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
Date: 2013-05-29
Institutions: European Commission
Subjects: Slovakia, administrative reform, budget deficit, budgetary equilibrium, employment service, energy grid, price of energy, public expenditure, stability programme, tax reform, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 375 final 

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 

{SWD(2013) 375 final} 

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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 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 
Having regard to the recommendation of the European Commission2, 
Having regard to the resolutions of the European Parliament3, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

(3) 

On  26  March  2010,  the  European  Council  agreed  to  the  Commission’s  proposal  to 
launch  a  new  strategy  for  growth  and  jobs,  Europe  2020,  based  on  enhanced 
coordination of economic policies, which will focus on the key areas where action is 
needed to boost Europe’s potential for sustainable growth and competitiveness. 

On 13 July 2010, the Council, on the basis of the Commission's proposals, adopted a 
recommendation  on  the  broad  guidelines  for  the  economic  policies  of  the  Member 
States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on 
guidelines  for  the  employment  policies  of  the  Member  States4,  which  together  form 
the  ‘integrated  guidelines’.  Member  States  were  invited  to  take  the  integrated 
guidelines into account in their national economic and employment policies. 

On 29 June 2012, the Heads of State or Government decided on a Compact for Growth 
and  Jobs,  providing  a  coherent  framework  for  action  at  national,  EU  and  euro  area 
levels using all possible levers, instruments and policies. They decided on action to be 
taken  at  the  level  of  the  Member  States,  in  particular  expressing  full  commitment  to 

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OJ L 209, 2.8.1997, p. 1. 
COM(2013) 375 final. 
P7_TA(2013)0052 and P7_TA(2013)0053. 
Council Decision 2013/208/EU of 22 April 2013 

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(4) 

(5) 

(6) 

(7) 

(8) 

achieving the objectives of the Europe 2020 Strategy and to implementing the country-
specific recommendations. 

On 6 July 2012, the Council adopted a recommendation on Slovakia’s national reform 
programme  for  2012  and  delivered  its  opinion  on  Slovakia’s  updated  stability 
programme for 2011-2015. 
On  28  November  2012,  the  Commission  adopted  the  Annual  Growth  Survey5, 
marking  the  start  of  the  2013  European  Semester  of  economic  policy  coordination. 
Also  on  28  November  2012,  the  Commission,  on  the  basis  of  Regulation  (EU)  No 
1176/2011,  adopted  the  Alert  Mechanism  Report6,  in  which  it  did  not  identify 
Slovakia as one of the Member States for which an in-depth review would be carried 
out. 

On  14  March  2013,  the  European  Council  endorsed  the  priorities  for  ensuring 
financial stability, fiscal consolidation and action to foster growth. It underscored the 
need  to  pursue  differentiated,  growth-friendly  fiscal  consolidation,  to  restore  normal 
lending conditions to the economy, to promote growth and competitiveness, to tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration. 

On 24 April 2013, Slovakia submitted its 2013 national reform programme and on 30 
April  2013  its  2013  stability  programme  covering  the  period  2012-2016.  In  order  to 
take  account  of  their  interlinkages,  the  two  programmes  have  been  assessed  at  the 
same time. 

Based  on  the  assessment  of  the  2013  stability  programme  pursuant  to  Council 
Regulation (EC) No 1466/97, the Council is of the opinion that Slovakia has reduced 
the general government deficit from 7.7%  of  GDP  in  2010  to  4.3%  of  GDP  in  2012 
thanks  to  a  substantial  consolidation  effort  and,  based  on  current  expectations,  is  on 
track  to  correct  the  excessive  deficit.  The  macroeconomic  scenario  underpinning  the 
budgetary  projections  in  the  programme  is plausible.  Compared  to  the  Commission 
forecasts, the authorities assume similar growth rates of GDP with a slightly different 
composition. The objective of the budgetary strategy outlined in the programme is to 
achieve  a  fiscal  position  that  ensures  long-term  sustainability  of  public  finances.  To 
achieve  this,  the  government  confirms  the  objective  of  reducing  the  headline  deficit 
below  the  3%  of  GDP  reference  value  in  2013,  in  line  with  the  Council 
recommendation  under  the  Excessive  Deficit  Procedure.  The  average  annual  fiscal 
effort in 2010-2013 amounts to 1.4% of GDP, well above the required effort of 1% of 
GDP recommended by the Council. A large part of the expenditure savings in 2013 is 
expected from the local governments and other general government units over which 
the  central  government  does  not  have  a  direct  influence.  Achieving  the  target  may 
therefore  be  at  risk,  also  in  light  of  expenditure  overruns  recorded  in  the  past.  The 
programme confirms the previous MTO of -0.5% to be achieved by 2018. The MTO is 
in line with the requirements of the Stability and Growth Pact. For the years following 
the expected date of correction of the excessive deficit the projected improvement in 
the (recalculated) structural budget balance is appropriate 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). Slovakia is expected to comply with the expenditure benchmark. According to 
the  programme,  the  government  debt  is  foreseen  to  remain  below  the  60%  of  GDP 

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COM(2012) 750 final. 
COM(2012) 751 final. 

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reference value in the Treaty until 2016. The Commission's spring forecast projects an 
increase in the debt ratio to 54.6% of GDP in 2013 and 56.7% of GDP in 2014.  

In  order  to  ensure  the  sizeable  reduction  in  the  headline  deficit  since  2011,  the 
authorities  have  also  relied  on  reductions  in  investment  financed  from  the  general 
government budget, which may not be sustainable or desirable in a medium to long-
run  perspective,  as  well  as  on  one-off  measures.  Looking  forward,  the  on-going 
consolidation and convergence process will need to safeguard expenditure on growth-
enhancing categories, such as education, innovation and transport infrastructure.  

(9) 

Slovakia has scope to raise additional resources by broadening the tax base, limiting 
the scope for tax non-compliance and evasion and by increasing recourse to taxes that 
are less detrimental to growth, such as property taxation and environmental taxation. 
An action plan to fight tax fraud, with a particular focus on VAT was adopted in 2012. 
For the strategy to be successful, further measures are needed, in particular to improve 
the  IT  infrastructure,  broaden  the  competences  and  audit  capacity  of  the  authorities 
and ensure judicial follow-up. 

(10)  Slovakia adopted a pension reform in 2012 to enhance the long-term sustainability of 
its public finances. However, the long-term sustainability gap of 4.9% of GDP remains 
well above the EU average of 3% of GDP. It largely reflects the impact of population 
ageing with pension expenditure contributing 1.5 pps of GDP and health care spending 
2 pps of GDP. Given that Slovakia’s health-care expenditure is projected to increase 
significantly 
improving  pension 
sustainability  will  need  to  be  allied  with  health-care  reform  in  order  to  place  public 
finances  on  a  sustainable  footing.  The  introduction  of  effective  incentive  structures 
and  control  mechanisms  would  help  to  improve  cost  effectiveness  of  the  health-care 
system. 

the  progress  achieved 

long-term, 

the 

in 

in 

(11)  Unemployment remains one of the main challenges for the Slovak economy. In recent 
months,  Slovakia  has  taken  steps  to  reform  active  labour  market  policies.  However, 
the  success  of  the  reform  will  largely  depend  on  the  capacity  of  public  employment 
services  to  implement  it  effectively.  Additional  more  targeted  measures  for  the  most 
disadvantaged  jobseekers  are  needed.  The  provision  of  social  assistance  should  be 
better  linked  to  activation,  and  there  is  a  need  to  remove  disincentives  in  the  tax-
benefit  system  for  those  taking  up  a  low  paid  job.  Increasing  labour-market 
participation  of  women  and  older  people  would  help  to  increase  the  overall 
employment  rate  and  reach  the  2020  national  employment  target  of  72 %.  However, 
the lack of adequate child care facilities, in particular for children under three, makes it 
more difficult for mothers to return on the labour market.  

(12)  Slovakia  has  one  of  the  highest  youth  unemployment  rates  in  the  EU.  In  spite  of 
reform steps in 2012 to improve the quality and labour-market relevance of education, 
school-to-job  transition  remains  difficult  and  the  education  system  does  not  respond 
readily to labour-market needs. Per capita funding of education favours quantity over 
quality and the share of funding allocated to teaching activities (teachers, material, and 
equipment)  is  low.  Improving  the  quality  of  higher  education  and  the  cooperation 
between  businesses  and  education  institutions  would  also  help  developing  a  well-
functioning knowledge triangle, greater effectiveness and attractiveness of investment 
in R&D, and enhancing the innovation capacity of the Slovak economy. 

(13)  Under-utilised  labour  potential  also  concerns  marginalised  communities  that  face 
significant barriers when seeking to enter the labour market and the education system. 
However,  no  effective  action  was  taken  in  2012  and  the  living  conditions  of 

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marginalised  communities,  including  Roma,  remain  difficult.  It  is  important  to 
accelerate efforts to improve educational outcomes of marginalised groups, as well as 
to ensure provision of targeted activation measures for adults. 

(14)  Despite  notable  progress,  Slovakia  ranks  fifth  amongst  the  most  energy-intensive 
Member  States,  partially  explained  by  having  the  greatest  share  of  industry  in  its 
economy (25.9 % of GDP). At the same time, electricity prices are relatively high, in 
particular for small and medium sized industrial customers. Slovakia has made efforts 
in  recent  years  to  partially  liberalise  the  energy  market  but  there  is  still  scope  to 
improve  the  way  the  market  functions;  in  particular  through  greater  transparency  — 
including in setting network tariffs — and improving the economic underpinning and 
predictability  of  the  regulatory  decisions.  There  is  also  scope  to  improve  security  of 
supply and to set more ambitious targets for energy efficiency. 

(15) 

(16) 

(17) 

(18) 

In  2012,  Slovakia  launched  a  major  reform  of  public  administration  to  improve  the 
client-orientation of public services for citizens and businesses. However, at this stage 
the  reform  does  not  apply  to  the  central  administration  and  its  overall  quality  and 
effectiveness. As there has been no progress in reforming the judicial system, judicial 
proceedings remain lengthy, in particular in insolvency cases, and alternative dispute 
resolution is not sufficiently used. Slovakia recently reformed its public-procurement 
rules, also enhancing the independence of the Public Procurement Office, experience 
in the implementation of the EU structural funds suggests that the effective application 
of the public-procurement rules remains a challenge. 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Slovakia’s  economic  policy.  It  has  assessed  the  stability 
programme  and  national  reform  programme.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socio-economic  policy  in  Slovakia  but  also  their 
compliance  with  EU  rules  and  guidance,  given  the  need  to  reinforce  the  overall 
economic governance of the European Union by providing EU-level input into future 
national decisions. Its recommendations under the European Semester are reflected in 
recommendations (1) to (6) below. 

In  the  light  of  this  assessment,  the  Council  has  examined  Slovakia’s  stability 
programme, and its opinion7 is reflected in particular in recommendation (1) and (2) 
below. 

In  the  context  of  the  European  Semester  the  Commission  has  also  carried  out  an 
analysis of the economic policy of the euro area as a whole. On this basis the Council 
has issued specific recommendations addressed to the Member States whose currency 
is  the  euro.  Slovakia  also  should  ensure  the  full  and  timely  implementation  of  these 
recommendations. 

HEREBY RECOMMENDS that Slovakia should take action within the period 2013-2014 to: 

1. 

Implement as envisaged the budget for the year 2013, so as to correct the excessive 
deficit in a sustainable manner and achieve the fiscal effort specified in the Council 
recommendations under EDP. After the correction of the excessive deficit, pursue the 
structural  adjustment  effort  that  will  enable  Slovakia  to  reach  the  medium-term 
objective by 2017. Avoid cuts in growth enhancing expenditure and step up efforts to 
improve  the  efficiency  of  public  spending.  Building  on  the  pension  reform  already 
adopted, further improve the long term sustainability of  public finance  by reducing 

7 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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2. 

3. 

4. 

5. 

6. 

the financing gap in the public pension system and increasing the cost-effectiveness 
of the health-care sector.  

Speed  up  the  implementation  of  the  action  plan  to  combat  tax  fraud  and  continue 
efforts to improve VAT collection, in particular by strengthening the analytical and 
audit  capacity  of  the  tax  administration.  Improve  tax  compliance.  Link  real-estate 
taxation to the market value of property. 

Take  measures  to  enhance  the  capacity  of  public  employment  services  to  provide 
personalised  services  to  jobseekers  and  strengthen  the  link  between  activation 
measures  and  social  assistance.  More  effectively  address  long-term  unemployment 
through  activation  measures  and  tailored  training.  Enhance  the  provision  of  child-
care  facilities,  in  particular  for  children  below  three  years  of  age.  Reduce  the  tax 
wedge for low-paid workers and adapt the benefit system. 

Step up efforts to address high youth unemployment, for example through a Youth 
Guarantee.  Take  steps  to  attract  young  people  to  the  teaching  profession  and  raise 
educational  outcomes.  In  vocational  education  and  training,  reinforce  the  provision 
of work-based learning in companies. In higher education, create more job-oriented 
bachelor programmes. Foster effective knowledge transfer by promoting cooperation 
between  academia,  research  and  the  business  sector.  Step  up  efforts  to  improve 
inclusive  pre-school  and  school  education  for 
access 
marginalised communities, including Roma.  

to  high-quality  and 

Step up efforts to make the energy market function better; in particular, to increase 
the  transparency  of  the  tariff-setting  mechanism,  enhance  the  accountability  of  the 
regulator. Strengthen interconnections with neighbouring countries. Improve energy 
efficiency in particular in the construction sector and in industry. 

Amend the Act on Civil Service to strengthen the independence of the public service. 
Improve  the  management  of  human  resources  in  public  administration.  Step  up 
efforts  to  strengthen  analytical  capacities  in  key  ministries,  also  with  a  view  to 
improving  the  absorption  of  EU  funds.  Implement  measures  to  improve  the 
efficiency  of  the  judicial  system.  Promote  alternative  dispute  resolution  procedures 
and encourage their greater use. 

Done at Brussels,  

For the Council 
The President 

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