Recommendation for a COUNCIL RECOMMENDATION on the 2016 national reform programme of Slovakia and delivering a Council opinion on the 2016 stability programme of Slovakia
Date: 2016-05-18
Institutions: European Commission, Secretariat-General
Subjects: Slovakia, administrative formalities, budget deficit, economic policy, economic reform, labour market, public contract, public finance, public service, stability programme

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   EUROPEAN COMMISSION  Brussels, 18.5.2016  COM(2016) 345 final   Recommendation for a COUNCIL RECOMMENDATION on the 2016 national reform programme of Slovakia  and delivering a Council opinion on the 2016 stability programme of Slovakia  
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2016 national reform programme of Slovakia 

and delivering a Council opinion on the 2016 stability programme of Slovakia 

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, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

On  26  November  2015,  the  Commission  adopted  the  Annual  Growth  Survey4, 
marking  the  start  of  the  2016  European  Semester  of  economic  policy  coordination. 
The priorities of the Annual Growth Survey were endorsed by the European Council 
on  17-18  March  2016.  On  26  November  2015,  on  the  basis  of  Regulation  (EU) 
No 1176/2011,  the  Commission  adopted  the  Alert  Mechanism  Report5,  in  which  it 
did not identify Slovakia as one of the Member States for which an in-depth review 
would  be  carried  out.  On  the  same  day,  the  Commission  also  adopted  a 
recommendation for a Council recommendation on the economic policy of the euro 
area6.  This  recommendation  was  endorsed  by  the  European  Council  on  18-19 
February  2016  and  adopted  by  the  Council  on  8  March  2016.  As  a  country  whose 
currency is the euro and in view of the close interlinkages between the economies in 

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OJ L 209, 2.8.1997, p. 1. 
COM(2016) 345 final. 
P8_TA(2016)0058, P8_TA(2016)0059, and P8_TA(2016)0060. 
COM(2015) 690 final. 
COM(2015) 691 final. 
COM(2015) 692 final. 

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(2) 

(3) 

(4) 

(5) 

(6) 

the  economic  and  monetary  union,  Slovakia  should  ensure  the  full  and  timely 
implementation of the recommendation. 
The  2016  country  report  for  Slovakia  was  published  on  26  February  20167.  It 
assessed  Slovakia’s  progress  in  addressing  the  country-specific  recommendations 
adopted by the Council on 14 July 2015 and Slovakia’s progress towards its national 
Europe 2020 targets 

On  29  April  2016,  Slovakia  submitted  its  2016  national  reform  programme  and  its 
2016  stability  programme.  To  take  account  of  their  interlinkages,  the  two 
programmes have been assessed at the same time. 

recommendations  have  been  addressed 

Relevant  country-specific 
the 
programming  of  the  European  Structural  and  Investment  Funds  for  the  2014-2020 
period.  As  foreseen  in  Article  23  of  Regulation  (EU)  No  1303/2013,  where  it  is 
necessary  to  support  the  implementation  of  relevant  Council  recommendations,  the 
Commission may request a Member State to review and propose amendments to its 
Partnership  Agreement  and  relevant  programmes.  The  Commission  has  provided 
further  details  on  how  it  would  make  use  of  this  provision  in  guidelines  on  the 
application  of  the  measures  linking  effectiveness  of  the  European  Structural  and 
Investment Funds to sound economic governance8. 

in 

Slovakia  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact.  In  its 
2016 stability programme, the government plans to improve the headline balance to -
1.9% of GDP in 2016 and further gradually to -1.3% of GDP in 2017. According to 
the stability programme, the medium-term budgetary objective — a structural deficit 
of 0.5 %  of  GDP  —  would be reached  in  2019.  According to  the programme, the 
government  debt-to-GDP  ratio  is  expected  to  reach  52.9%  in  2016  and  to  continue 
decreasing  to  47.3%  in  2019.  The  macroeconomic  scenario  underpinning  these 
budgetary  projections  is  plausible.  However,  the  measures  needed  to  support  the 
planned  deficit  targets  from  2017  onwards  have  not  been  sufficiently  specified. 
Based on the Commission 2016 spring forecast, Slovakia is at risk of some deviation 
from the medium-term budgetary objective in  2016, while it is expected to  comply 
with  recommended  adjustment  in  2017  under  unchanged  policies.  Based  on  its 
assessment of the stability programme and taking into account the Commission 2016 
spring  forecast,  the  Council  is  of  the  opinion  that  Slovakia  is  expected  to  broadly 
comply  with  the  provisions  of  the  Stability  and  Growth  Pact.  Nevertheless,  further 
measures will be needed to ensure compliance in 2016. To this end, the long-delayed 
adoption  of  binding  expenditure  ceilings  and  the  implementation  of  the  'value  for 
money'  programme  to  increase  efficiency  of  public  expenditure,  with  planned 
expenditure reviews in selected areas, would be of critical importance. 

The long-term sustainability of public finance in Slovakia remains a challenge. This 
is  mainly  due  to  the  projected  growth  of  ageing-related  costs  on  healthcare  and 
pensions. The increase in Slovakia's pension spending up to 2060 is expected to be 
one of the highest in the EU, driven by population ageing and low fertility rates. The 
statutory  retirement  age  in  Slovakia  is  comparatively  low,  partly  due  to  life 
expectancy factors. Healthcare expenditure is the main driver of ageing-related costs. 
Public  healthcare  expenditure  is  projected  to  grow  substantially  in  the  long  term, 
albeit from a comparatively low level. Despite some improvement, health indicators 

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SWD(2016) 93 final. 
COM(2014) 494 final. 

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restructuring  hospital  capacity, 

remain very low in Slovakia. To raise the cost-effectiveness of the healthcare sector, 
the  government  has  been  taking  measures  in  both  inpatient  and  outpatient  care. 
Efforts to introduce an integrated model of care continue. The success of this reform 
is  likely  to  depend  on  ownership  by  the  key  stakeholders,  the  integration  of 
healthcare centres and hospitals, and appropriate staffing. Despite measures adopted 
to  limit  a  further  build-up  of  debt  in  public  hospitals,  several  are  still  in  a  poor 
financial  situation.  Challenges  remain  in  fully  reversing  the  negative  expenditure 
trends,  such  as 
introducing  a  prospective 
reimbursement system and increasing competition in public procurement in the area 
of  healthcare.  Regarding  outpatient  care,  the  weak  gatekeeping  role  of  general 
practitioners is partly due to a suboptimal division of competences between general 
practitioners  and  specialists  and  favours  recourse  to  more  costly  specialised  care. 
With regard to taxation, government measures to fight tax fraud have contributed to 
better tax collection, in particular in the area of value added tax (VAT). However, the 
VAT  gap  remains  high,  indicating  an  ongoing  compliance  challenge.  A  strong 
emphasis on VAT collection in recent years has lessened attention to other important 
areas  of  taxation  such  as  income  taxation.  In  addition,  a  focus  on  auditing  has  left 
other  roles  of  tax  administration  such  as  tax  debt  collection  underdeveloped.  This 
suggests  that  there  is  scope  to  improve  resource  allocation  within  the  taxation 
system. A strategy to define compliance goals has not yet been developed. 

Despite  improvements  in  the  labour  market  resulting  from  the  good  economic 
recovery  and  recent  policy  measures,  long-term  unemployment  remains  a  problem. 
The  rate  of  long-term  unemployment  continues  to  be  one  of  the  highest  in  the  EU 
(7.6%  vs.  4.3%  in  the  EU  as  a  whole  in  the  third  quarter  of  2015).  It  particularly 
affects  marginalised  Roma,  the  low-skilled  and  young  people.  Measures  to  address 
unemployment  have  been  taken  in  the  area  of  vocational  education  and  training, 
subsidised  jobs  and  job  counselling.    However,  the  successful  implementation  of 
most of these reforms will depend on the capacity of the public employment service. 
Despite reorganisation of the Central Labour Office and improved access to training, 
there  are  still  difficulties  in  introducing  individualised  support  to  the  long-term 
unemployed  and  to  vulnerable  groups.  Roma  participation  in  the  Slovak  labour 
market remains  very  low and progress  in increasing their employment rate is  slow. 
Low  levels  of  education  and  skills  and  discrimination  are  factors  influencing  their 
poor  labour  market  participation.  The  low  employment  rate  of  women  of 
childbearing age reflects the long parental leave (up to three years), lack of childcare 
facilities, especially for children under the age of three, high childcare costs and the 
limited  use  of  flexible  working-time  arrangements.  In  addition,  regional  disparities 
persist – the unemployment rate in Eastern Slovakia is still twice that in Bratislava. 
Regarding governance of labour market services, measures taken in recent months do 
not  provide  for  a  tailored  approach  in  addressing  the  structural  challenges  of  the 
Slovak labour market.  

The  education  system  is  insufficiently  geared  to  increasing  Slovakia’s  economic 
potential.  Educational  outcomes  are  low  by  international  standards  and  have 
deteriorated  further.  This  is  largely  linked  to  the  inadequacy  of  teachers’  education 
and the low attractiveness of the teaching profession. Despite the 4% salary increase 
for teachers in 2016, low pay and insufficient practical training are among the factors 
making  the  profession  unattractive  to  young  people.  Recently  adopted  anti-
segregation legislation has yet to be implemented to bring about positive change and 
increase  Roma  participation 
including  pre-school 
education. 

in  mainstream  education, 

(7) 

(8) 

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(9) 

(10) 

Public  administration  is  still  burdened  by  inefficiency.  Effective  coordination  is 
wanting,  due  to  the  fragmented  and  rigid  organisation  of  the  public  administration. 
The adoption of the Strategy on Human Resource Management in October 2015 is a 
positive step forward. However, the new Act on Civil Service, which is a necessary 
prerequisite  for  its  suscessful  implemenation,  has  not  been  adopted  yet.  The 
government has taken several measures to tackle corruption, but their impact so far 
has  been  limited.  In  particular,  Slovakia  has  a  limited  track  record  on  initiating 
criminal  proceedings  and  prosecuting  corruption  cases,  including  illicit  practices  in 
public  procurement.  Building  permit  procedures  for  large-scale  investment  and 
infrastructure  projects  have  been  shortened.  Unconsolidated  governance,  lack  of 
evidence-based  design  of  public  procurement  procedures,  weak  professionalism, 
conflicts  of  interest,  tailor-made  tender  specifications  and  excessive  use  of  lowest 
price award criteria result in  limited quality-based  competition. Public procurement 
weaknesses  are  persistently  reported  as  affecting  the  efficiency  of  public  resources 
allocation.  Frequent  changes 
legislation  and  burdensome  administrative 
procedures and requirements affect businesses in Slovakia. High administrative and 
regulatory barriers with respect to some professional services and network industries, 
weaknesses  in  some  areas  such  as  contract  enforcement  and  insolvency  resolution 
and  long-standing  concerns  regarding  the  quality  of  the  judicial  system  harm  the 
business  environment  and  discourage  investment.  Some  measures  to  ease  doing 
business have been taken, such as the Centre for Better Regulation, which was set up 
in  October  2015,  and  the  launch  of  the  National  Business  Centre  in  early  2016. 
However,  the  adoption  of  the  Small  Business  Act  (SBA)  under  the  SMEs 
Development Strategy has been postponed. 

to 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive analysis of Slovakia’s economic policy and published it in the 2016 
country report. It has also assessed the stability programme and the national reform 
programme  and  the follow-up given to  the recommendations  addressed to  Slovakia 
in  previous years.  It has taken into account  not only  their relevance for sustainable 
fiscal and socioeconomic policy in Slovakia but also their compliance with EU rules 
and guidance, given the need to strengthen the EU’s overall economic governance by 
providing EU-level input into future national decisions. The recommendations under 
the European Semester are reflected in recommendations 1 to 3 below. 

(11) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  stability  programme, 
and its opinion is reflected in particular in recommendation 1 below.  

HEREBY RECOMMENDS that Slovakia take action in 2016 and 2017 to: 

1. 

2. 

Achieve  an  annual  fiscal  adjustment  of  0.25  %  of  GDP  towards  the  medium-term 
budgetary  objective  in  2016  and  of  0.5%  of  GDP  in  2017.  Improve  the  cost-
effectiveness of the healthcare system. Take measures to increase tax compliance. 

Improve activation measures for the long-term unemployed and other disadvantaged 
groups,  including  individualised  services  and  targeted  training.  Facilitate  the 
employment  of  women,  in  particular  by  extending  the  provision  of  affordable, 
quality childcare. Improve educational outcomes by making the teaching profession 
more  attractive  and  by  increasing  the  participation  of  Roma  children  from  early 
childhood in mainstream education. 

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3. 

Consolidate  governance,  reinforce  the  shift  from  price  only  to  quality-based 
competition  and  improve  the  prosecution  of  illicit  practices  in  public  procurement. 
Improve the transparency, quality and effectiveness of human resources management 
in  public  administration,  in  particular  by  adopting  a  new  civil  service  act,  and  the 
effectiveness  of  the  justice  system.  Adopt  a  comprehensive  plan  to  address 
administrative and regulatory barriers for businesses. 

Done at Brussels, 

For the Council 
The President 

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