5% compared to an EU average of 92.5%). 

•  Public administration: Several measures were adopted to make public procurement 
and  the  judiciary  more  transparent.  Nevertheless,  experience  with  implementing  EU 
structural  funds  suggests  that  there  are  still  problems  in  this  area.  Weaknesses  also 
persist  in  the  functioning  of  public  institutions,  law  enforcement  and  the  business 
environment. Better use could be made of EU funds available to finance educational 
reforms and improve the quality of the science and technological base.  

•  Energy:  Effective  competition  and  the  transparency  of  price-setting  mechanisms  in 
regulated  industries  could  be  improved,  notably  in  the  energy  sector,  where 
consumers’  switching  rates  are  low  and  unregulated  electricity  prices  for  medium-
sized industrial consumers were the fifth highest in the EU in 2011. This is cause for 
concern given the high energy intensity of the economy.  

4 

 
 
 
 
 
 
1.  INTRODUCTION 

In May 2012, the Commission proposed a set of country-specific recommendations (CSRs) on 
economic and structural reform policies for Slovakia. On the basis of these recommendations, 
the  Council  of  the  European  Union  adopted  seven  CSRs  in  the  form  of  a  Council 
Recommendation.  These  CSRs  concerned  public  finances,  taxation,  the  labour  market, 
education,  vulnerable  groups  and  public  administration.  This  Staff  Working  Document 
(SWD) assesses the state of implementation of these recommendations. 

The SWD assesses policy measures in light of the findings of the Commission’s 2013 Annual 
Growth Survey (AGS)1 and the second annual Alert Mechanism Report (AMR)2, which were 
published in November 2012. The AGS sets out the Commission’s proposals for building the 
necessary  common  understanding  about  the  priorities  for  action  at  national  and  EU  level  in 
2013.  It  identifies  five  priorities  to  guide  Member  States  towards  renewed  growth: 
implementing  differentiated,  growth-friendly  fiscal  consolidation  policies;  restoring  normal 
lending  to  the  economy;  promoting  growth  and  competitiveness  for  today  and  tomorrow; 
tackling  unemployment  and  the  social  consequences  of  the  crisis;  and  modernising  public 
administration. The AMR was used to determine whether macroeconomic imbalances exist or 
risked emerging in Member States. It found positive signs that macroeconomic imbalances in 
Europe were being corrected. To ensure that a complete and durable rebalancing is achieved, 
14 Member States were selected for a review of developments in accumulating and unwinding 
imbalances.3 

Against  the  background  of  the  2012  Council  Recommendation,  the  AGS  and  the  AMR, 
Slovakia  presented  updates  of  its  national  reform  programme  on  24  April  2013  and  of  its 
stability  programme  on  30  April  2013.  These  programmes  provide  detailed  information  on 
progress made since July 2012 and on the government’s future plans. They also provide the 
basis for the assessment in this SWD. 

The  programmes  submitted  were  the  subject  of  a  consultation  process,  which  was  publicly 
accessible.  The  preparation  of  the  national  reform  programme  involved  the  Council  for 
Solidarity and Development, which encompasses a broad range of stakeholders. The stability 
programme  is  sent  for  information  to  the  Parliament,  while  the  economic  parliamentary 
committee discusses the national reform programme. 

Overall assessment 

The analysis in this SWD leads to the conclusion that Slovakia has made some progress on 
measures taken to address the CSRs of the Council Recommendation.  

1 COM(2012) 750 final. 
2 COM(2012) 751 final. 
3 The conclusions of these reviews were published on 10 April 2013. See COM(2013) 199 final. 

5 

 
 
 
                                                 
Regarding fiscal consolidation, taxation and the long-term sustainability of public finances, a 
sizeable consolidation package, an action plan to combat tax fraud and an important reform to 
reduce the long-term financing gap of the pension system have been adopted during the last 
12 months. 

Progress  has  also  been  achieved  in  implementing  the  CSRs  on  labour  market  policies, 
education  and  the  public  administration.  The  youth  action  plan  has  been  launched, 
amendments  to  the  acts  on  vocational  education  and  training  (VET)  and  higher  education 
(HE) have been adopted in 2012 and a reform of public administration was recently launched. 
Only limited progress has been made on implementing the 2012 CSR on marginalised Roma 
communities. 

Despite  the  progress  made,  more  needs  to  be  done  in  all  of  these  areas  and  the  challenges 
identified in July 2012 remain. In the short term, the main challenge is to ensure that the fiscal 
consolidation strategy is sustainable while implementing measures for a return to growth and 
job  creation,  in  particular  by  improving  public  administration,  public  employment  services 
and  the  capacity  to  efficiently  use  EU  funds.  In  the  medium  term,  continuing  efforts  to 
improve  the  quality  of  education,  institutions  and  the  business  and  regulatory  environment 
and to improve tax compliance and broaden the tax base will be instrumental in fostering and 
sustaining economic and employment growth. 

Slovakia’s policy agenda is relevant and addresses most of challenges identified in last year’s 
Staff Working Document. The two documents are fully aligned with each other. The national 
reform programme reiterates the commitments made by the authorities to tackle the problems 
in the labour market and to improve the education system and the business environment, with 
a  special  focus  on  public  administration.  In  the  stability  programme,  Slovakia  confirms  its 
commitment  to  meeting  the  requirements  under the  Excessive  Deficit  Procedure,  improving 
tax  collection  and  continuing  consolidation  over  the  programme  period  so  as  to  converge 
towards  the  medium-term  objective  in  line  with  the  Stability  and  Growth  Pact.  Sometimes, 
however, the measures planned do not address the challenges in a comprehensive way. 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

After holding up well in 2012, in early 2013 the Slovak economy started to feel the toll of 
the protracted global economic uncertainty and a weaker external environment. Having 
experienced  one  of  the  strongest  post-crisis  recoveries  in  the  EU,  the  Slovak  economy 
maintained  momentum  in  2012,  with  real  GDP  growing  by  2 %. The situation in the labour 
market,  however,  did  not  improve.  The  unemployment  rate  increased  to  14 %,  partly 
reflecting  GDP  growth  below  the  level  historically  associated  with  falling  unemployment. 
Economic  growth  was  entirely  driven  by  net  exports,  boosted  by  a  major  increase  in 
production in the automotive industry. Import growth remained subdued as domestic demand 

6 

 
 
contracted. Private consumption and household real disposable income continued to decline in 
real terms. After a spike in 2011, investment also dropped. Production declined by around 10 
percentage  points  (pps)  in  the  construction  sector,  with  companies  putting  investment 
decisions on hold because of the uncertain economic outlook. 

Economic outlook 

According to the Commission’s 2013 spring forecast, economic activity will remain weak 
in 2013 but should pick up in 2014. With no further expansion of car production planned for 
2013, export growth is expected to decelerate in  the first half of the year yet to continue to 
support growth in 2013 as a whole. After a negative contribution to real GDP growth in 2012, 
domestic  demand  is  expected  to  remain  subdued  in  2013  and  to  contribute  significantly  to 
growth only in 2014. GDP growth is hence forecast to decelerate to 1 % in 2013, and there are 
downside  risks  given  weak  external  demand  and  the  reliance  of  the  economy  on  a  few 
cyclically-sensitive sectors. With external demand expected to pick up in the second half of 
the  year,  consumer  confidence  and  domestic  demand  growth  are  forecast  to  gradually 
strengthen in 2014, underpinning a rebound in GDP growth to 2.8 %. This scenario builds on 
the assumption that the relatively high profitability of Slovak corporates and the growing size 
of manufacturing clusters will help attract fresh investment. 

The  unemployment  rate  is  set  to  remain  above  14 %  up  to  the  forecast  horizon,  some 
4 pps  above  its  pre-crisis  level.  With  a  large  and  increasing  pool  of  resources  sitting  idle, 
household real disposable income is expected to stagnate in 2013. Households are nonetheless 
expected  to  offset  a  further  drop  in  consumption  by  drawing  on  their  savings.  In  line  with 
developments  in  the  labour  market,  unit  labour  cost  growth  is  expected  to  remain  low. 
Inflation is therefore set to stabilise at close to 2 % due to low domestic demand pressures and 
imported inflation, as well as the fading out of base effects from previous price shocks. 

The macroeconomic scenario underlying the SP and NRP is plausible. It projects a pick-
up  in  economic  activity  from  1.2 %  in  2013  to  2.9 %  in  2014.  This  is  comparable  with  the 
Commission’s  spring  forecast,  which  projects  real  GDP  growth  of  1.0 %  and  2.8 %  in 
respective  years.  While  the  two  forecasts  differ  in  terms  of  composition  of  growth  in  2013 
(i.e. the Commission forecast projects a larger contribution from net exports), both expect a 
balanced  contribution  of  domestic  demand  and  net  exports  to  growth  in  2014.  The 
macroeconomic  scenario  of  the  SP/NRP  does  not  include  estimates  of  the  macroeconomic 
impact of structural reforms. 

2.2. 

Challenges 

Slovakia continues to face significant structural challenges and challenges with regard to 
public finances. The overriding challenge is to strengthen its domestic production base and 
progressively  diversify  sources  of  growth,  whilst  consolidating  the  progress  made  so  far  on 
structural  reforms  and  public  finances.  This  challenge,  highlighted  in  the  2012  SWD  for 
Slovakia, remains critical.   

7 

 
 
The  public  finance  situation  has  improved  but  there  are  still  concerns  about  the 
sustainability  of  the  adjustment  in  the  medium  term.  Some  of  the  measures  adopted  to 
consolidate  public  finances,  though  serving  the  immediate  purpose  of  reducing  the  budget 
deficit,  are  temporary  or  one-off  and  will  need  to  be  progressively  replaced  with  more 
structural measures. In addition, the progress on improving pension sustainability will need to 
be  followed  up  and  complemented  with  healthcare  reform  to  bring  public  finances  on  a 
sustainable footing. 

Given the need to support continuing economic convergence through expenditure in key 
areas  such  as  education,  innovation  and  transport  infrastructure,  a  key  challenge  is  to 
acquire additional resources by broadening the tax base and limiting the scope for tax fraud 
and evasion. To maximise the positive structural impact, greater recourse to taxes that are less 
detrimental  to  growth,  such  as  property  and  environmental  taxation,  is  needed.  Building  on 
the recent adoption of an action plan to reduce tax fraud, efforts need to continue in this area 
and  be  underpinned  by  a  comprehensive  tax  compliance  strategy  going  beyond  VAT  fraud. 
Additional  cuts  in  capital  expenditure  would  be  detrimental  to  Slovakia’s  infrastructure, 
undermining  the  economy’s  long-term  growth  prospects.  An  expenditure  review  could  help 
reduce inefficiencies and reallocate spending to areas with greater growth potential. 

As high unemployment persists amid clouded labour market prospects, the risk that the 
recent  cyclical  surge  in  unemployment  becomes  a  structural  one  is  sharply  increasing, 
with  young  people  among  those  most  affected.  School-to-job  transition  is  weak  and  the 
education system does not respond readily to labour market needs. Long-term unemployment 
remains  among  the  highest  in  the  EU,  partly  reflecting  large  regional  disparities.  Public 
employment  services  do  not  have  sufficient  capacity  to  provide  personalised  services  to 
jobseekers  and  to  assess  the  effectiveness  of  active  labour  market  policies  (ALMPs). 
Employment of the low-skilled also remains among the lowest in the EU. Despite some recent 
improvements  in  the  design  of  the  Slovak  tax  and  benefits  system,  the  tax  wedge  for  the 
unemployed taking up a low-paid job remains large. The persistent shortage of good quality, 
affordable  early  childhood  education  and  care  is  an  obstacle  to  female  participation  in  the 
labour market. Despite the projected increase in retirement age, more remains to be done to 
increase the employability of older workers and access to lifelong learning is insufficient. The 
integration of the Roma population into the labour market is very limited. The participation of 
Roma children in early childhood education and care is very low. 

A  further  key  challenge  in  terms  of  supporting  growth  and  competitiveness  in  the 
medium  term  relates  to  strengthening  institutions,  human  capital,  innovative  capacity 
and  the  business  environment.  Despite  the  recent  adoption  of  several  measures  to  make 
public  procurement  and  the  judiciary  more  transparent,  experience  of  implementing  EU 
structural funds suggests that there are still problems in this area. Weaknesses also persist in 
the  functioning  of  public  institutions,  law  enforcement  and  the  business  environment.  The 
political  cycle  has  a  high  impact  on  staff  turnover  in  public  administration,  capacities  for 
evidence-based  policy-making  are  not  sufficiently  developed,  there  is  no  clear  framework 

8 

 
 
regulating  lobbying  activities,  perceived  judicial  independence  is  low  and  judicial  and 
enforcement  proceedings  are  long.  With  regard  to  human  capital,  the  per  capita  funding  of 
education  favours  quantity  over  quality  and  the  proportion  of  funding  allocated  to  teaching 
activities  (teachers,  material,  and  equipment)  is  low  by  international  comparison.  Better  use 
could be made of EU funds available to finance educational reforms and improve the quality 
of  the  science  and  technological  base.  Effective  competition  and  the  transparency  of  price-
setting  mechanisms  in  regulated  industries  could  be  improved,  notably  in  the  energy  sector 
where consumers’ switching rates are low and unregulated electricity prices for medium-sized 
industrial  consumers  are  among  the  highest  in  the  EU.  This  is  cause  for  concern  given  the 
high energy intensity of the economy. It also suggests that gains from improvements in energy 
efficiency would be considerable.  

3.  ASSESSMENT OF POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

Slovakia’s  fiscal  targets  meet  its  obligations  under  the  Pact.  The  stability  programme 
defines the general goal of the government’s fiscal policy as achieving a fiscal position that 
ensures  long-term  sustainability  of  public  finances.  To  achieve  this  goal,  the  government 
confirms the target of reducing the headline deficit below the 3 % of GDP reference value in 
2013,  as  recommended  by  the  Council  on  2  December  2009  under  the  Excessive  Deficit 
Procedure  (EDP).  After  2013,  the  stability  programme  envisages  further  reductions  in  the 
deficit consistent with reaching its medium-term objective (MTO) confirmed at 0.5 % of GDP 
in  cyclically  adjusted  terms  net  of  one-off  and  temporary  measures.  The  MTO  reflects  the 
objectives of the Pact. It is to be reached by 2018, outside the programme period.4  

The  government’s  deficit  target  for  2012  was  overachieved.  The  general  government 
outturn  in  2012,  a  deficit  of  4.3 %  of  GDP,  was  some  0.3  percentage  point  lower  than 
envisaged  in  the  2012  stability  programme.  It  resulted  from  the  combination  of  revenue 
measures  adopted  by  the  government  in  the  course  of  the  year  as  well  as  a  lower-than-
budgeted  drawdown  of  EU  funds,  non-budgeted  revenue,  lower  investment  by  local 
governments  and  savings  on  social  insurance  expenditure.  One-off  measures  that  improved 
the revenue outturn included a one-off bank levy, special levy on high-profit enterprises operating 
in a regulated environment and the opening of the statutory fully funded pension pillar, which 
enabled pension savers to move their savings to the public pension scheme. The resulting net 
savings  more  than  offset  the  deficit-increasing  impact  of  substantial  revenue  shortfalls 
(especially for VAT) and a higher-than-budgeted assumption of past hospital debts. 

The programme envisages further reduction of the headline deficit to 2.9 % of GDP in 
2013.  This  is  to  be  achieved  mainly  through  a  combination  of  temporary  and  permanent 

4 The programme also presents a table with the convergence path towards the MTO. 

9 

 
 
                                                 
revenue measures (expected to induce an increase in the revenue ratio by 1 pp to 34.1 % of 
GDP) as well as some expenditure cuts (expenditure is to decline by 0.4 pp to 37 % of GDP).5 
Measures  with  a  one-off  effect  constitute  almost  a  third  of  all  planned  revenue  measures. 
These  include  enabling  pension  savers  to  move  their  assets  from  the  statutory  fully  funded 
pillar to the public pension scheme, extra dividends from state-owned companies, the sale of 
part  of  the  emergency  oil  stocks  (on  the  revenue  side),  and  the  sale  of  the  frequency  band 
freed  up  by  eliminating  analogue  broadcasting  (which  is  accounted  for  as  an  expenditure 
reducing measure). Furthermore, substantial reductions in expenditure would come from local 
governments  and  budgetary  entities  not  under  the  direct  control  of  central  government.  The 
Commission’s spring forecast projects a slightly higher general government deficit of 3.0 % of 
GDP in 2013, partly because some envisaged savings were deemed not to be fully attainable. 

The budgetary targets in 2014 and beyond are not sufficiently underpinned by specified 
measures.  The  government  plans  further  consolidation  after  2013,  with  a  view  to 
progressively lowering the headline deficit, to reach 1.3 % of GDP in 2016. Compared to the 
2012  stability  programme,  these  targets  are  slightly  less  ambitious  and  they  rely  on 
expenditure restraint, with the expenditure-to-GDP ratio projected to decline faster (by some 3 
pps)  between  2013  and  2016  than  the  revenue-to-GDP  ratio  (set  to  fall  by  2.4  pps).  The 
adjustment  appears  to  be  back-loaded.  The  programme  intends  to  reach  the  2014  headline 
deficit target through a combination of actions, including an additional sale of emergency oil 
stocks, a freeze in public wages at the 2013 level and a reduction in subsidies — mainly those 
granted  by  local  authorities  to  local  public  transport.  The  one-off  additional  sale  of  the 
emergency  fuel  stock  would  constitute  the  major  part  of  the  consolidation.  Moreover, 
additional and as yet unspecified measures would still be necessary to reach the target. Under 
the  assumption  of  unchanged  policies,  the  Commission  projects  the  headline  deficit  to 
increase slightly in 2014 to 3.1 % of GDP despite the pick-up in economic activity, as several 
revenue  measures  adopted  to  achieve  the  2013  target  expire  in  2014.  The  assumed 
achievement  of  budgetary  targets  in  the  outer  years  of  the  programme  is  not  supported  by 
specified and quantified measures. In addition, the currently on-going process of unification 
of healthcare insurance providers might induce arbitrage between the private health insurance 
companies  and  the  state,  with  a  possible  negative  impact  on  public  finances  during  the 
programme period.6 

Some projected expenditure developments may not be sustainable in the medium to long 
run. The programme projects a decline in the public investment ratio from 1.9 % of GDP in 
2012  to  0.6 %  of  GDP  in  2016,  a  very  low  level  especially  for  a  catching-up  economy.  An 

5 On the revenue side, the consolidation package includes a hike in the corporate income tax rate from 19 % to 
23 %, a new 25 % tax bracket in the personal income tax system, adjustments in the taxation of self-employed 
and atypical work contracts, a broadening of the bases for social contributions, and increases in administration 
fees. Expenditure savings are envisaged in the wage bill for public employees, goods and services and general 
government investment.  
6 As the decisions underlying the unification of healthcare insurers into a one public insurer could be taken in 
2013, the operation could have a budgetary impact already in 2013. 

10 

 
 
                                                 
initial  planned  increase  in  expenditure  on  research,  development  and  innovation  in  2013  is 
followed  by  a  decline  in  later  years.  In  addition,  expenditure  cuts  carried  out  in  the  past  on 
goods and services and the public wage bill and planned also for 2013 and 2014 may not be 
sustainable, as they can impair the efficient functioning of the public sector. A more targeted 
cost  reduction,  prioritising  growth-enhancing  expenditure  and  supported  by  an  expenditure 
review would be beneficial. 

Meeting  the  fiscal  obligations  under  the  EU  surveillance  framework  appears  to  be 
within reach. For the period 2010-2013 the adjusted annual average fiscal effort7 is estimated 
to have reached 1.4 % of GDP annually, compared to a recommended average fiscal effort of 
at  least  1 %  of  GDP,  implying  that  effective  action  has  been  taken  in  response  to  the  2009 
EDP  recommendation.  For  the  years  following  the  expected  date  of  correction  of  the 
excessive deficit, the projected improvement in the (recalculated) structural balance8 appears 
to be ensuring sufficient progress on the adjustment path towards the MTO in 2014 and 2015 
(0.6 pps and 0.7 pps of GDP, respectively), but it would be insufficient in 2016 (0.3 pps of 
GDP).  According  to  the  information  provided  in  the  programme,  the  growth  rate  of 
government  expenditure,  net  of  discretionary  revenue  measures,  in  the  years  between  2014 
and  2016  is  expected  to  contribute  to  an  annual  structural  adjustment  towards  the  MTO  by 
0.5 % of GDP. This is because the growth rate of this expenditure is set at (in 2014 and 2015) 
or  below  (in  2016)  1.5 %,  the  lower  rate  under  the  expenditure  benchmark.  Following  an 
overall assessment of Slovakia’s budgetary plans, with the structural balance as a reference, 
including  an  analysis  of  expenditure  net  of  discretionary  revenue  measures,  the  adjustment 
path towards the MTO over the programme period seems to be appropriate. However, based 
on the recalculated change in the structural balance, Slovakia would not carry out sufficient 
structural effort in 2017. 

7 Adjusted for developments in potential output and revenue windfalls or shortfalls. 
8  The  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.  

11 

 
 
                                                 
  Revenue 

Box 1. Main measures 

Main budgetary measures 

2013 

Expenditure

•  Savings  on  goods  and  services  and  other 
current  and  capital  transfers  in  the  state 
budget (-0.5 % of GDP) 

•  Savings  of  the  local  governments  and 
other general government units outside the 
central government (-0.7 % of GDP) 
Increase 
the  expenditure  on 
healthcare system (0.2 % of GDP) 

the 

in 

• 

•  Reduction  in  the  wage  bill  in  the  state 

• 

budget (-0.1 % of GDP) 
Increase  in  the  wages  in  the  primary  and 
secondary schools (0.1 % of GDP) 

•  Unification  of  and 

in 

increase 

the 
assessment  bases  for  social  contributions 
(0.2 % of GDP) 
Introduction  of  social  contributions  for 
contracts ‘by agreement’ — revenue effect 
(0.2 % GDP) 
Increase in taxation of self-employed (e.g. 
limiting  lump-sum  deductions)  (0.1 %  of 
GDP) 

• 

• 

•  Changes  in  the  fully  funded  pillar  (e.g. 
reduction of the contribution rate from 9 % 
to  4 %  and  reintroduction  of  voluntary 
participation) (1.0 % of GDP) 
Increase in the bank levy (0.1 % of GDP) 
Introduction  of  a  special  levy  on  high-
profit  enterprises  operating  in  a  regulated 
environment (0.1 % of GDP) 

• 
• 

•  Changes in the income taxes (e.g. increase 
in CIT from 19 % to 23 %, the introduction 
of  a  25 %  tax  bracket  for  PIT)  (0.5 %  of 
GDP) 

•  Sale of free frequencies (0.1 % of GDP) 
•  Sale  of  emergency  oil  stocks  (0.3 %  of 

GDP) 

•  Sale  of  emergency  oil  stocks  (0.2 %  of 

•  Reduction  in  the  public  wage  bill  (-0.1 % 

GDP) 

of GDP) 

2014 

•  Reduction in subsidies (-0.1 % of GDP) 
• 

Increase  in  capital  expenditure  by  local 
governments (0.1 % 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 the measure. 
The degree of detail reflects the information made available in the stability programme and, where 
available, in a multiannual budget.  

• 

According to the programme, the public debt ratio is projected to stabilise at the end of 
the programme period. After increasing to 56.7 % of GDP in 2015, the debt-to-GDP ratio is 
to  decline  to  close  to  56 %  of  GDP  by  2016.  Persistent  general  government  deficits  are  the 
main driving force behind the projected increase. In view of the limited capacity of the Slovak 
financial  sector  to  absorb  sovereign  bonds,  Slovakia  has  issued  several  bonds  abroad  since 

12 

 
 
 
 
 
 
 
 
 
 
2012,  thus  diversifying  the  investor  base  and  issuance  currencies.9  To  maintain  unimpeded 
access  to  international  markets,  Slovakia  will  need  to  continue  implementing  prudent  fiscal 
policies. Since the debt-to-GDP ratio is expected to remain below the reference rate of 60 % 
of GDP over the programme period, the debt reduction benchmark is not applicable. Medium-
term debt projections (see Graph below Table V in annex) indicate that full implementation of 
the programme would imply increasing debt until 2015, although remaining below the 60 % 
of GDP reference value, followed by a slight decrease towards 2020. 

Box 2. Excessive deficit procedure for Slovakia 

On  2  December  2009  the  Council  adopted  a  decision  stating  that  Slovakia  had  an  excessive  deficit 
under  Article  126(6)  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  At  the  same 
time, the Council recommended under Article 126(7) TFEU that the excessive deficit be corrected by 
2013. 

In particular, Slovakia was recommended to implement deficit reducing measures in 2010 as planned 
in  the budget  for  2010-2012,  ensure  an  average  annual  deficit  effort  of 1 %  of  GDP  over  the  period 
2010-2013, and specify the necessary measures for correcting the excessive deficit by 2013, cyclical 
conditions permitting. It was also recommended to accelerate the reduction of the deficit if economic 
or budgetary conditions turned out better than expected. In addition, to limit risks to this adjustment, 
Slovakia was recommended to strengthen the enforceability of its medium-term budgetary framework 
and  improve  the  monitoring  of  budget  execution  throughout  the  year,  in  particular  to  avoid 
expenditure overruns compared to budget plans. 

An  overview  of 
is  available  on: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/index_en.htm  (please  refer  to 
country sections at the bottom of the page).  

the  excessive  deficit  procedures 

the  current  state  of 

Long-term sustainability 

The long-term sustainability of public finances has improved. Slovakia does not appear to 
face  a  risk  of  fiscal  stress  in  the  short  term.  Nonetheless,  the  country  is  at  medium 
sustainability  risk  in  a  medium-term  and  long-term  perspective,  conditional  upon  full 
implementation of the planned ambitious fiscal consolidation and on maintaining the primary 
balance well beyond 2014 at the level expected to be reached in that year. The risks would be 
much higher if the structural primary balance were to revert to more negative values observed 
in the past, such as the average for the period 1998-2012. The focus should therefore be on 
resolutely  and  swiftly  continuing  to  implement  measures  which  improve  sustainability.  In 
addition,  further  containing  age-related  expenditure  growth,  including  through  further 
adjustments to the pension system, remains a priority so as to contribute to the sustainability 
of public finances in the long term. 

9 According to the ARDAL (The Debt Management Agency), the currency volatility is fully hedged.  

13 

 
 
 
 
 
                                                 
However,  the  sustainability  gap  remains  large.  The  long-term  sustainability  gap  (S2)  of 
4.9 %  of  GDP  remains  well  above  the  EU  average  of  3 %  of  GDP.  In  addition  to  the  initial 
budgetary  position  in  2014,  the  sustainability  gap  largely  reflects  the  contribution  from  the 
projected long-term cost of ageing (3.5 pps). Pension expenditure would contribute 1.5 pps, 
and health care spending 2 pps to the sustainability gap. 

Major  changes  to  the  pension  system  were  adopted  in  2012  but  while  significantly 
reducing pension costs these do not fully ensure its sustainability in the longer term. The 
most important changes in the public pension pillar are linking of the statutory retirement age 
to life expectancy from 2017 and a switch to inflation-based indexation starting from 2018.10 
Redistribution in the system was increased and rules regulating early retirement have become 
stricter.  The  generous  pension  regimes  for  special  categories  such  as  the  armed  forces  and 
police were also curbed, although not as much as initially proposed. The recommendation to 
include a sustainability factor in the pension formula was not adopted. The measures should 
reduce the projected increase in pension expenditures in the 2010-2060 period by half, to 2.6 
percentage  points  of  GDP,11  significantly  improving  the  sustainability  of  the  public  pension 
pillar.  However,  given  rapid  population  ageing,  the  public  pension  pillar  is  projected  to 
remain in deficit.12 This would warrant swifter phasing-in of the pension reform. In addition, 
with the exception of low earners, the changes in the calculation and indexation of pensions 
adopted as part of the 2012 reform are likely to reduce the replacement rate in the long run, 
undermining the adequacy of retirement income. 

The fully funded statutory pension pillar was downsized. Pension savers were allowed to 
opt in or out of this pillar.13 Moreover, the contribution rate was reduced from 9 % to 4 % of 
the base until 2016 (and the funds rerouted towards the public scheme) although there will be 
a  gradual  increase  in  the  contribution  rate  back  to  6 %  by  2024.  In  addition,  voluntary 
participation  was  reintroduced  for  new  labour  market  entrants,  who  can  decide  whether  to 
participate in the funded pillar until the age of 35. These measures have a positive short-term 
impact  on  the  accounts  of  the  general  government.  The  reverse  is  true  in  the  long  term, 
because  the  pension  liabilities  of  the  state  increase.  Nevertheless,  the  measures  taken  in  the 
first  pillar  more  than  compensate  for  this  impact  within  the  projection  period.  However,  in 

10  Between  2013  and2017,  the  weight  of  inflation  in  the  indexation  formula  will  increase  annually  by  10  pps 
from 50 %, while the weight of wages will be reduced. During this transition period, all pensions will be indexed 
by  a  fixed  nominal  amount.  The  price  index  mirroring  the  consumption  basket  of  pensioners  will  be  used  to 
index pensions from 2018. 
11  On  6  March  2013,  the  Ageing  Working  Group  approved  the  recalculated  pension  costs  reflecting  the  most 
recent changes in the Slovak pension system. The Economic Policy Committee endorsed them on 16 April 2013. 
These projections are the basis of the discussion in this text. 
12 An additional factor improving long-term sustainability will be the increased ceiling of the assessment base for 
pension contributions, which will not be reflected in the calculation of pension rights. 
13 Social Insurance Agency data show that about 89 500 people left the fully funded pillar between September 
2012  and  January  2013,  the  period  during  which  it  was  temporarily  opened,  while  14 700  joined  it.  Although 
more  people  than  expected  (60 000)  opted  out,  the  volume  of  assets  transferred  was  as  expected  (EUR  280 
million). 

14 

 
 
                                                 
light of past experience, these changes are likely to impact negatively on the size and scope of 
the fully funded pillar.14 

Healthcare expenditure is projected to increase significantly in the long term. Although 
expenditure on healthcare remains below the EU average (6.2 % of GDP as against 7.1 % in 
2010,  respectively),  it  is  projected  to  increase  by  3  pps  of  GDP  by  2060,  reaching  9.2 %  of 
GDP. While starting from a lower base, this would be the second highest increase among the 
Member States.15 In addition, public expenditure on healthcare as a percentage of the overall 
general government spending amounted to 16 % in 2010, above the EU average of 14.7 % and 
some 6 pps higher than in 2000. The rapid expansion in healthcare expenditure that has taken 
place in recent years has not been mirrored by improvements in health outcomes,16 while the 
rise in out-of-pocket spending on healthcare raises concerns about access to care.   

Measures were taken to curb expenditure on pharmaceuticals, but the authorities could 
usefully  consider  whether  further  efficiency  gains  can  be  achieved.  Slovakia  introduced 
the  requirement  that  the  active  component  be  prescribed  alongside  the  brand  name  to 
encourage  the  prescription  of  generic  medicines.  Prices  of  medicines  use  the  average  of  the 
three lowest prices in the EU as a reference and clearer rules on coverage of medicine prices 
by  public  insurance  have  been  introduced.  These  measures  are  expected  to  have  helped  to 
keep  the  rapid growth  of  expenditure  on pharmaceuticals in check. An evaluation would be 
useful to determine whether there is scope for further reducing spending on pharmaceuticals. 

Repeated debt build-up points to existing inefficiencies in hospitals. Slovakia’s system of 
healthcare  provision  is  centred  on  hospitals  and  is  characterised  by  a  high  number  of 
facilities17 and acute care beds18 and a high average length of inpatient stays.19 Remuneration 
of hospitals is on a per-diem basis rather than by diagnosis-related groups (DRGs), possibly 
leading  to  a    high  number  of  in-patient  cases.  These  inefficiencies  are  aggravated  by  weak 
accounting mechanisms, a lack of effective monitoring of hospital activity and an ineffective 
incentive  structure.  Labour  costs  represent  a  large  part  of  the  cost  structure  of  hospitals.20 
Public expenditure on hospitals, both as a share of GDP and as a share of the overall public 
healthcare budget, is one of the lowest in the EU.21 However, the low efficiency of the system 
coupled with the limited financial resources and the pressure of an ageing population all point 
to  the  need  for  a  substantial  hospital  reform,  including  streamlining  the  hospital  network, 

14  Voluntary  participation  may  lead  to  substantially  lower  participation  by  new  labour  market  entrants. 
Experience from the first time that voluntary participation was introduced, between 2008 and 2011, suggests that 
only about 10-15 % of a given age cohort could join the fully funded pillar. 
15 See 2012 Ageing Report. 
16 The number of avoidable deaths, or the amenable mortality rate, ranks among the highest in the EU. 
17 There are more than 120 hospitals and a large number of university hospitals. 
18 4.8 per 1000 inhabitants vs EU average of 3.7 in 2010. 
19 6.7 days vs EU average of 5.9 days. 
20 In some cases, as documented by the Ministry of Healthcare, wages may account for more than 85% of total 
costs. 
21  Public  expenditure  on  hospitals  amounts  to  1.9%  of  GDP,  compared  the  EU  average  of  3%  of  GDP,  and 
represents 33% of public current health expenditure (EU average: 47.3%).  

15 

 
 
                                                 
changing costing and remuneration, improving control and monitoring and promoting better 
management practices. 

The  authorities  envisage  taking  additional  measures  in  the  health  care  system.  The 
National  Reform  Programme  envisages  improving  information  systems,  strengthening 
hospital  management,  implementing  centralised  procurement  and  introducing  DRGS,  which 
would  lead  to  substantial  efficiency  gains.  The  government  also  plans  to  unify  all  health 
insurers  into  one  public  health  insurance  provider,  with  a  view  to  addressing  the 
comparatively  high  administrative  costs  in  the  healthcare  system.22  The  impact  of  this 
operation  on  public  finances,  if  pursued,  should  be  carefully  considered.  Overall,  the 
implementation of the government’s plans on health care reform appears to be still at an initial 
stage. 

Increasing  the  efficiency  of  the  healthcare  system  will  require  well-designed  incentive 
structures and an action plan for reform. It is essential that the measures envisaged by the 
authorities are complemented by the introduction of effective incentive structures and control 
mechanisms  in  hospitals.  A  clearly  defined  timed  action  plan  would  help  ensure  stepwise 
monitoring and control of the reform process. 

Fiscal framework 

Slovakia has taken substantive steps to strengthen its fiscal framework. The first of the 
2012  Council  Recommendations  called  on  the  authorities  to  accelerate  the  establishment  of 
the Fiscal Council and adopt rules on  expenditure ceilings. The Commission concludes that 
Slovakia  has  made  substantial  progress  on  measures  to  address  the  first  part  of  the 
recommendation.  The  Fiscal  Council,23  which  was  established  by  a  constitutional  law  on 
1 March 2012, was set up in the second half of the year in line with the CSR.24 

However,  the  rules  on  expenditure  ceilings  have  not  yet  been  adopted.  While  Slovakia 
sets  multiannual  budgetary  objectives,  these  are  not  binding,  except  for  the  first  year.  This 
weakens  the  overall  set-up  of  the  fiscal  framework  and  could  be  remedied  by  adopting 
binding  multiannual  expenditure  ceilings.  There  is  a  legislative  proposal  to  amend  the 
Budgetary  Rules  Act  to  determine  the  procedures  for  setting  such  ceilings  for  general 
government, excluding local government, but its adoption has been postponed to September 
2013. Member States are encouraged to ensure that any adopted expenditure rule is consistent 
with  the  expenditure  benchmark  set  in  the  revised  Stability  and  Growth  Pact,  in  terms  of 

22 Slovakia's expenditure on healthcare-related administration and insurance is above the EU average (0.3 % of 
GDP compared to 0.2 %). 
23  Officially  called  the  Council  for  Budgetary  Responsibility.  Its  main  responsibilities  include  (i)  issuing  an 
annual  report  on  the  long-term  sustainability  of  public  finances,  (ii)  assessing  adherence  to  fiscal  rules,  (iii) 
giving opinions on legislative proposals as necessary, and (iv) drafting documents related to the monitoring and 
assessment of budgetary developments as deemed necessary. 
24 The Parliament appointed three Board members in July. By the end of 2012 the Bureau of the Council was set 
up  and  staff  hired.  The  Council  has  already  published  several  reports  including  an  assessment  of  the  2013-15 
budget proposal and a report on the long-term sustainability of public finances. 

16 

 
 
                                                 
definition and coverage. The authorities plan to adopt legislation addressing the requirements 
of the Fiscal Compact25 that was ratified by the Parliament in December 2012. 

Tax system 

Improving  the  efficiency  of  the  taxation  system  and  increasing  reliance  on  sources  of 
taxation that are less detrimental to growth remains an important task given the need to 
finance the convergence process. In 2012, a Council Recommendation on taxation called on 
Slovakia to improve the efficiency of tax collection, in particular VAT, reduce distortions in 
the  taxation  of  labour  across  different  types  of  employment;  link  real  estate  taxation  to  the 
market value of property; and make greater use of environmental taxation. Some progress has 
been achieved towards addressing the CSR. 

In 2012, Slovakia adopted important measures reducing the large differences in taxation 
among  different  types  of  employment  and  simplified  the  rules  on  social  contributions. 
These  measures  are  described  in  more  detail  in  Box  3.  The  large  discrepancies  between 
various  employment  types  were  thus  reduced  (see  chart  below)  partly  addressing  the  2012 
CSR. The latest changes may reduce the tax burden on dependent work and the future risk of 
inadequately  low  pensions  for  the  self-employed  and  those  who  only  work  by  agreement.26 
Nevertheless, no review was carried out to evaluate the deductibility rules that apply to those 
that do not opt for lump-sum deductions. This remains an important drawback of the taxation 
system for self-employed persons, as their declared costs for tax purposes constitute 80-90 % 
of  the  declared  revenue.27  Thus  while  the  self-employed  represented  15 %  of  total 
employment  in  2012,  they  generated  less  than  6 %  of  the  overall  personal  income  tax 
collected.  An  additional  weakness  is  low  monitoring  of  these  taxpayers,  as  the  tax  office 
focuses on VAT liabilities.28 Given the low tax revenue from this group of taxpayers, ceteris 
paribus  the  authorities  need  to  tax  other  activities  more  (e.g.  the  income  of  dependent 
workers, corporates, consumption, etc.) to cover the revenue gap. 

Graph 1: Tax wedge before the reform 

Graph 2 Tax wedge after the reform 

25 Title III of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. 
26 Work by agreement is an atypical working contract that was given favourable tax treatment and was intended 
mainly for seasonal and student jobs. The recent changes limited its use and reduced the tax advantages. 
27  The  figure  includes  those  who  use  lump-sum  deductions  and  is  based  on  aggregated  data  from  the  tax 
declaration form type B. 
28  In  2012,  the  tax  administration  authority  carried  out  16 053  controls  out  of  which  more  than  three  quarters 
focused on VAT, about 10 % on corporate income tax (CIT) and 9 % on personal income tax (PIT). Breaches of 
the rules were found in 65 % of controls on CIT and PIT and in around 38 % of cases for VAT. 

17 

 
 
                                                 
The  number  of  contract  agreements  plunged  after  the  reform.  Partly  in  reaction  to  the 
adopted  measures,  the  number  of  contract  agreements  fell  by  half  from  almost  650 000  in 
December 2012 to less than 300 000 in January 2013.29 To stem the outflow of workers to the 
grey economy and increase the demand for low-skilled labour, especially at the lower end of 
the income distribution, the government could consider reducing the tax wedge for low-paid 
workers  regardless  of  the  type  of  employment,  as  suggested  in  the  2012  CSRs.  The 
government has so far not acted on this recommendation and no measures are envisaged in the 
NRP. 

Box 3 — Changes to the taxation of employment 

In  2012,  the  Council  recommended  that  Slovakia  ‘reduce  distortion  in  taxation  of  labour  across 
different  employment  types,  also  by  limiting  tax  deductions’.  The  government  adopted  a  set  of 
measures  that  markedly  reduce  these  large  discrepancies  between  various  employment  types.  The 
following measures were adopted for various employment types. 

• 

In  the  case  of  the  self-employed,  the  assessment  base  for  calculating  social  contributions  was 
adjusted by increasing its minimum level.30 It will gradually be broadened over the 2013-15 period 
by  reducing  an  arbitrary  coefficient  that  previously  lowered  the  base.31  The  possibility  of 
deducting  40 %  of  expenses  without  any  bookkeeping  to  reduce  the  tax  base  was  limited  in 
nominal terms to EUR 5 040 per year or EUR 420 per month.32 

•  Social  contributions  were  increased  significantly  for  workers  by  agreement  who  have  a  regular 
income, to match those of dependent workers. Those with an irregular income will pay somewhat 

29 The Social Insurance Agency has statistics on the number of contracts but not on the number of people who 
‘work by agreement’. A person can have more than one agreement contract. 
30 About 86 % of self-employed people pay social contributions from the minimum assessment base. 
31 The current coefficient of 2 (2.14 for healthcare contributions) will decrease to 1.486 in 2015. 
32 The self-employed will no longer be able to apply these deductions to rental income. 

18 

 
 
 
                                                 
lower  rates.  Students  (within  certain  limits),  invalidity  and  regular  pensioners  were  granted 
exceptions. 

•  A new 25 % tax bracket was introduced for dependent work. It will apply to those whose tax base 

exceeds 176.8 times the subsistence minimum (for 2013 it amounts to EUR 34 402). 

The differing rules for the assessment bases of social contributions were unified and the ceiling was 
raised for all employment types.33 

In mid-2012 the government approved an action plan to fight tax fraud. This three-phase 
plan sets out precise measures and the timeline for implementing them, with a particular focus 
on VAT. A company cannot be registered if the founder has outstanding tax liabilities; people 
deemed by the tax authorities to pose a high-risk of non-compliance must pay a deposit when 
they  register  for  VAT  refunds  and  when  re-exporting;  and  all  payments  above  EUR  5 000 
must  be  made  electronically.  These  measures  can  contribute  to  fighting  tax  fraud. 
Nevertheless,  no  tangible  impact  has  been  observed  so  far,  as  VAT  collection  subsequently 
dropped by some 10 % in cash terms. The authorities intend to continue efforts in this area, 
mainly  by  tackling  transfer  pricing  and  introducing  compulsory  reporting  of  large 
international transactions by financial institutions. 

The  toolkit  for  addressing  tax  fraud  includes  improving  the  current  poor  IT 
infrastructure,34  broadening  the  competences  of  the  authorities  and  ensuring  judicial 
follow-up. Good IT infrastructure is essential, as a system that works well can enable the tax 
authority  to  collect  data  for  required  analyses,  minimise  the  need  for  manual  tasks,35  easily 
access the data of other (state) institutions and carry out cross-checks. The UNITAS project 
could  partly  improve  this,  but  so  far  it  has  not  been  successfully  implemented.  The 
authorities’  powers  to  prevent  tax  fraud  and  recover  unpaid  taxes  appear  to  be  limited.36 
Although the number of people convicted of tax crimes has increased in recent year, the rate 
of rejected tax investigations remains high. In 2011, investigators rejected about 65 % of all 
notifications  by  the  tax  authority,  in  most  instances  without  thoroughly  analysing  the  case. 
This leads to low levels of tax-related prosecutions and subsequent convictions.37 

33 Previously, the maximum base varied as follows: (i) 1.5 times the average wage (AW) from two years before 
for guarantee and sickness insurance, (ii) 3 times the AW for health insurance, (iii) 4 times the AW for old-age, 
invalidity,  unemployment  insurance  and  reserve  fund  contributions  and  (iv)  no  ceiling  for  accident  insurance. 
The ceiling was increased to 5 times the AW. 
34 While not directly related to tax IT infrastructure, the government passed a law to create a central register of 
physical persons, which may improve interconnectivity between various databases in the future, thus potentially 
giving the tax authority quicker access to a broader set of data. 
35 For example, the Slovak tax authorities state that the deadlines for filing and payment of VAT are monitored 
manually through browsing a set of reports and summaries. Another example is manual calculation for offsetting 
tax credit entitlements (e.g. VAT refunds) against other outstanding tax debts. 
36 For example, the tax authority cannot suspend the deadline for a VAT refund if it suspects fraud. Assets are 
manually identified during the process of tax recovery. This may require the tax recovery officers to send a letter 
to a registrar of assets. 
37 From 2003 to 2011 the number of convictions was on average 27 % of all annual prosecutions.  

19 

 
 
                                                 
No progress has been achieved in reforming property taxation. To date, the government 
has not taken  measures to reform the  taxation of residential  real  estate  to  reflect  the  market 
value  of  property,  in  contrast  with  the  Council’s  recommendation  in  2012.  The  measures 
planned to improve the situation include obtaining a more detailed description of property on 
its registration in the land register (including the price) and/or a more detailed tax declaration 
form for real estate to include property characteristics. 

There is scope for accommodating some environmental concerns in the taxation system. 
In  2012,  Slovakia  changed  the  car  registration  fees  for  new  cars.  The  new  fee  structure 
reflects  car  engine  power.  Although  this  measure  does  have  environmental  aspects, 
environmental taxation as such could be improved by introducing an annual car tax directly 
linked  to  CO2  emissions.  As  pointed  out  in  the  NRP,  due  to  its  geographical  location, 
Slovakia  has  limited  scope  to  significantly  increase  taxes  on  fossil  fuels  and  energy 
independently from neighbouring countries. According to the SP, the introduction of a carbon 
tax  could  have  a  negative  impact  especially  on  lower-income  households  and  it  would  be 
detrimental  to  the  competitiveness  of  Slovak  businesses.  While  competitiveness  and 
distributional  concerns  must  be  carefully  weighed  when  designing  environmental  taxes, 
Slovakia’s  implicit  tax  rate  on  energy  remains  among  the  lowest  in  the  EU,  suggesting  that 
there is still room to broaden the tax base in this direction. The Slovak authorities could, for 
instance,  reconsider  the  application  of  certain  exemptions  provided  in  the  Energy  Tax 
Directive. Taxes on pollution are negligible and could also be increased.38 

3.2. 

Financial sector 

The largely foreign-owned financial sector proved resilient during the crisis. The stability 
of  the  banking  sector  is  expected  to  continue  to  be  supported  by  declining  yet  relatively 
healthy  profitability,  high  deposit-to-loan  ratios  and  a  negligible  share  of  loans  in  foreign 
currencies.  Efforts  to  ensure  strong  coordination  between  home  and  parent  banks  remain 
critically  important.  Despite  the  overall  resilience  of  the  sector,  ease  of  access  to  financing 
was negatively affected in 2012 by both the cyclical downturn and the increase in credit risk. 
While the number of loans to non-financial firms39 increased at a moderate pace from 2010 to 
2011,  in  2012  it  declined  by  3.6 %.  The  stock  exchange  and  venture  capital  market  also 
remain  underdeveloped  and  no  substantial  progress  was  made  in  2012.  Equity  financing  is 
very  limited,  providing  small  and  medium-sized  enterprises  (SMEs)  and  start-ups  with  very 
few  alternatives  to  traditional  bank  loans.  As  a  part  of  the  JEREMIE  initiative,  the  Slovak 
Guarantee  and  Development  Fund  implemented  the  first  loss  guarantee  in  2012.40  The  risk 
capital instrument should be launched later in 2013, after the evaluation of received offers is 
completed. 

38 The landfill charge for waste is especially low compared to other Member States. Progressively increasing the 
charge would help to divert waste from landfill, which still accounts for 75 % of municipal waste treatment. 
39 National Bank of Slovakia — Statistics on loans granted between January and December 2012. 
40 The first guarantee agreements were signed in April 2013, allowing the participating banks to provide up to 
EUR 170 million in new loans to SMEs. 

20 

 
 
                                                 
3.3. 

Labour market, education and social policies 

Labour market 

The unemployment rate remains high at 14 % and gives reason for concern. The number 
of  unemployed  persons  went  up  from  260 000  in  2008  to  380 000  in  2012,  an  increase  of 
nearly 50 %. While the persistence of high unemployment to a large extent is due to the slow 
pace  of  the  post-crisis  recovery,  some  long-standing  structural  challenges  exacerbate  the 
situation.  About  60 %  of  the  unemployed  are  low  skilled  and  two  thirds  are  long-term 
unemployed,  partly  reflecting  persisting  regional  disparities  and  skills  mismatches.  Youth 
unemployment  also  remains  among  the  highest  in  the  EU.  The  employment  rate  of  older 
women and low-skilled workers, including Roma, is among the lowest in the EU.   

To  date,  labour  market  services  and  active  labour  market  policies  (ALMP)  have  not 
proved sufficiently effective. In response to the 2012 Council Recommendation, Slovakia is 
reforming  ALMPs.  A  reform  is  in  force  since  May  2013,  improves  the  targeting  and 
efficiency of such policies but its implementation is constrained by a lack of resources. While 
it  aims  to  increase  the  provision  of  personalised  services  and  to  improve  evaluation  of 
ALMPs, it is not clear how the public employment services will be able to fulfil the new tasks 
with the existing capacity.41 Many of the labour offices remain understaffed and there is no 
regular comprehensive analysis of ALMPs based on harmonised data collection. 

Regional disparities  in employment are  very large, mirroring differentials in economic 
development.  The  share  of  ALMP  participants  among  job  seekers  is  significantly  lower  in 
regions with higher unemployment rates.42 Workers appear reluctant to move from areas with 
high unemployment to those where there are vacancies (in particular, urban areas). Part of the 
reason for the current mismatch is the underdeveloped rental housing market and the lack of 
affordable housing in economically dynamic regions. Three activation policies currently aim 
to  increase  regional  mobility.43  However,  so  far  they  have  not  significantly  reduced 
unemployment. 

Graph 3: Nominal GDP per capita by 
region (Euro) 

Graph 4: Registered unemployment rate by 
region (% of labour force) 

41  The  caseload,  estimated  in  terms  of  the  number  of  registered  jobseekers  per  front  line  staff,  has  more  than 
doubled since 2006. Few resources are dedicated to placement and ALMP-related services in Slovakia (around 
50 %). In Luxembourg and Norway it is 80 % (Duell, 2010), OECD 2012 Economic survey. 
42  While  12 %  of  unemployed  people  on  average  were  participating  in  2010,  this  figure  reached  25 %  in 
Bratislava and 10 % in eastern regions (OECD Economic Surveys, 2012). 
43 Three ALMP measures supporting internal mobility that will remain legally claimable in the amended Act on 
Employment  Services  are  contributions  (i)  for  commuting  to  work;  (ii)  for  moving  to  work;  and  (iii)  to 
compensate operational costs of a sheltered workshop/workplace or transportation of employees. 

21 

 
 
                                                 
Source: Commission  

Source: Commission  

Despite  relatively  low  expenditure  in  unemployment  and  social  assistance,  the  existing 
array  of  social  and  activation  policies  suffers  from  considerable  complexity  and  the 
existence  of  disincentives.  Unemployment  benefits  only  last  for  six  months.  After  that,  the 
unemployed  can  request  social  assistance  and receive  limited  individual  support  but  are  not 
obliged to register with the labour office. They may therefore be uninformed about vacancies, 
activation or training opportunities, and may progressively become detached from the labour 
market.  While  a  comprehensive  reform  is  planned  for  2014,  some  changes  aimed  at 
eliminating the misuse of social assistance entered into force in January 2013 and go in the 
right  direction.  By  contrast,  the  tax  and  benefits  system  continues  to  provide  insufficient 
incentives  for  the  longer-term  unemployed  to  take  up  low-paid  jobs  because  social  benefits 
are  withdrawn  rather  quickly  and  not  through  a  more  gradual  phasing  out.44  Existing 
activation  measures  for  long-term  unemployed  are  not  sufficiently  effective.45  At  the  same 
time,  social  security  contributions  paid  by  an  employer  hiring  a  low-paid  worker  have 
remained  high  at  around  35 %  of  the  gross  wage.  Although  the  reformed  system  of  ALMP 
envisages  a  hiring  subsidy  in  the  form  of  a  contribution  to  employment  of  disadvantaged 
jobseekers  and  a  contribution  to  support  local  and  regional  employment,  the  support  is  not 
focused solely on the long-term unemployed. Insufficient progress has therefore been made in 
reducing the tax wedge for the low-skilled unemployed. 

Despite some improvements, the situation of young people remains difficult. Long-term 
unemployment  among  the  young  (15-24)  is  almost  three  times  higher  than  the  EU  average 
(18.1 %  vs  6.4 %  across  the  EU  in  2011).  The  graduate  practice  scheme  for  unemployed 
graduates under 26 is being reformed to improve targeting and effectiveness. In autumn 2012, 

44  For  people  moving  from  inactivity  with  an  activation  allowance  to  minimum  wage  work,  the  marginal 
effective tax rate, which measures the part of a person’s income that goes on taxes, exceeds 60 %. It reaches 80 % 
for a single parent with 2 children.  
45  According  to  a  recent  evaluation  of  activation  strategies  in  Slovakia,  the  probability  that  jobseekers 
participating in activation works will not find employment in labour market is 80 %. 

22 

 
 
 
 
 
                                                 
two projects (worth EUR 70 million) co-financed by the European Social Fund were launched 
in the framework of the Youth Action Plan. They aim to create 13 000 jobs mainly for young 
people. Through the Youth Employment Initiative, the ESF will reinforce its action targeted at 
young  people  not  in  employment,  education  or  training.46  The  implementation  of  a  Youth 
Guarantee would help to set a more coherent framework to address youth employment.47 

The recently adopted Labour Code entered into force on 1 January 2013. It introduced an 
increase in employment protection for regular and temporary contracts and a new definition of 
dependent  work  to  minimise  the  use  of  other  forms  of  work  as  disguised  employment  (see 
also  section  3.1).48  Although  the  labour  market  remains  flexible,  the  recent  reform  might 
increase  labour  costs  and  discourage  employers  from  hiring  at  a  time  when  the  economy  is 
slowing down and the labour market remains sluggish. It is too early to assess the impact of 
the labour code reform on employment, but it is important that it is regularly monitored and 
independently evaluated. 

Women  face  barriers  to  entering  or  staying  in  the  labour  market.  The  gender 
employment gap for young women (20-29) is almost double the EU average and the impact of 
parenthood  on  female  employment  remains  among  the  highest  in  the  EU.  There  are  not 
enough  good  quality,  affordable  early  childhood  education  and  care  services,  which  also 
contribute  to  supporting  children’s  development.  In  particular,  facilities  for  children  under 
three  are  insufficient  due  to  a  lack  of  resources  at  local  level  and  to  shortcomings  in 
legislative provisions.49 Maternity leave and parental leave can be very long, making it more 
difficult for mothers to smoothly re-enter the labour market.50 Slovakia is among the Member 
States  with  the  highest  gender  pay  gap  but  has  no  policies  in  place  to  tackle  this  problem. 
Insufficient progress has been made in  acting on the  2012  Council Recommendation  on  the 
availability of childcare facilities. 

Policies promoting access to lifelong learning and increasing the employability of older 
workers  also  appear  insufficiently  developed.  Participation  in  lifelong  learning  remains 
among the lowest in the EU and contributes to the persistence of skills mismatches. Given the 
projected  increase  in  the  retirement  age,  promoting  longer  working  lives  will  be  important, 
also with a view to ensuring pension adequacy. 

46  Calls  have  been  recently  launched  for  the  allocation  of  EUR  220  million  from  the  European  Regional 
Development Fund to support job creation for youth in small and medium-sized enterprises Council).   
47 Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (2013/C 120/01) to ensure that 
all young people under the age of 25 years receive a good-quality offer of employment, continued education, an 
apprenticeship or a traineeship within four months of becoming unemployed or leaving formal education.   
48 The new law reintroduced the possibility of benefiting of both a notice period of up to 3 months (depending on 
job  tenure)  and  a  severance  payment  of  up  to  4  months  (depending  on  job  tenure)  in  case  of  lay-off.  The 
maximum duration of consecutive fixed-term contracts was also reduced to 2 years. Night work was prolonged 
by  1 hour  (now  it  is  between  10pm  and  6am).  The  trade  unions  regain  more  negotiation  and decision-making 
powers and must no longer prove that they represent at least 30 % of employees. 
49 Only 3 % of children under three were enrolled in formal and pre-school care facilities (compared to 29.2 % in 
the EU in 2011). 
50 The current entitlement for postnatal leave is up to three years. This can be spread over five years with the 
employer’s agreement. 

23 

 
 
                                                 
Education 

High youth unemployment partly reflects the low quality of the education and training 
systems  and  their  limited  relevance  to  labour  market  needs.  Relatively  low  public 
expenditure in education and the low attractiveness of the teaching profession exacerbate this 
problem.51 Recently adopted and proposed reforms go in the right direction. Notably, the NRP 
sets the objective of gradually increasing public expenditure on education to 6 % of GDP by 
2020  while  increasing  efficiency  by  adjusting  the  number  of  schools  and  teachers  to 
demographic developments. However, much of the planned increase in education is likely to 
be outside the current government’s mandate. The NRP also announces several measures for 
teachers.  Improved  initial  training  of  teachers  and  continuous  monitoring  of  the  recently 
introduced career system for teachers could contribute to improving the quality of educational 
outcomes, which strongly depends on the role of teachers, by increasing the attractiveness of 
the  profession  and  encouraging  teachers  to  participate  in  in-service  training.  It  will  be 
essential to ensure that the courses offered respond to the needs of teachers and that the status 
of teachers and the overall system of incentives for them are sufficient to make the teaching 
profession attractive to graduates. 

Higher  education  reform  was  adopted  in  December  2012.  It  aims  to  improve  internal 
quality  assurance  systems  and  the  quality  of  part-time  studies  and  teaching.  It  also  contains 
incentives to increase the internationalisation of higher education institutions. However, there 
are not enough professionally oriented bachelor degrees. A comprehensive new law on higher 
education  institutions  is  under  consideration,  as  is  a  revised  funding  mechanism  that  would 
link the financing of education more closely to the overall quality of education. A revised law 
on vocational education  and training (VET)  was  adopted in 2012. It creates a more flexible 
and closer link between VET institutions and the labour market.52 Pilot projects creating new 
apprenticeships  in  companies  have  been  introduced.  The  authorities  are  working  on  further 
developing work-based learning in VET and reinforcing the involvement of social partners. 

Social policies 

Despite a relatively low number of people at risk of poverty or social exclusion, around 
10 %  of  the  population  suffered  from  severe  material  deprivation  in  2011.  Children  are 
much more at risk than the overall population, with a risk-of-poverty rate of 21.2 % compared 
to  13 %  for  the  overall  population.  Yet  Slovakia  did  not  use  the  2012  allocation  of  funds 
(EUR 5 million) from the EU programme for food for the most deprived because it was unable 
to  coordinate  the  delivery  of  assistance.  The  situation  of  those  with  the  lowest  incomes  has 

51  The  latest  available  data  confirms  that  public  education  expenditure,  as  a  proportion  of  GDP,  and  teachers’ 
relative wages, remains among the lowest in the EU. In addition, funding mechanisms favour quantity more than 
quality  and  are  insufficiently  adapted  to  local  needs.  Public  and  private  returns  on  education  in  Slovakia  are, 
however, relatively high by OECD standards, especially because the chance of finding a job increases with the 
level of qualification. 
52 Companies operating in sectors such as information technology and the automotive sector report difficulties in 
hiring skilled workers. 

24 

 
 
                                                 
also  been  negatively  impacted  by  rising  out-of-pocket  spending  on  healthcare,53  which  may 
have  adversely  affected  their  access  to  healthcare.  A  strategy  for  de-institutionalisation  of 
social services54 was adopted in December 2011, but the implementation of the pilot national 
projects has been considerably delayed. 

Insufficient  progress  was  made  in  acting  on  the  Council  Recommendation  concerning 
the  marginalised  Roma  community.  Education  measures  were  announced,  but  have  not 
been adopted yet. Employment measures, on the other hand, have yet to be drafted. Even if 
access  to  pre-school  education  is  legally  guaranteed  for  all,  participation  in  early  childhood 
education  is  low  compared  to  the  EU  average  (77.5 %  vs  92.5 %),  and  minorities  from 
disadvantaged  areas  are  mostly  concerned.  At  the  same  level  of  education,  the  Roma 
unemployment rate is between two and eight times higher than the non-Roma unemployment 
rate  in  the  same  area.55  Anti-segregation  education  policies  and  anti-discriminatory 
employment policies are inadequately implemented.56 The numerous projects funded through 
the  Structural  Funds  brought  no  significant  improvements  due  to  inefficient  coordination, 
weak capacity in the line ministries and among project promoters (e.g. remote municipalities) 
and insufficient involvement  of  Roma stakeholders in designing and implementing  projects. 
No relevant social considerations are currently being taken into account in public procurement 
contracts in Slovakia (for example through contract performance clauses). 

3.4. 

Structural measures promoting growth and competitiveness 

As  a  small  open  economy  with  relatively  high  profitability  and  productivity  growth, 
Slovakia  is  in  a  favourable  competitive  position.  Manufacturing  plays  a  very  important 
role,  accounting  for  26 %  of  total  value  added  compared  to  the  EU  average  of  15.5 %.  The 
country’s  industrial  base  is,  however,  specialised  in  a  few  capital-intensive,  cyclically 
sensitive sectors. While technology imports have been a source of major productivity gains in 
the  past  ten  years,  the  marked  specialisation  of  the  economy  makes  it  highly  dependent  on 
external demand and vulnerable to global sector-specific developments. In the long term, the 
contribution of foreign direct investment to growth is bound to diminish, while labour costs 
and productivity are expected to converge with EU levels. Due to weaknesses in institutions, 
education  and  the  innovation  system,  the  innovation  capacity  of  domestic  firms  remains 
limited. 

Research, development and innovation policies 

So far, progress towards developing an effective policy framework supporting research, 
development  and  innovation  has  been  limited.  Policy  documents  and  measures  adopted 

53 It increased by 15.3 % between 2000 and 2010 (OECD Health Data 2012). 
54 Deinstitutionalisation is the process of replacing long-stay care homes for children or adults with less isolated 
community  or  family-based  services  that  respect  the  right  to  live  on  your  own  and  to  be  included  in  the 
community. 
55 Economic Survey, OECD, 2012. 
56  Prešov  Regional  Appeal  Court’s  decision  of  30  October  2012  on  the  illegal  segregation  of  Roma  pupils  at 
elementary school from kindergarten pupils in Šarišské Michaľany. 

25 

 
 
                                                 
since  2007  have  identified  existing  weaknesses.  But  ‘knowledge  triangle’  policies  remain 
beset  by  governance  problems  and  fragmented  responsibility.  The  lack  of  excellence  in 
research  and  the  quality  of  tertiary  education  remain  major  weaknesses  as  demonstrated  for 
example  by  the  low  number  of  frequently  quoted  scientific  publications.  The  generation  of 
intellectual  assets  and  patent  revenues  is  low  by  international  comparison.  Collaboration 
between companies and domestic research centres is limited, resulting in a low proportion of 
innovative  enterprises.  Against  this  background,  an  important  priority  is  to  finalise  and 
implement the research, development and innovation strategy for smart specialisation.57 

In 2012, several measures were announced to improve collaboration between the public 
and  private  sector  but  they  have  been  implemented  only  partially,  due  in  part  to 
insufficient  and  ineffective  use  of  funding.  The  R&D  Operational  Programme  provided 
81 % of R&D funds, whereas innovation policy measures were almost completely funded by 
the  Competitiveness  and  Growth  Operational  Programme.  Most  financial  assistance  was 
provided  through  grants.  Although  planned  for  several  years,  more  sophisticated  funding 
mechanisms such as support for clusters and innovation vouchers have not yet been put into 
operation.  Although  the  Slovak  Government’s  Council  for  Science,  Technology  and 
Innovation was recently established, an effective governing structure is not in place yet. 

Business environment 

Despite  some  recent  improvements,  Slovakia’s  regulatory  policy  environment  scores 
poorly as regards administrative capacity and the administrative burden on start-ups. A 
comprehensive  strategy  to  improve  the  business  environment  was  adopted  in  2011  and  an 
update  with  new  measures  was  approved  by  the  Government  in  2013.  While  54  measures 
have  been  implemented  since  2011,  the  goal  of  reducing  the  administrative  burden  on 
businesses  by  2012  has  not  been  reached.  On  the  other  hand,  the  time  needed  to  start  up  a 
business was reduced to two days for a trade licence and three days for company registration 
by the court. With some notable exceptions, overall analytical capacity at central government 
level remains rather limited. Impact assessments are often carried out only formally and tend 
to focus only on the impact on the state budget. To address this problem, analytical units are 
being  further  developed  in  key  ministries.  The  indicators  measuring  various  aspects  of 
entrepreneurship  are  well  below  the  EU  average,  suggesting  that  school  education  does  not 
sufficiently  encourage  a  sense  of  business  initiative.  Slovakia  has  a  relatively  low  score  for 
ease of paying taxes in international comparisons. 

Network industries 

There is room for improvement in the market functioning of network industries, notably 
in  the  energy  sector.  Competition  in  the  energy  sector  has  improved  in  recent  years,  with 
retail consumers gradually starting to benefit from liberalisation of the market. On the other 
hand,  consumers’  switching  rates  remain  low  and  electricity  prices  for  medium-sized 
industrial  consumers  are  among  the  highest  in  the  EU  (see  Box  2  for  a  discussion  of  the 

57 The strategy should provide a coherent framework to prioritise EU funds on a limited set of areas with genuine 
growth  potential  in  the  next  programming  period..  It  should  also  address  issues  related  to  governance 
arrangements, involvement of stakeholders and monitoring mechanism. 

26 

 
 
                                                 
energy  market).58  Following  the  adoption  of  the  Postal  Service  Act,  the  postal  market  has 
been  fully  liberalised  since  2012.  However,  the  letter  mail  market  is  dominated  by  the 
incumbent and there is still only limited competition. Professional services are subject to entry 
and  conduct  regulations  but  there  are  no  quotas  or  economic  need  tests.  Slovakia  is  also 
lagging behind when it comes to the award of spectrum to operators for the rollout of mobile 
broadband. This delay compounds the problem of low broadband coverage and the take up of 
broadband is also among the lowest in the EU (19 % of the population in January 2013, 9 pps 
below the EU average). 

Box 4 — Energy market in Slovakia 

Due to partial liberalisation of the sector, the number of retailers in both the electricity and gas market 
has risen in recent years. However, the regional market share of incumbents remains high, especially 
in the household segments. 

In the Slovak Republic, the Regulatory Office for Network Industries (RONI) sets a price cap on end-
user  gas  and  electricity  prices  for  households  and  small  industrial  consumers.59  The  price  cap  on 
electricity and gas prices for small industrial consumers was reintroduced in 2012, in contrast with the 
Commission  Communication  ‘Making  the  internal  energy  market  work’  (COM(2012) 663)  and  its 
country specific annex. On the other hand, prices for medium and large industrial consumers remain 
unregulated. 

Electricity  retail  is  dominated  by  three  regional  companies  which  also  operate  distribution  networks 
through  their  legally  unbundled  subsidiaries.  In  2011,  switching  rates  were  still  low  (1.6 %  for 
industrial users and 0.8 % for households), pointing to a non-dynamic market. Retail activities in the 
gas sector are concentrated, with one company covering more than 75 % of the market. In 2011, only 
0.21 % of gas consumers switched operator although the rate was 10.1 % among large industrial users60 

Due  to  effective  market  coupling,  Slovakia  has  the  same  wholesale  electricity  prices  as  the  Czech 
Republic.  However,  the  unregulated  end-user  prices  for  medium-sized  industrial  consumers  in 
Slovakia were the fifth highest in the EU in 2011.61 On average they were around 21 % higher than 
those  for  their  Czech  competitors  in  the  past  four  years.  This  appears  to  be  due  less  to  end-price 
regulation, taxes or generation prices, than to the high network costs, which are among the highest in 
the  EU.62  Unlike  energy  costs,  which  decreased,  network  costs  increased  between  2009  and  2012.63 

58  Data  refer  to the  consumption band for  light  industry  (Band IC:  500 MWh  <  Consumption  <  2 000  MWh). 
Although  it  is  generally  used  for  cross-country  comparison,  it  covers  only  a  small  share  of  Slovak  electricity 
users due to the structure of the Slovak industry.  
59 ‘Small industrial consumers’ refers to those consuming less than 30 MWh electricity and 100 MWh gas. The 
calculation takes into account the value of the regulated asset base, operational costs, depreciations and adequate 
profit. 
60 Staff working document ‘Energy Markets in the European Union in 2011’ (SWD(2012)368)) using data from 
the CEER database. 
61 Eurostat. 
62 Cross-country comparisons of network costs are difficult to make as different countries might include different 
elements in the network costs. In particular, support for renewables and/or cogeneration can be reported either 
under  network  costs  or  under  taxes  and  levies.  In  the  case  of  Slovakia  and  the  Czech  Republic,  however, 

27 

 
 
 
                                                 
 
The  high  level  of  transmission  and  distribution  tariffs,  which  form  part  of  the  network  costs,  may 
reflect the size of the country, its topography, the volume of electricity transported, or the recent re-
evaluation of assets by the Slovak transmission system operator and of the three distribution system 
operators.64 The increase in network costs has also been affected by increasing support for renewable 
energies and for combined heat and power generation, and by environmentally harmful subsidies for 
domestically produced lignite.65 

Differences  in  network  costs  may  also  reflect  a  lack  of  transparency  in  the  tariff  setting  mechanism 
applied by the RONI. In addition, there appears to be no sound economic analysis underpinning the 
regulatory  regime  and  this  weakens  the  RONI’s  accountability.  As  a  consequence,  the  overall 
regulatory framework is viewed as scarcely predictable, with adverse consequences for tariffs, longer-
term investment and multi annual contracts for customers. As regards infrastructure, there is still no 
comprehensive  roll-out  plan  for  smart  meters;  unplanned  flows  of  electricity  originating  from  the 
Austrian and German grids limit cross-border transmission capacity and are a source of concern for the 
security of Slovakia’s network. The construction of new electricity lines and interconnections would 
be needed to address these issues. 

Retail  prices  of  gas  are  below  the  EU  average  for  households  while  they  are  slightly  above  the  EU 
average for industry.66 As in other Eastern European countries, wholesale gas prices  are higher than 
prices in north-west Europe where access to multiple sources of gas and competitive trading has led to 
price decreases. There are still no gas interconnections on the north-south axis. The main gas company 
in  Slovakia  imports  gas  from  Russia  predominantly  with  long-term  contracts  and  maintains  a  high 
market share in both wholesale and retail markets. This share has been declining mainly in the non-
regulated segments. Under the European Energy Programme for Recovery, the EU is co-financing the 
Hungary-Slovakia gas interconnector, which is currently in the implementation phase. 

Energy efficiency and climate change 

Despite  notable  progress,  more  ambitious  efforts  are  required  to  improve  the  energy 
efficiency  of  the  economy.  In  line  with  the  Directive  on  Energy  Efficiency  2012/27/EU, 
Slovak authorities have notified the energy efficiency target with final energy savings of 23 % 
(3.12  Mtoe),  or  primary  energy  savings  of  20 %  (4.07  Mtoe)  in  2020.  The  authorities  have 

renewable  energy  support  schemes  are  included  in  network  costs  and  have  similar  shares.  According  to  data 
provided  by  Eurostat,  Slovakia’s  network  costs  for  industrial  consumers  are  40 %  higher  than  in  the  Czech 
Republic,  while  they  are  broadly  comparable  for households. Network  charges for  households  are  nonetheless 
among the highest in the EU in both countries. 
63  The  network  costs  between  2009  and  2012  increased  by  around  18%.  Energy  &  supply  costs  decreased 
between 2009 and 2012 by around 28%. Source: Eurostat. 
64 Re-evaluation of assets increases the value of assets entering the regulated asset base that is then used for tariff 
calculation.  If  the  money  is  not  reinvested  this  approach  leads  to  higher  tariffs  without  real  cost  increases  for 
transmission and distribution operators. 
65 All these elements are part of network costs in Slovakia. Support for renewable energy and CHP has been the 
fastest growing sub-component of network costs, according to the RONI. It rose from 0.12 EUR/MWh in 2009 
to  11.95  EUR/MWh  in  2012.  In  2012  it  represented  about  9.3 %  of  the  final  electricity  price  for  households. 
Support for domestic lignite represented around 1.5 % of the final electricity price for households. For industrial 
consumers these shares are not available. RONI Annual Report 2011. 
66 Comparison of consumption bands D2 (5.56 MWh-55.6 MWh) for households and I3 (2.77 GWh-27.8 GWh) 
for industrial consumers in 2011. 

28 

 
 
                                                                                                                                                         
also  adopted  an  energy  efficiency  action  plan  to  tackle  the  economy’s  carbon  and  energy 
intensity.  Several  positive  measures  were  taken,  such  as  the  implementation  of  the 
SLOVSEFF  programme  and  the  introduction  of the  energy  saving  awareness  campaign  and 
the  energy  auditing  scheme  in  industry.  Structural  funds  were  used  to  support  sustainable 
energy investments in SMEs and the public sector. However, Slovakia has not yet complied 
with the obligations on public procurement stemming from the Energy Services Directive.67 
Economic  activities  that  have  a  negative  impact  on  the  environment,  such  as  mining,  also 
continue  to  be  subsidised.68  EU  Structural  funds  for  energy  saving  projects  channelled 
through grants may have led to distortion of competition, crowding out private investment and 
commercially based financing products. On the other hand, the use of financial instruments, 
including revolving funds and guarantee schemes, is not sufficiently developed. 

Regarding  renewables,  Slovakia  is  on  track  to  meet  its  2020  targets.  The  proportion  of 
renewable  energy  sources  increased  from  6.2 %  in  2005  to  9.7 %  in  2011.  The  support 
framework,  in  the  form  of  feed-in  tariffs,  was  changed  in  2011  and  2012.  While  Slovakia 
needs to speed up renewably energy development, the cost-effectiveness and transparency of 
the  renewables  promotion  mechanism,  including  the  feed-in  tariff  system,  should  be 
reviewed.  In  addition,  it  is  important  to  further  simplify  administrative  procedures  and  to 
reinforce the electricity infrastructure where necessary. 

Transport infrastructure 

The  lack  of  adequate  infrastructure  remains  an  obstacle  to  growth  in  the  eastern 
regions.  Slovakia’s  specialisation  in  export-oriented  manufacturing  places  increasing 
demands  on  the  quality  of  transport  infrastructure.  There  has  been  a  delay  in  completing  a 
long-  and  medium-term  transport  master  plan  to  identify  key  priorities  consistent  with  EU 
transport policy, in particular the Trans-European Transport Network (TEN-T) and to provide 
a strong basis for programming of EU funds.69 The very high unit costs of new or renovated 
infrastructure  also  reflect  weak  planning,  poor  design  and  inefficiencies  in  public 
procurement.70 Compared to neighbouring Member States, Slovakia’s railway infrastructure is 
underdeveloped. This, together with the high density of the rail network, may lead to greater 
investment needs in the future. In terms of rail passenger and freight transport, the market has 
been  liberalised  but  the  market  shares  of  new  entrants  are  low,  partly  reflecting  high 
infrastructure access charges. 

3.5.  Modernisation of public administration 

The  public  administration  continues  to  suffer  from  weaknesses  that  reduce  its 
effectiveness.  The  2011  Worldwide  Government  Effectiveness  indicator  ranked  Slovakia 

67  The  requirement  to  include  a  minimum  of  two  options  from  the  ‘list  of  eligible  energy  efficient  public 
procurement measures’ in Annex VI of the ESD has not been met. 
68 Fiscal Policy Institute (2011), A subsidy of one miner constitutes twofold of his gross wage. 
69 After the delay, the first phase of the transport plan should be ready in June 2013. 
70 This was already communicated to the Slovak authorities in the Position of the Commission Services on the 
development of the Partnership Agreement and programmes in Slovakia for the period 2014-2020. 

29 

 
 
                                                 
19th  among  the  EU  Member  States.  High  staff  turnover  linked  to  the  political  cycle 
undermines  its  independence  and  weak  analytical  capacities  impair  the  evaluation  and 
implementation of public policies. In 2012, the government  adopted  an  important  reform  of 
the public administration with implementing measures spanning over several years. The main 
objective  of  the  initial  phase  of  the  reform  is  to  streamline  the  organisational  structure  of 
local-  and  district-level  state  administration.  Ministries  and  central  government  bodies  are 
expected to undergo functional audits to identify duplication and optimise internal processes. 
At  a  later  stage,  the  reform  envisages  the  modernisation  of  human  resources  management. 
Improving  the  quality  of  public  service  will  be  crucial  for  the  reform  to  be  fully  and 
successfully  implemented  and  the  challenges  identified  in  this  area  with  the  2012  CSR 
remain. In its current stage the reform does not sufficiently focus on weaknesses at the level 
of the central administration and a modern system of human resources management is yet to 
be  developed.  Finally,  whereas  the  availability  of  e-government  services  for  businesses  is 
close to the EU average, e-government services for citizens are not significantly developed.71  

Current international indicators suggest that Slovakia ranks low in terms of perceived 
corruption.72  Concerns  also  exist  with  regard  to  the  capacity  of  judicial  authorities  to 
investigate and prosecute corruption offences.73 Despite greater transparency, irregularities in 
public procurement procedures have also persisted. The average and median number of bids 
are  among  the  lowest  in  the  EU,  indicating  a  very  low  overall  level  of  public  procurement 
competition.  In  2013,  Slovakia  significantly  amended  the  Public  Procurement  Act  to 
streamline  lengthy  tender  procedures,  improve  transparency  requirements  and  enhance 
competition.74  In  addition  to  the  amendment,  the  government  also  decided  to  substantially 
strengthen  the  Public  Procurement  Office.  Progress  has  hence  been  made  in  addressing  the 
2012  CSR  on  public  procurement.  The  effective  application  of  the  new  procurement  rules, 
however, could be facilitated by further developing the skills of officials in charge of drafting 
terms of references, and of evaluating and selecting bids. 

Judicial  and  enforcement  proceedings  for  civil  and  commercial  cases  remain  long  and 
perceived judicial independence is the lowest in the EU.75 The relatively high number of 
pending litigious civil and commercial cases and their sub-optimal rate of resolution results in 
delays impairing access to effective legal recourse. Insolvency proceedings take twice as long 
as  the  EU  average.  Alternative  dispute  resolution  systems  remain  underutilised.  Digital 
infrastructure for the electronic communication and information exchange between courts and 

71 Other areas where there is room for improvement are government-to-government transactions and the inter-
operability of databases among various public institutions. 
72 Transparency International ranked Slovakia 62nd in its global corruption perception index. 
73 OECD Report on implementing the OECD Anti-Bribery Convention in the Slovak Republic, June 2012. 
74 The new law provides for a central electronic market place that is obligatory for below-threshold off-the-shelf 
procurement. The use of non-competitive amendments to the existing contracts has further been restricted. The 
concept of ‘abnormally low tenders’, which can be excluded from procurement, was defined in more detail. A 
new appeal body, with a majority of external members, will decide on appeals against decisions by the Public 
Procurement Office (‘Office’). 
75 Based on the 2010 data in the EU Justice Scoreboard. 

30 

 
 
                                                 
their environment require further investment and reforms.76 With regard to competition law, 
various  court  panels  deal  with  appeals  by  different  parties  in  the  same  case  against  the 
competition  authority’s  decisions.  They  are  often  not  used  to  dealing  with  competition  law 
cases and have limited awareness of the principles of EU competition law. This may result in 
inconsistent  court  rulings  and  undermines  the  judiciary’s  effective  enforcement  of 
competition  rules.  Following  preparatory  work  in  2013,  the  NRP  announces  a  legislative 
proposal in 2014 on the new Code of Civil Procedure. The NRP further proposes amendments 
to the Rules of Enforcement and the introduction of an insolvency register. In 2012, several 
reforms  came  into  effect  on  the  recruitment  and  evaluation  of  judges  and  prosecutors,  the 
functioning  of  the  courts  and  the  Judicial  Council.  Although  some  progress  was  made  with 
regard to the judiciary, the 2012 recommendation remains largely valid. 

76 Idem. 

31 

 
 
                                                 
4.  OVERVIEW TABLE 

2012 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR 1: Take additional measures in 2012 and specify the 
necessary measures in 2013, to correct the excessive deficit 
in a sustainable manner and ensure the structural 
adjustment effort specified in the Council recommendations 
under EDP. Implement targeted spending cuts, while 
safeguarding growth-enhancing expenditure, and step up 
efforts to improve the efficiency of public spending. 
Thereafter, ensure an adequate structural adjustment effort 
to make sufficient progress towards the MTO, including 
meeting the expenditure benchmark. Accelerate the setting 
up of the Fiscal Council and adopt rules on expenditure 
ceilings. 

Slovakia is expected to make progress in terms of 
fiscal consolidation but at this stage it is premature to 
comment on the EDP. Limited progress has been made 
on safeguarding growth-enhancing expenditure, 
making public spending more efficient and laying 
down an adequate structural adjustment towards the 
medium-term objective. The Fiscal Council has been 
set-up. The original plan to adopt rules on expenditure 
ceilings has been postponed to the first quarter of 2013. 
No information on current progress towards reaching 
this goal is available. 

CSR 2: Increase tax compliance, in particular by 
improving the efficiency of VAT collection; reduce 
distortions in taxation of labour across different 
employment types, also by limiting tax deductions; link real 
estate taxation to the market value of property; make 
greater use of environmental taxation. 

CSR 3: Further adjust the pay-as-you-go pension pillar, 
mainly by changing the indexation mechanism, introducing 
a direct link between the statutory retirement age and life 
expectancy and introducing a sustainability factor in the 
pension calculation formula reflecting demographic change. 
Ensure the stability and viability also of the fully funded 
pillar. 

CSR4: Enhance the administrative capacity of public 
employment services with a view to improving the 
targeting, design and evaluation of active labour market 
policies to ensure more individualised employment 
services for the young, the long-term unemployed, older 
workers and women. Ensure the provision of childcare 
facilities. Reduce the tax wedge for low-paid workers 
and adapt the benefit system. 

32 

Progress has been made on reducing distortions in the 
taxation of labour across different employment types. 
However, no review of tax deductions has been carried 
out. The legislative changes adopted to fight VAT 
evasion go in the right direction and can help make 
VAT collection more efficient. Nevertheless, there 
continued to be shortfalls in VAT revenue in 2012 and 
the challenge in this area remains. No progress has 
been made on real estate and environmental taxation. 

A comprehensive pension reform has been adopted. 
Within the pay-as-you-go pillar, the indexation 
mechanism was changed and the link between the 
statutory retirement age and life expectancy 
introduced. The sustainability factor in the pension 
calculation has not been introduced. Repetitive 
opening of the fully funded pillar, the reintroduction of 
voluntary participation and several other changes 
undermined the stability of its set-up. After the Ageing 
Working Group reviews and recalculates the S2 
indicator, it will assess the impact of the changes 
adopted on the long-term sustainability of public 
finances. Preliminary estimates show that they have 
improved the long-term sustainability of public 
finances but the long-term financing gap remains high 
compared to that of other Member States. 

Slovakia has only partially implemented this CSR: 
The ALMP reform entered into force in May 2013 
and is expected to improve the targeting and design 
of activation policies and introduced obligatory 
evaluation by public employment services. 
However, despite additional responsibilities and 
increased needs for analytical capacity, public 
employment services have not been strengthened. 
No sufficient progress made on ensuring the 
provision of childcare facilities and reducing the tax 
wedge.  

 
 
CSR 5: Adopt and implement the youth action plan, in 
particular as regards the quality and labour market 
relevance of education and vocational training, including 
through the introduction of an apprenticeship scheme 

CSR 6: Take active measures to improve access to and 
quality of schooling and pre-school education of 
vulnerable groups, including Roma. Ensure labour 
market reintegration of adults through activation 
measures and targeted employment services, second-
chance education and short-cycle vocational training 

CSR 7: Strengthen the quality of the public service, 
including by improving management of human resources 
and strengthening analytical capacities. 

This CSR was only partially implemented. 
The youth action plan was adopted in October 2012. 
In the area of employment, a limited number of 
actions were taken (e.g. two national projects co-
financed by the structural funds, supporting job 
creation for young people); a more systematic 
approach to supporting people seeking a job for the 
first time is lacking. The VET reform adopted in 
September 2012 is in line with the CSR.     

Slovakia implemented this CSR to a limited extent. 
A Roma reform has been publicly announced. It 
includes measures addressing the part of the CSR 
that deals with education. However, this has not 
been followed up by the required legislative acts or 
by the allocation of additional resources. Slovakia 
launched a number of projects supporting social 
inclusion. They are relevant but their sustainability 
and scale is inadequate given the magnitude of the 
problems.  

Slovakia implemented the CSR to a limited extent. 
A comprehensive reform to make local 
administration more efficient was launched this 
year. However, a strategic policy framework to 
improve the quality, human resource management 
practices and analytical capacities of central 
administration is still lacking. No measures were 
adopted to mitigate the impact of the political cycle 
on staffing decisions, nor were mechanisms to 
reduce corruption put in place. The improvement of 
analytical capacities does not seem to be supported 
by sufficient budget allocations.  

Europe 2020 (national targets and progress) 

Employment rate target: 72% 

R&D intensity target: 1.2%  

Employment rate only marginally increased to 
65.2 % in 2012. The unemployment rate reached 
14 % in 2012 and continued rising. Long-term and 
youth unemployment remains among the highest in 
the EU, and the labour market has been marked by 
educational, geographical, and skills mismatches. 
Employment rate of Roma is below 30 %. 

The Slovak R&D intensity (0.68% of GDP) is one 
of the lowest in Europe and Slovakia is not on track 
to reach its national R&D intensity target of 1.2%. 
While the overall R&D intensity was in 2011 just 
above its 2000 level (0.65%), there has been since 
2000 a strong decrease in business R&D intensity 
(from 0.43 % of GDP in 2000 to 0.25% in 2011), 
compensated by the strong increase in recent years 
of the public sector R&D intensity (from 0.22 % of 
GDP in 2000 to 0.42% in 2011).  

Greenhouse gas (GHG) emissions target: +13 % 
(compared to 2005 emissions); ETS emissions are not 

The change in non-ETS greenhouse gas emissions 
between 2005 and 2011 was -2 %. According to the 

33 

 
 
 
covered by this national target 

Renewable energy target: 14% 
Share of renewable energy in all modes of transport: 
10% 

Indicative national energy efficiency target for 2020: 
3.12 Mtoe of final energy savings for the 2014-2020 
period. 

Early school leaving target: 6% 

Tertiary education target: 40% 

Risk of poverty or social exclusion target: 17.2% 

latest available projections, the target would be 
achieved by a wide margin as total change over 
2005-20 would reach -24 %. 

Share of total renewable energy in gross final 
energy consumption was 9.7 % in 2011 and 0.4 % 
in the transport sector.77  

Slovakia has set an indicative national energy 
efficiency target in accordance with Articles 3 and 
24 of the Energy Efficiency Directive 
(2012/27/EU). It has also expressed it, as required, 
in terms of an absolute level of primary and final 
energy consumption in 2020 and has provided 
information on the basis on which this data has been 
calculated. Reaching the target in 2020 implies 
achieving a level of 16.2 Mtoe primary 
consumption and 10.39 Mtoe final energy 
consumption. 

The rate increased from 5% in 2011 to 5.3% in 
2012, Slovakia being the second-best EU performer. 
National target is 6%, taking into account increasing 
proportion of Roma children at high risk of drop-
out. Further measures to support their educational 
achievements are needed to stop the negative 
progression. 

Despite limited progress in 2012 (from 23.4% in 
2011 to 23.7% in 2012), there has been a 60% 
increase since 2006. 

People at-risk-of-poverty or social exclusion 
decreased slightly by 6 000 to 1 112 000 in 2011. 
The achievement of the target to lift 170 000 out of 
the risk of poverty or social exclusion by 2020 is 
not realistic given the deteriorating conditions in the 
labour market and the negative impact of the crisis 
on disposable income of households. The risk of 
social exclusion remains significant in particular 
among children, Roma (above 90 %), low-skilled, 
single parents with dependent children. 

77 Source: Eurostat. April 2013. For 2011, only formally reported biofuels compliant with Art. 17 and 18 of 
Directive 2009/28/EC are included. 

34 

 
 
 
 
 
                                                 
 
5.  ANNEX 

Table I. Macroeconomic indicators 

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-
2009

2010

2011

2012

2013

2014

4.3
0.6
7.2
6.2
13.2
31.1
24.8

-6.5
33.8
12.7
42.6
49.0
2.6

3.9
-0.4
7.8
3.7
18.7
26.1
21.1

-6.4
45.3
-6.4
37.5
43.9
3.3

5.3
2.0
2.8
3.9
12.6
25.0
20.1

-3.6
31.5
-8.7
33.5
37.0
1.5

4.4
-1.1
0.7
3.9
14.5
21.0
20.1

-7.7
41.0
-22.2
32.3
40.0
1.3

3.2
-0.6
4.1
1.4
13.6
23.1
21.5

-5.1
43.3
-26.3
33.3
38.3
1.6

2.0
-1.1
3.7
-3.1
14.0
21.5
22.2

-4.3
52.1
n.a
33.1
37.4
1.9

1.0
-2.9
1.9
0.3
14.5
21.5
22.8

-3.0
54.6
n.a
33.9
36.9
1.9

2.8
-3.2
2.0
1.5
14.1
21.6
23.7

-3.1
56.7
n.a
33.2
36.3
1.9

-4.2

0.4

-1.0

4.1

2.5

6.7

7.4

7.6

n.a
n.a
15.5
29.6

n.a
n.a
15.1
28.8

n.a
n.a
14.5
28.2

-69.4
-2.4
18.7
26.9

-61.3
-6.5
18.3
24.9

-78.2
-16.0
22.5
25.9

-68.9
0.9
16.8
26.4

-70.7
-2.3
15.0
26.1

1.1
n.a
30.4
1.1
18.4
5.1

2.7
37.3
31.0
1.9
18.9
7.0

4.5
55.2
32.6
5.3
16.9
7.4

-1.3
32.1
31.1
1.3
16.5
4.0

-0.6
40.9
31.4
3.3
16.9
5.2

1.7
37.8
30.6
1.8
18.2
6.3

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 goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on 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.

-0.9
58.0
-0.2
-1.4
1.6
50.6
40.4
8.3
130.9
94.5
115.7

-0.8
56.4
0.6
-2.2
1.7
50.7
39.7
8.2
129.3
93.2
123.6

3.3
n.a
5.0
-2.1
1.9
52.3
39.3
7.4
125.7
92.4
134.1

-5.8
48.4
-2.5
-2.4
0.4
53.1
37.0
7.8
115.6
97.4
110.6

4.5
n.a
7.5
-2.3
1.2
n.a
n.a
n.a
124.5
93.2
137.9

4.0
n.a
6.3
-2.2
1.5
n.a
n.a
n.a
125.4
93.2
136.4

-6.2
26.4
-6.7
0.2
-0.3
54.5
35.4
6.1
76.9
100.9
80.9

-6.5
33.3
-4.5
-2.0
-0.5
53.4
36.4
6.1
85.1
100.8
90.8

-0.5
n.a
29.4
0.9
17.4
3.8

-0.8
n.a
29.8
1.0
18.0
3.3

Source :
Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

35 

 
 
 
 
Table II. Comparison of macroeconomic 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)

2012
COM SP
2.0
-0.6
-3.7
8.6
2.8

2.0
-0.6
-3.7
8.6
2.8

2013
COM SP
1.2
-0.1
2.3
3.3
3.5

1.0
0.0
1.4
3.0
2.4

2014
COM SP
2.9
1.5
3.3
4.9
4.1

2.8
0.9
3.0
6.2
5.1

-1.5
-1.6
5.2
-1.1
0.1
14.0
2.0
3.7
1.4
2.0
3.3

-1.3
-2.2
5.5
-1.0
0.1
14.0
2.1
3.7
1.4
2.0
2.4

0.2
0.1
0.7
-2.9
0.0
14.5
0.9
1.9
2.5
1.7
4.0

0.3
0.6
0.2
-2.3
-0.5
14.3
1.7
2.4
1.9
2.6
1.9

1.4
0.0
1.4
-3.2
0.5
14.1
2.3
2.0
2.0
3.0
4.5

1.3
0.3
1.3
-1.9
0.5
13.8
2.3
2.5
2.0
3.5
2.4

2015
SP
3.3
2.6
2.4
4.8
4.0

1.9
0.1
1.3
-0.9
0.7
13.0
2.6
2.5
2.1
4.4
3.1

2016
SP
3.6
3.2
2.0
4.7
4.3

2.2
0.2
1.1
0.5
0.8
12.1
2.8
2.4
2.0
4.7
3.7

Note:
1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme 
scenario using the commonly agreed methodology.

Source :

Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

36 

 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

6

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

6

Expenditure
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 gap

2

Cyclically-adjusted balance

2

3
Structural balance (SB)
Change in SB
Two year average change in SB 

3

Structural primary balance
Change in structural primary balance
Expenditure benchmark

Applicable reference rate

4

2012

2013

2014

2015

2016

COM COM

33.1

33.9

9.9
5.6
12.7
5.0

37.4

9.8
5.9
13.6
4.6

36.9

SP

34.1

9.8
5.9
13.4
5.0

37.0

1
COM

33.2

9.6
5.9
13.1
4.6

36.3

SP

31.8

9.3
5.9
12.8
3.8

35.2

SP

30.6

8.8
6.0
12.7
3.1

33.8

SP

31.7

8.7
6.1
12.7
4.2

34.1

35.6

35.0

35.1

34.4

33.3

31.9

32.0

7.0
4.3
18.6
1.4
1.9
2.4
1.9
-4.3
-2.5
0.2
-4.5

-1.1

-4.0

-4.1
1.1
1.5

-2.3

6.6
4.0
18.3
1.2
1.6
3.3
1.9
-3.0
-1.1
0.9
-3.9

-2.9

-2.1

-3.0
1.2
1.1

-1.1
1.2

6.4
4.0
18.4
1.2
1.7
3.4
1.9
-2.9
-1.0
0.8
-3.7

-2.3

-2.1

-2.9
1.2
1.1

-1.0
1.2

6.5
3.9
18.0
1.3
1.6
3.1
1.9
-3.1
-1.2
0.4
-3.5

-3.2

-2.0

-2.4
0.5
0.8

-0.5
0.5

6.2
4.1
17.9
1.1
1.3
2.7
1.9
-2.6
-0.7
0.4
-3.0

-1.9

-2.0

-2.4
0.6
0.9

-0.5
0.6

5.9
3.7
17.6
1.1
0.7
2.8
1.9
-2.0
-0.1
0.0
-2.0

-0.9

-1.7

-1.7
0.7
0.6

0.2
0.7

5.6
5.3
17.4
1.0
0.6
2.1
2.1
-1.3
0.8
0.0
-1.3

0.5

-1.5

-1.5
0.3
0.5

0.6
0.5

1.83

1.83

1.83

1.50

1.50

1.50

1.50

Change: 
2012-2016

SP

-1.4

-1.2
0.5
0.0
-0.8

-3.3

-3.6

-1.4
1.0
-1.2
-0.4
-1.3
-0.3
0.2
3.0
3.3
-0.2
3.2

1.6

2.5

2.7
-
-

2.9
-

-

5

0.0

0.0

-0.7

-1.9

-1.7

-3.2

0.1

-
-

0.0

-2.4

-2.0

-1.8

-0.8

-0.4

-1.6

 (% GDP)

Deviation
Two-year average deviation (% GDP)
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services 
on the basis of the programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
to 2014 onwards have been updated in 2013. 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 
applicable reference rate. The expenditure aggregate used for the expenditure benchmark is obtained following the commonly agreed 
methodology. A positive sign implies that expenditure growth exceeds the applicable reference rate. 
6The revenue and expenditure figures are based on the General Government Budget Framework for 2014-2016, which assumes some 
expenditure-reducing measures (e.g. reduction of subsidies, a freeze of the wages for most employees financed from the central government 
budget) and revenue-increasing measures (e.g. a sale of emergency oil stocks) for 2014-2016. These measures, however, do not ensure 
achievement of the general government balance targets presented in this table.
Source :
Stability programme (SP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

37 

 
 
 
Average
2007-2011

35.5

2.5

3.5

-0.1

1.4

-1.1

-0.3

-0.9

Table IV. Debt dynamics 

(% of GDP)

1
Gross debt ratio
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

5,6

Gap to the debt benchmark
7
Structural adjustment
To be compared to:
Required adjustment8

Notes:

2012

52.1

8.8

2.5

0.4

1.9

-0.8

-0.6

5.9

2012

n.r.
n.r.

n.r.

2013

2014

COM

54.6

2.5

SP

54.8

2.7

COM

56.7

2.1

1.2

-0.6

1.9

-1.5

-1.0

1.5

2015
SP

56.7

0.4

2016
SP

55.9

-0.8

1.2

-0.9

2.0

-1.8

-1.1

0.1

0.4

1.0

0.0
-0.1

0.3

-0.9

2.1

-1.9

-1.0

-0.2

0.2

0.7

0.0
-0.1

SP

56.3

1.5

1.5

-0.8

1.8

-1.5

-1.1

0.8

0.5

1.0

0.0
0.0

2014

2015

2016

COM / 
3

SP
n.r.
n.r.

4

SP

n.r.
n.r.

SP

n.r.
n.r.

n.r.

SP

n.r.
n.r.

n.r.

n.r.

n.r.

n.r.

n.r.

1.1

0.2

1.9

-0.5

-1.3

1.2

2013

COM / 
3

SP
n.r.
n.r.

1.0

0.3

1.9

-0.6

-0.9

1.3

0.5

0.8

0.0
0.1

4

SP

n.r.
n.r.

1End of period.
2The snow-ball 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, accumulation of financial assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in SP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the SP assuming growth follows the SP projections.
5Not relevant for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of three years 
following the correction of the excessive deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, 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 EDP 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 COM  (SP) budgetary 
projections for the previous years are achieved.

Source :

Stability programme (SP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

38 

 
 
 
 
Table V. Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

SK

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

4.9

1.5

3.5

1.5

2.0

0.2

-0.3

0.6

0.3

-0.2

0.5

3.9

0.4

3.5

1.5

2.0

0.2

-0.3

-0.7

-0.9

-0.3

0.5

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

0.33

52.1

17.7

:

87.0

25.8

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' 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.              
** The critical threshold for the S0 indicator is 0.44. 

Source : 
Commission services; 2013 stability programme.                                                                                                                               

39 

 
 
 
4
0

S
C
P
s
c
e
n
a
r
i
o

C
O
M
c
o
n
s
o

l
i

d
a
t
i
o
n
s
c
e
n
a
r
i
o
(
1
%
p
e
r

y
e
a
r

o
n
S
B

)

i

n
o
r
d
e
r

t

i

o
a
c
h
e
v
e
M
T
O

C
O
M
c
o
n
s
o

l
i

d
a
t
i
o
n
s
c
e
n
a
r
i
o
(
0
.
5
%
p
e
r

y
e
a
r

o
n
S
B

)

i

n
o
r
d
e
r

t

i

o
a
c
h
e
v
e
M
T
O

0

1
0

2
0

3
0

4
0

5
0

6
0

7
0

8
0

(

%
o
f

G
D
P

)

G

r
o
s
s
d
e
b
t

a
s
%
o
f

G
D
P

-

S
K

-

M
e
d
u
m

i

t
e
r
m
d
e
b
t
p
r
o
j
e
c
t
i
o
n
s

C
O
M
n
o
-
p
o

l
i

c
y

c
h
a
n
g
e
s
c
e
n
a
r
i
o

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

C
O
M
+
S
h
o
c
k

(
+
1
p
.
p
.

C
O
M
+
S
h
o
c
k

(

-
1
p
.
p
.

i

n
t
h
e
s
h
o
r
t
-
t
e
r
m

/
l
o
n
g
-
t
e
r
m

i

n
t
e
r
e
s
t

t

t

r
a
e
o
n
m
a
u
r
i
n
g
a
n
d
n
e
w
d
e
b

t

i

n
t
h
e
s
h
o
r
t
-
t
e
r
m

/
l
o
n
g
-
t
e
r
m

i

n
t
e
r
e
s
t

t

r
a
e
o
n
m
a

t

u
r
i
n
g
a
n
d
n
e
w
d
e
b

t

f
r
o
m
2
0
1
5
)

f
r
o
m
2
0
1
5
)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table VI. Taxation indicators 

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

33.0

29.3

29.3

28.9

28.1

28.5

2002

2006

2008

2009

2010

2011

Breakdown by economic function (% of GDP)1
     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

11.2

10.5

10.4

10.1

10.5

7.0

1.1

1.9

1.1

7.5

0.9

2.0

0.8

6.9

0.9

1.8

0.9

6.7

1.1

1.7

0.8

6.3

1.3

1.6

0.8

6.8

1.3

1.6

0.8

14.6

11.2

12.1

12.2

12.2

11.9

0.6

6.1

0.8

2.2

0.8

5.5

0.7

2.3

0.7

5.5

0.6

2.0

0.7

5.0

0.6

2.0

0.5

4.6

0.6

1.9

0.7

4.8

0.6

1.8

42.8

57.3

53.7

47.6

46.7

49.7

Note: 
1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.

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

3 The VAT efficiency is measured via the VAT revenue ratio. The 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 (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

41 

 
 
 
Table VII. Financial market indicators 

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)
              - return on equity (%) 1), 2)
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)

Private debt (% of GDP)
Gross external debt (% of GDP)3)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

1) Latest data (September 2012).
2) Excludes foreign branches.
3) Latest data 2012Q3.

* M easured in basis points.

Source :

2008

2009

2010

2011

2012

101.7

71.6

92.8

3.2
11.1

15.4

16.7

26.1

81.5

0.0

…

47.3

11.3
26.3

0.7

89.5

72.1

96.1

5.3
12.6

6.7

1.1

10.9

87.0

4.3

…

48.9

12.4
27.3

1.5

145.5

106.9

88.2

72.0

…

5.8
12.7

12.6

5.3

14.8

90.7

2.0

…

49.5

15.0
27.7

1.1

77.8

83.9

72.2

…

5.6
13.4

14.5

9.3

13.7

90.3

2.9

…

50.5

17.0
28.0

1.8

82.5

…

…

5.0
15.8

11.2

3.8

11.1

87.2

3.9

…

49.7

23.4
28.4

3.1

134.9

192.4

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).

42 

 
 
 
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, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)
Long-term unemployment rate2 (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)
Youth NEET rate (% of population aged 15-24)

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)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)
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)

Real unit labour cost growth (annual % change)

2007

2008

2009

2010

2011

2012

67.2

68.8

66.4

64.6

65.1

65.0

2.1

58.7

76.0

35.6

2.6

4.5

1.1

5.1

8.0

11.2

8.3

20.6

12.5

6.5

3.2

60.3

77.4

39.2

2.7

4.2

1.4

4.7

4.9

9.6

6.7

19.3

11.1

6.0

-2.0

58.2

74.6

39.5

3.6

4.7

2.7

4.4

4.0

12.1

6.5

27.6

12.5

4.9

-1.5

57.4

71.9

40.5

3.9

5.4

2.8

5.8

2.9

14.5

9.3

33.9

14.1

4.7

1.8

57.6

72.7

41.4

4.1

5.9

2.8

6.6

:

13.6

9.2

33.5

13.8

5.0

0.0

57.3

72.8

43.1

4.2

5.7

2.9

6.8

:

14.0

9.4

34.0

13.8

5.3

14.8

15.8

17.6

22.1

23.4

23.7

1.0

1.0

8.2

0.9

7.2

7.5

0.5

-0.6

0.0

2.0

2.4

0.1

2.3

4.0

4.4

1.5

1.0

2.0

-3.0

-0.7

-2.3

3.7

5.7

7.0

0.0

3.0

6.0

1.5

4.4

4.5

-0.9

-1.4

1.0

3.0

1.4

-0.8

2.2

-0.6

-0.4

-2.0

:

:

2.0

-0.4

2.4

0.7

0.1

-1.3

Notes:
1 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.

2 Long-term unemployed are unemployed persons for at least 12 months.

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

43 

 
 
 
 
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
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households 4 (% of 
people aged 0-59)
In-work at-risk-of poverty rate (% of persons employed)
Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices5
Gross disposable income (households)
Relative median poverty risk gap (60% of median equivalised 
income, age: total)

2006

2007

2008

2009

2010

4.75

1.34

6.91

1.65

0.53

0.00

15.74

1.02

4.75

1.31

6.76

1.55

0.56

0.00

15.43

0.95

5.07

1.40

6.61

1.48

0.60

0.00

15.55

0.77

5.75

1.55

7.77

1.72

1.04

0.00

18.25

0.89

5.55

1.57

7.76

1.76

0.92

0.00

18.02

0.00

2007

2008

2009

2010

2011

21.3

25.8

22.0

10.6

13.7

6.4

4.9

20.6

24.3

21.9

10.9

11.8

5.2

5.8

19.6

23.7

19.7

11.0

11.1

5.6

5.2

20.6

25.3

16.7

12.0

11.4

7.9

5.7

20.6

26.0

14.5

13.0

10.6

7.6

6.3

41.8

40.8

35.7

39.4

33.3

2383

2822

3213

3434

3516

36249

39755

40283

42127

43167

19.2

18.1

23.2

25.7

22.8

Notes:
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 household with zero or very low work intensity (LWI).
2 At-risk-of poverty rate (AROP): 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 (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

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

44 

 
 
 
Table IX. Product markets performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

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)

2003-
2007

6.1

13.1

2008

2009

2010

2011

2012

2.4

3.4

-3.0

6.0

-4.5

25.6

1.4

2.1

2.0

13.8

17.1

-1.4

-19.8

-2.3

12.2

n.a.

7.2

10.0

-10.8

1.0

7.7

-3.6

12.1

12.6

12.9

12.1

n.a.

n.a.

2003-
2007
583

47

0.5

2008

2009

2010

2011

2012

565

18

0.5

565

18

0.5

565

18

0.6

565

18

0.7

545

16

n.a.

13.6

15.8

17.6

22.1

23.4

23.2

3.95

3.61

4.09

4.22

n.a.

n.a.

2007

2008

2009

2010

2011

2012

n.a.

n.a.

1.6

0.8

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

2.0

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of 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 Energy, Transport and Communications Regulation (ETCR).
*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). 

45 

 
 
 
Table X. Green Growth 

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**
Gas 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
Security of energy supply
Energy import dependency

Diversification of oil import sources 
Diversification of energy mix
Share renewable energy in energy mix

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

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

%

HHI
HHI
%

2002-
2006

0.71
1.95
2.54
n.a.
-5.3%
n.a.
n.a.
18.2%
7.5%

0.47
16.0
n.a.
n.a.
n.a.
n.a.
8.5%
n.a.
n.a.
n.a.

n.a.

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

2007

2008

2009

2010

2011

0.53
1.46
2.15
n.a.
-5.0%
18
0.7
18.6%
7.2%

0.30
16.6
0.10
0.03
0.01%
0.01%
13.2%
50.5%
0.78
2.05

0.52
1.41
2.34
0.32
-6.0%
17
0.2
16.5%
6.8%

0.29
15.1
0.12
0.04
0.01%
0.01%
15.8%
51.6%
0.79
1.94

0.50
1.31
2.17
n.a.
-4.4%
16
2.7
15.7%
6.6%

0.31
13.3
0.14
0.04
0.01%
0.01%
14.6%
49.1%
0.73
1.90

0.51
1.31
n.a.
0.30
-5.8%
16
-4
15.6%
6.8%

0.37
n.a.
0.12
0.03
0.01%
0.01%
18.1%
47.3%
n.a.
n.a.

0.48
n.a.
n.a.
n.a.
-6.5%
15
4.7
n.a.
n.a.

n.a.
n.a.
0.13
0.04
0.01%
0.01%
n.a.
49.1%
n.a.
n.a.

68.4%

64.6%

66.4%

63.0%

64.2%

0.69
0.22
5.4%

0.67
0.23
5.4%

0.68
0.22
7.2%

0.66
0.22
7.8%

n.a.
0.22
7.8%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated 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 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
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 activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption 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 renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents
*Provisional figures provided by DG CLIM A. Final figures will be available on 15/04.
** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.
*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

46