Recommendation for a COUNCIL RECOMMENDATION on the 2017 National Reform Programme of Slovakia and delivering a Council opinion on the 2017 Stability Programme of Slovakia
Date: 2017-05-22
Institutions: European Commission, Secretariat-General
Subjects: Slovakia, budget deficit, economic policy, economic reform, education, employment policy, independence of the judiciary, organisation of health care, public contract, stability programme

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   EUROPEAN COMMISSION  Brussels, 22.5.2017  COM(2017) 524 final   Recommendation for a COUNCIL RECOMMENDATION on the 2017 National Reform Programme of Slovakia  and delivering a Council opinion on the 2017 Stability Programme of Slovakia   
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2017 National Reform Programme of Slovakia 

and delivering a Council opinion on the 2017 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 
policies,1 and in particular Article 5(2) thereof, 
Having regard to the recommendation of the European Commission,2 
Having regard to the resolutions of the European Parliament,3 

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  16 November  2016,  the  Commission  adopted  the  Annual  Growth  Survey,4 
marking  the  start  of  the  2017  European  Semester  of  economic  policy  coordination. 
The priorities of the Annual Growth Survey were endorsed by the European Council 
on  9-10 March  2017.  On  16 November  2016,  on  the  basis  of  Regulation  (EU) 
No 1176/2011,  the  Commission  adopted  the  Alert  Mechanism  Report,5  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 
area. That Recommendation was endorsed by the European Council on 9-10 March 
2017 and adopted by the Council on 21 March6.  

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OJ L 209, 2.8.1997, p. 1. 
COM(2017) 524 final. 
P8_ TA(2017)0038, P8_ TA(2017)0039, and P8_ TA(2017)0040. 
COM(2016) 725 final. 
COM(2016) 728 final. 
2017/C92/01. 

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(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

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As  a  country  whose  currency  is  the  euro  and  in  view  of  the  close  interlinkages 
between the economies in the economic and monetary union, Slovakia should ensure 
the full and timely implementation of the Recommendation for the euro area which is 
reflected in recommendations 1 to 2 below.  
The  2017  country  report  for  Slovakia7  was  published  on  22 February  2017.  It 
assessed  Slovakia’s  progress  in  addressing  the  country-specific  recommendations 
adopted by the Council on 12 July 2016, the follow-up given to the recommendations 
adopted in previous years and Slovakia’s progress towards its national Europe 2020 
targets.  

On 26 April 2017, Slovakia submitted its 2017 National Reform Programme and its 
2017 Stability  Programme.  To  take  account  of  their  interlinkages,  the  two 
programmes have been assessed at the same time. 

The relevant country-specific recommendations have been taken into account in the 
Member States' programmes for the European Structural and Investment Funds (ESI 
Funds) covering the 2014-2020 period. As foreseen in the legislation governing the 
ESI Funds,8 where it is necessary to support the implementation of relevant country-
specific  recommendations,  the  Commission  may  request  a  Member  State  to  review 
and  amend  its  relevant  ESI  Funds  programmes.  The  Commission  has  provided 
further guidelines on the application of those rules.9 

Slovakia  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact.  In  its 
2017 Stability Programme, the government plans to improve the headline deficit to 
1.3% of GDP in 2017, and gradually further to 0% of GDP in 2019 and 2020. The 
medium-term  budgetary  objective  —  a  structural  deficit  of  0.5%  of  GDP  —  is 
expected to be reached in 2018. According to the Stability Programme, the general 
government debt-to-GDP ratio is expected to gradually decline to 46 % by 2020. The 
macroeconomic scenario underpinning these budgetary projections is plausible. 

On  12  July  2016,  the  Council  recommended  Slovakia  to  achieve  an  annual  fiscal 
adjustment of 0.5% of GDP towards the medium-term budgetary objective in 2017. 
Based  on  the  Commission  spring  2017  forecast,  there  is  a  risk  of  some  deviation 
from that requirement in 2017.  

In  2018,  in  the  light  of  its  fiscal  situation,  Slovakia  is  expected  to  further  adjust 
towards its medium-term budgetary objective of a structural deficit of 0.5% of GDP. 
According  to  the  commonly  agreed  adjustment  matrix  under  the  Stability  and 
Growth Pact, that adjustment translates into a requirement of a nominal growth rate 
of  net  primary  government  expenditure10  which  does  not  exceed  2.9%.  It  would 

SWD(2017) 90 final/2. 
Article  23  of  Regulation  (EU)  No  1303/2013  of  the  European  Parliament  and  of  the  Council  of  17 
December  2013  laying  down  common  provisions  on  the  European  Regional  Development  Fund,  the 
European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and 
the  European  Maritime  and  Fisheries  Fund  and  laying  down  general  provisions  on  the  European 
Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime 
and  Fisheries  Fund  and  repealing  Council  Regulation  (EC)  No  1083/2006,  OJ  L  347,  20.12.2013,  p. 
320. 
COM(2014) 494 final. 
Net  government  expenditure  is  comprised  of  total  government  expenditure  excluding  interest 
expenditure,  expenditure  on  Union  programmes  fully  matched  by  Union  funds  revenue  and  non-
discretionary  changes  in  unemployment  benefit  expenditure.  Nationally  financed  gross  fixed  capital 
formation  is  smoothed  over  a  4-year  period.  Discretionary  revenue  measures  or  revenue  increases 

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correspond  to  a  structural  adjustment  of  0.5%  of  GDP.  Under  unchanged  policies, 
there is a risk of significant deviation from that requirement over the period 2017-18 
taken  together.  Overall,  the  Council  is  of  the  opinion  that  Slovakia  needs  to  stand 
ready  to  take  further  measures  to  ensure  compliance  in  2017  and  that  further 
measures will be needed in 2018 to comply with the provisions of the Stability and 
Growth Pact. However, as foreseen in Regulation (EC) No 1466/97, the assessment 
of  the  budgetary  plans  and  outcomes  should  take  account  of  the  Member  State’s 
budgetary  balance  in  the  light  of  the  cyclical  conditions.  As  recalled  in  the 
country-specific 
Commission 
recommendations, the assessment of the 2018 Draft Budgetary Plan and subsequent 
assessment  of  2018  budget  outcomes  will  need  to  take  due  account  of  the  goal  to 
achieve a fiscal stance that contributes to both strengthening  the ongoing recovery 
and  ensuring  the  sustainability  of  Slovakia’s  public  finances.  In  that  context,  the 
Commission intends to make use of the applicable margin of appreciation in the light 
of the cyclical situation of Slovakia. 

Communication 

accompanying 

these 

(9) 

(10) 

(11) 

Slovakia’s  public  finances  still  face  risks  in  the  long  term.  Healthcare  expenditure 
continues  to  pose  a  risk  to  the  long-term  sustainability  of  public  finances  as 
increasing the cost-effectiveness of healthcare in Slovakia remains a challenge. Some 
steps have been taken to rationalise hospital care and lower costs, but concrete results 
are  not  yet  visible.  The  2016  spending  review  has  identified  potential  savings. 
Nevertheless,  progress on the ground  in  delivering  a comprehensive healthcare and 
health  spending  reform  has  been  to  date  protracted  with  the  introduction  of  the 
diagnosis-related groups system for payments and the launching of e-health systems 
making  only  slow  progress.  Meanwhile,  the  deficit  of  the  public  pension  system  is 
projected to double in the long term, and the retirement age in Slovakia is among the 
lowest in the EU. Recent adjustments in the pension system have largely been ad hoc 
and short-term. 

Tax  evasion  and  tax  avoidance  have  fallen,  and  efforts  are  being  made  to  raise 
voluntary  compliance.  Improvements  in  tax  collection  have  significantly  reduced 
what was, in the past, a high VAT gap. Limiting VAT fraud appears to have also had 
a  positive  impact  on  the  collection  of  corporate  income  tax.  The  financial 
administration  adopts  a  focus  on  improving  VAT  compliance,  especially  through 
auditing.  At  the  same  time,  non-audit  activities  to  strengthen  voluntary  tax 
compliance are being explored. 

Despite improvements in the labour market resulting from robust economic recovery 
and strong job creation, long-term unemployment remains a problem. The long-term 
unemployment  rate  continues  to  be  one  of  the  highest  in  the  EU.  It  particularly 
affects  marginalised  Roma,  low-skilled  and  young  people.  In  addition,  regional 
disparities persist — the unemployment rate in eastern Slovakia is still twice that in 
Bratislava.  Adult  participation  in  lifelong  learning  and  second-chance  education 
remains  low.  Despite  measures  encouraging  low-wage  earners  to  work  and  an 
ongoing public employment services reform, there are still difficulties in introducing 
individualised  support  to  the  long-term  unemployed  and  to  vulnerable  groups  due 
among  others  to  a  high  caseload.  The  Slovak  action  plan  on  the  integration  of  the 
long-term  unemployed,  largely  financed  by  the  European  Social  Fund,  seeks  to 
remedy  this  via  a  comprehensive  approach  to  personalised  services.    This  will  be 
achieved  by  providing  specialised  counselling,  a  new  profiling  system,  cooperation 

mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted 
out. 

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(12) 

(13) 

(14) 

with private employment agencies and the delivery of targeted training programmes 
designed by employers based on regional labour market needs. 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 contributing to their poor labour market outcomes. The low employment rate 
of  women  of  childbearing  age  reflects  the  long  parental  leave  (up  to  three  years) 
rarely taken up by men, shortage of childcare facilities, especially for children under 
the age of three, and a low uptake of flexible working-time arrangements.  

The  education  system  is  insufficiently  geared  to  increasing  Slovakia’s  economic 
potential. Educational outcomes and the level of basic skills remain disappointing by 
international  standards  and  have  deteriorated  further  in  2012-15.  Moreover,  strong 
regional differences persist. Poor performance is primarily linked to a strong impact 
of the socioeconomic and ethnic background of students, to issues of equity, access 
and  inclusiveness  as  well  as  the  relatively  low  attractiveness  of  the  teaching 
profession. Despite the 6 % salary increase for teachers in 2016 and further increases 
planned  for  2017-2020,  uncompetitive  salary  conditions  and  limited  continuous 
teacher  training  are  among  the  factors  that  make  the  profession  still  largely 
unattractive, especially to prospective young teachers and those residing in the more 
developed regions of the country. The recently adopted anti-segregation legislation, 
on  the  marginalised  Roma  community,  has  yet  to  be  fully  implemented  to  bring 
about  positive  change  and  increase  their  participation  in  inclusive  mainstream 
education, with a special focus on early childhood education and care as well as pre-
school education. 

Slovakia’s  public  administration  is  being  modernised,  but  corruption  remains  a 
challenge.  Perceptions  of  corruption  remain  high  and  act  as  a  major  business 
impediment.  Control  mechanisms  and  the  enforcement  of  anti-corruption  rules  still 
appear inadequate, and policy initiatives on whistleblowing and letterbox companies 
may not be enough to resolve the problem. In addition, public procurement practices 
fall short of best practices in many areas. Training measures are being developed to 
equip  staff  to  run  a  more  efficient  procurement  system.  However,  conflicts  of 
interest,  tailor-made  tender  specifications  and  excessive  use  of  the  lowest  price 
award  criteria  remain  a  concern  and  result  in  limited  quality-based  competition. 
Weaknesses  in  public  procurement  are  persistently  reported  as  affecting  the 
efficiency of public resources allocation.  

A  frequently  changing  legislative  environment  makes  it  difficult  and  costly  for 
companies  to  comply  with  legislation,  and  legislative,  regulatory  processes  and 
insolvency  arrangements  are  often  viewed  as  insufficiently  business-friendly.  An 
inter-ministerial working group for doing business, led by the State Secretary of the 
Ministry of Economy, was recently set up and is expected to present by June 2017 
proposals  for  measures  to  improve  the  business  environment.  High  regulatory 
barriers  remain  in  the  business  services  sector  in  Slovakia.  Specific  guidance  per 
profession to address this issue was made in January 2017, in a Communication from 
the Commission on reform recommendations for regulation in professional services, 
as part of a package of measures to tackle barriers in services markets.11   

(15) 

Improving  the  effectiveness,  including  the  independence  of  the  justice  system, 
remains  a  challenge  for  Slovakia,  although  efforts  are  being  made  to  address  the 

11 

COM(2016)  820  final,  COM(2016)  821  final,  COM(2016)  822  final,  COM(2016)  823  final, 
COM(2016) 824 final. 

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shortcomings.  However,  concerns  about  the  efficiency  and  independence  of  the 
judiciary remain. In addition, public administration is still burdened by inefficiency, 
insufficient  capacity  and  fragmentation.  The  adoption  of  the  strategy  on  Human 
Resource Management in October 2015 and the recent adoption of the Civil Service 
Act  are  positive  steps  forward.  The  new,  politically  independent  Civil  Service 
Council will supervise the implementation of the principles of the Act as well as the 
code  of  ethics  for  civil  servants.  The  complex,  opaque  regulatory  framework 
complicates  relations  between  interested  parties  in  the  energy  market.  Recent 
changes  in  setting  distribution  tariffs  indicate  continued  political  and  business 
influence.  Independence  of  the  energy  price  regulator  is  expected  to  decrease 
following the adoption of legislation that grants the government an exclusive right to 
name  the  regulator’s  chair  and  grants  the  Ministries  for  the  Economy  and  the 
Environment right to step into price-setting proceedings. 

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 2017 
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.  

(16) 

(17) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  Stability  Programme 
and its opinion12 is reflected in particular in recommendation 1 below, 

HEREBY RECOMMENDS that Slovakia take action in 2017 and 2018 to: 

1. 

2. 

3. 

Pursue  its  fiscal  policy  in  line  with  the  requirements  of  the  preventive  arm  of  the 
Stability and Growth Pact, which translates into a substantial fiscal effort for 2018. 
When taking policy action, consideration should be given to achieving a fiscal stance 
that  contributes  to  both  strengthening  the  ongoing  recovery  and  ensuring  the 
sustainability  of  Slovakia’s  public  finances.  Improve  the  cost  effectiveness  of  the 
healthcare system, including by implementing the value for money project. 

Improve  activation  measures  for  disadvantaged  groups,  including  by  implementing 
the  action  plan  for  the  long-term  unemployed  and  by  providing  individualised 
services  and  targeted  training.  Enhance  employment  opportunities  for  women, 
especially  by  extending  affordable,  quality  childcare.  Improve  the  quality  of 
education and increase the participation of Roma in inclusive mainstream education.   

Improve competition and transparency in public procurement operations and step up 
the  fight  against  corruption  by  stronger  enforcement  of  existing  legislation.  Adopt 
and implement a comprehensive plan to lower administrative and regulatory barriers 
for businesses. Improve the effectiveness of the justice system, including a reduction 
in the length of civil and commercial cases. 

Done at Brussels, 

For the Council 
The President 

12 

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

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