Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Slovakia and delivering a Council opinion on the 2019 Stability Programme of Slovakia
Date: 2019-06-05
Institutions: European Commission, Secretariat-General
Subjects: Slovakia, budget deficit, economic policy, economic reform, education, independence of the judiciary, investment, public finance, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 5.6.2019  COM(2019) 525 final  Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Slovakia and delivering a Council opinion on the 2019 Stability Programme of Slovakia    
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2019 National Reform Programme of Slovakia and delivering a Council opinion 
on the 2019 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, 

Having regard to the resolutions of the European Parliament, 

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 21 November 2018, the Commission adopted the Annual Growth Survey, marking 
the start of the 2019 European Semester for economic policy coordination. It took due 
account  of  the  European  Pillar  of  Social  Rights,  proclaimed  by  the  European 
Parliament, the Council and the Commission on 17 November 2017. The priorities of 
the  Annual  Growth  Survey  were  endorsed  by  the  European  Council  on  21  March 
2019.  On  21  November  2018,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  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 date, the Commission also adopted a recommendation for a Council 
recommendation on the economic policy of the euro area, which was endorsed by the 
European  Council  on  21  March  2019.  On  9  April  2019,  the  Council  adopted  the 
recommendation  on  the  economic  policy  of  the  euro  area  (‘Recommendation  for  the 
euro area’).  

(2) 

As a Member State whose currency is the euro and in view of the close interlinkages 
between the economies in the economic and monetary union, Slovakia should ensure 

1 

OJ L 209, 2.8.1997, p. 1. 

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(3) 

(4) 

(5) 

(6) 

in 

the  specified  areas  will  help  address 

the  full  and  timely  implementation  of  the  Recommendation  for  the  euro  area,  as 
reflected  in  recommendations  (2)  to  (4)  below.  In  particular,  measures  to  tackle 
corruption  and  improving  the  justice  system  will  help  address  the  first  euro  area 
recommendation as regards quality of institutions, focusing economic policy related to 
investment 
the  second  euro  area 
recommendation  as  regards  supporting  investment,  and  measures  to  improve  skills 
will  help  address  the  third  euro  area  recommendation  as  regards  functioning  of  the 
labour market.  
The 2019 country report for Slovakia2 was published on 27 February 2019. It assessed 
Slovakia’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 13 July 2018, the follow-up given to the recommendations adopted in 
previous years and Slovakia's progress towards its national Europe 2020 targets. 

On  25  April  2019,  Slovakia  submitted  its  2019  National  Reform  Programme  and  its 
2019 Stability Programme. To take account of their interlinkages, the two programmes 
have been assessed at the same time. 

Relevant country-specific recommendations have been addressed in the programming 
of  the  European  Structural  and  Investment  Funds  ('ESI  Funds')  for  the  2014-2020 
period.  As  provided  for  in  Article  23  of  Regulation  (EU)  No  1303/2013  of  the 
European  Parliament  and  of  the  Council3,  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 that provision in guidelines on the application of the measures linking the 
effectiveness of the ESI Funds to sound economic governance4.  

Slovakia  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact.  In  its 
2019  Stability  Programme,  the  government  expects  the  headline  balance  to  improve 
from  a  deficit  of  0.7%  of  GDP  in  2018  to  a  balanced  budget  in  2019  and  to  remain 
unchanged  out  to  2022.  Based  on  the  recalculated  structural  balance5,  the  medium-
term budgetary objective – which has been changed from a structural deficit of 0.5% 
of  GDP  in  2019  to  1%  of  GDP  as  of  2020  –  is  planned  to  be  achieved  in  2020. 
According  to  the  2019  Stability  Programme,  the  general  government  debt-to-GDP 
ratio  is  expected  to  gradually  decline  from  47.5%  in  2019  to  44.4%  by  2022.  The 
macroeconomic scenario underpinning those budgetary projections is plausible. At the 
same  time,  the  measures  needed  to  support  the  planned  deficit  targets  from  2019 
onwards have not been fully specified. The budget includes a non-specified category 
of  expenditure  called  budgetary  reserves  (totalling  0.7%  of  GDP),  which  reduces 
predictability in budget implementation. 

2 
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5 

SWD(2019) 1024 final. 
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. 
Cyclically-adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
using the commonly agreed methodology. 

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(7) 

(8) 

(9) 

On  13  July  2018,  the  Council  recommended  Slovakia  to  ensure  that  the  nominal 
growth  rate  of  net  primary  government  expenditure6  does  not  exceed  4.1%  in  2019, 
corresponding  to  an  annual  structural  adjustment  of  0.5%  of  GDP.  In  view  of  the 
Commission  autumn 2018 forecast,  which projected a closer position to  the medium 
term  objective  in  2019,  and  consistent  with  the  rules  for  unfreezing  the  required 
adjustment,  the  nominal  growth  rate  of  net  primary  government  expenditure  should 
not  exceed 4.6%, corresponding to  an  annual  structural  adjustment of 0.3% in  2019. 
Based on the Commission 2019 spring forecast, there is a risk of significant deviation 
from the recommended fiscal adjustment over 2018 and 2019 taken together. 

In 2020, Slovakia should achieve its medium-term budgetary objective. Based on the 
Commission 2019 spring forecast  under unchanged policies, this is  consistent with  a 
maximum  nominal  growth  rate  of  net  primary  government  expenditure  of  4.6%, 
corresponding to a structural adjustment of 0.3% of GDP. Based on the Commission 
2019 spring forecast under unchanged policies, there is a risk of a significant deviation 
from  that  requirement  over  2019  and  2020  taken  together.  Slovakia  is  forecast  to 
comply with the debt rule in 2019 and 2020. Overall, the Council is of the opinion that 
the necessary measures should be taken as of 2019 to comply with the provisions of 
the Stability and Growth Pact. 

Slovakia’s  public  finances  face  medium  fiscal  sustainability  risks  in  the  long  term. 
According  to  the  Commission’s  2018  Fiscal  Sustainability  Report,  a  cumulated 
improvement of 2.5 pps of GDP in the structural primary balance would be required to 
stabilise  the  debt-to-GDP  ratio  over  the  long  term,  relative  to  the  no-policy-change 
scenario. This  is  due to  the projected increase in pension and healthcare  expenditure 
that is driving up ageing costs (joint contribution of 1.8 pps of GDP). As birth rates are 
low  while  life  expectancy  in  Slovakia  is  expected  to  increase  further,  the  old-age 
dependency ratio (comparing elderly people with the active population – the share of 
the population in work of training) is projected to almost triple by 2060. And, while in 
2016  there  were  only  about  three  inactive  people  above  65  for  every  ten  employed 
persons, this is projected to rise to more than seven for every ten employed by 2060 
(economic  old-age  dependency  ratio).  Introducing  automatic  adjustments  of  the 
retirement age to life expectancy had gradually improved the long-term sustainability 
of the pension system. This was seen as an important tool to ensure intergenerational 
fairness and long-term sustainability. Concerns over the long-term fiscal sustainability 
of  the  pension  systems  have  heightened  following  the  adoption  by  Parliament  on  28 
March 2019 of a constitutional amendment instituting retirement age caps (64 for men 
and  women  without  children,  with  half  a  year  reductions  for  women  for  each  of  the 
first three children) and scrapping the automatic adjustments linked to life expectancy. 
According to Slovakia’s Fiscal Council, the cap  will bring  an additional  expenditure 
increase  of  1.6%  of  GDP,  from  8.6%  in  2016  to  11.4%  in  2070  compared  to  the 
increase to 9.8% projected in the 2018 Ageing Report. This will significantly increase 
sustainability  risks.  No  counterbalancing  measures  have  been  put  forward  at  this 
moment and the impact on old age income and poverty has not been calculated. 

6 

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

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(10)  Despite some progress in fighting tax evasion, tax compliance remains a challenge and 
the  VAT  compliance  gap  was  more  than  twice  the  EU  average  in  2016.  While 
measures planned under the Third Action Plan are expected to bring positive results, 
some  of  them  are  still  pending  implementation.  For  instance,  the  introduction  of 
electronic tax returns is likely to reduce the administrative burden on taxpayers, but a 
failure to implement all planned measures risks diminishing the overall effect. At the 
same  time,  a  structured  framework  of  policy  measures  can  help  to  reduce  frequent 
changes in the tax code and encourage its simplification. Finally, the revenue potential 
of environmental and property taxation is underused relative to other EU countries. 

(11)  Positive  developments  in  the  labour  market  continue,  marked  by  increasing 
employment  and  historically  low  levels  of  unemployment.  There  has  been  good 
progress  in  implementing  the  Action  plan  for  the  long-term  unemployed,  which  has 
helped  reduce  the  number  of  long-term  unemployed  by  one  third  over  two  years. 
Nevertheless,  the  long-term  unemployment  rate  remains  above  the  EU  average, 
affecting  in  particular  low-skilled  people,  young  people  and  Roma.  In  contrast  to 
falling unemployment rates, reports of skilled labour shortages have become a major 
issue.  Severe  regional  disparities  in  the  labour  market  continue  to  be  observed,  with 
higher  unemployment  concentrated  in  three  regions  of  eastern  Slovakia  and  labour 
shortages concentrated in the western part of the country. Continued capacity building 
for employers and trade unions is needed to promote their more active involvement. 

(12)  The range and effectiveness of policies to improve employability is limited. Training 
and requalification programmes have been strengthened, but are still insufficient  and 
do  not  target  fully  the  long-term  unemployed  and  disadvantaged  groups.  The 
education system does not sufficiently contribute to socio-economic development and 
is under-funded at all levels. The low quality of educational results, the participation 
of  Roma  in  inclusive  mainstream  education  as  of  early  childhood  and  the  effective 
in 
integration  of  pupils  from  socio-economically  disadvantaged  backgrounds 
education  and  training  (given  the  increasing  early  school  leaving  rate)  are  pressing 
challenges.  Educational  results  and  the  level  of  basic  skills  remain  weak  by 
international  standards,  strongly  affected  by  the  pupils'  socioeconomic  background. 
Ensuring  the  Slovak  population  is  equipped  with  better  sets  of  skills  for  a  changing 
economy  and  society  is  a  challenge.  Despite  progressive  salary  increases  until  2020, 
the  teaching  profession  remains  unattractive  and  faces  increasing  shortages.  In 
addition, the quality and relevance of initial training and opportunities for professional 
development  of teachers are limited. Current  measures  to  foster  equity  and inclusive 
education  have  so  far  fallen  short  of  expectations,  and  no  real  progress  on 
desegregation  of  Roma  students  was  observed.  The  government  has  adopted  the 
"National  reform  plan  for  education  and  upbringing"  (2018–27)  and  the  first  Action 
Plan  (2018-19)  (together  with  an  estimated  budget),  as  well  as  new  legislation  on 
quality  assurance  in  higher  education.  It  will  be  crucial  that  these  measures  are 
effectively implemented and monitored to see if they bring the expected results.  

(13)  The low employment rate for women reflects the fact that long parental leave is rarely 
taken up by men and is further accentuated by limited access to and low availability of 
affordable childcare and long-term care facilities. For children under the age of three 
in  particular,  the  overall  enrolment  rates  in  childcare  are  extremely  low.  The 
government  adopted  a  new  decision  on  mandatory  participation  in  early  childhood 
education  and  care  as  of  5  years  old,  with  the  effect  as  of  2020.  However,  further 
investment and encouraging attendance in childcare and pre-school facilities is needed.  

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(14)  Even though the share of people at risk of poverty or social exclusion is below the EU 
average,  levels  are  considerably  higher  in  a  number  of  districts  in  Southern  and 
Eastern  Slovakia.  A  considerable  bottleneck  exists  in  access  to  high-quality  and 
inclusive  education,  where 
into  particularly 
the  regional  disparities 
pronounced  early  school  leaving  rates.  Other  bottlenecks  concern  access  for 
disadvantaged groups, in particular for Roma, as well as people with disabilities and 
people that suffer from homelessness and housing exclusion, to healthcare, long-term 
care, social housing and other essential services. An integrated approach is essential in 
order to foster social inclusion for these groups. 

translate 

(15)  Reforms  aimed  at  improving  the  cost-effectiveness  of  the  healthcare  system  are 
gaining momentum, although the degree of implementation has varied across different 
care  areas.  Policy  measures  carried  out  in  the  context  of  the  health  spending  review 
achieved  some  positive  results,  mainly  following  a  series  of  cost  containment 
measures in the areas for pharmaceuticals and medical devices. However, there is still 
room  for  increasing  efficiency  and  delivering  better-value  care  by  strategically 
reallocating  resources  between  areas  of  care.  Health  service  delivery  remains 
excessively  reliant  on  hospitals,  which,  despite  regular  debt  relief,  continue  to 
accumulate debt  and struggle to  fund the investments required to  improve efficiency 
and quality of care. While strengthening primary care is key to reducing avoidable use 
of hospital services, the low number of general practitioners and the limited scope of 
services offered in primary care act as a bottleneck to improving the efficiency of the 
health  system.  As  the  government  has  initiated  measures  to  tackle  health  workforce 
shortages, it will be important to fit these efforts into a longer-term strategy aimed at 
gradually  decentralising  services  from  acute  care,  strengthening  primary  care  and 
reinforcing preventive services. 

(16)  A  fragmented  research  system  undermines  the  effectiveness  of  public  research  and 
development  investment  in  raising  scientific  research  quality  and  does  not  attract 
private funding. Research and innovation policy suffers from ineffective coordination 
among  ministries  and  other  actors,  leading  to  delays  and  failures  of  major  reforms. 
The  suboptimal  transformation  process  of  the  Slovak  Academy  of  Sciences  rasied 
concerns about the continuity of its operations, which led to the collapse of the whole 
process. A lack or failure of targeted measures, together with limited engagement by 
research  institutions  and  limited  research  capacity,  all  contribute  to  low  private 
research  and  development  expenditure.  Overall,  business  research  and  development 
remains  one  of  the  lowest  in  the  EU  and  is  centred  on  medium/high-tech 
manufacturing,  areas  dominated  by  multinational  firms.  Measures  to  stimulate 
knowledge  transfer,  strengthen  innovative  capacities  in  industry  and  improve 
cooperation between businesses and academia are advancing slowly.  

(17)  To increase Slovakia’s productivity and maintain the convergence process,  sustained 
investment  efforts  are  also  needed  in  digital  and  transport  infrastructure,  and  energy 
efficiency.  There  is  a  need  to  improve  basic  fixed  broadband  and  4G  coverage  and 
take-up  of  ultrafast  broadband.  Investing  into  energy  efficiency,  in  particular  in  the 
buildings sector, and environmental technology can be a source of green growth and 
will help preserve scarce environmental resources. In addition, to allow less developed 
regions  to  catch up and become more knowledge-based,  competitive and productive, 
more  strategic  investment  is  needed  to  fill  in  the  infrastructure  gaps  and  to  improve 
transport  networks.  Slovakia  is  lagging  behind  with  regards  to  completing  both  the 
core road and railway network under the Trans-European Transport Network, such as 
in the Rhine-Danube corridor. Weaknesses in the transport network could be tackled 

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by enhancing the interconnectivity, multimodality and interoperability of the existing 
public and urban transport network, and by promoting sustainable modes of transport. 

(18)  A  heavy  administrative  and  regulatory  burden  may  negatively  affect  investment  and 
innovation,  especially  for  small  and  medium-sized  enterprises.  Despite  government 
efforts,  administrative  burden  is  not  being  reduced  enough  and  the  Slovak  business 
environment is losing ground in international comparisons. Quality of legislation and 
lack  of  predictability  are  a  concern  for  businesses.  These  challenges  should  be 
addressed by the full deployment of Slovakia's Better Regulation Strategy (RIA2020) 
and the strengthening of its Better Regulation Centre. The Slovak professional services 
sector  remains  highly  regulated.  The  restrictiveness  of  regulation  is  above  the 
weighted  EU  average  for  lawyers,  patent  agents,  civil  engineers,  architects, 
accountants, tourist guides and estate agents. 

(19)  The  government 

is  substantially  reforming  public  procurement  practices  by 
overhauling the legal framework to simplify procedures and reduce transaction costs. 
A  new  focus  on  professionalisation  is  welcome;  however,  general  benefits  are  only 
emerging slowly.  In the  context  of  distrust towards public institutions,  public buyers 
need to make more effort to regain confidence from businesses, media and the public 
at  large.  This  hinders  the  introduction  of  much  needed  novel  practices.  Efforts  to 
increase  the  use  of  quality  criteria  need  to  be  stepped-up  to  achieve  better  value  for 
money and improve strategic use of public procurement. 

(20)  Slovak  public  administration  still  faces  inefficiencies  and  bottlenecks  caused  in 
particular  by  ineffective  cooperation  between  government  departments.  The  lack  of 
capacity  and  strategic  planning  as  well  as  administrative  inefficiencies  hamper  a 
smooth delivery of ESI Funds. As a result, Slovakia lost EUR 120 million of funding 
from the 2014-2020 period, while distribution of funds to final beneficiaries remains 
low.  In  addition,  sub-optimal  preparation  of  projects  funded  by  ESI  funds  led  to 
delayed investment and resulted in tight deadlines for public procurement procedures, 
increasing the risk of irregularities. 

(21)  Corruption  continues  to  pose  a  challenge  and  there  has  been  only  limited 
determination  to  prosecute  high-level  corruption  cases.  Efforts  to  combat  corruption 
are  hindered  by  organisational  and  procedural  weaknesses  at  the  police  and 
prosecutor’s  level,  and  weak  protection  for  whistle-blowers.  Also,  improving  the 
effectiveness  of  the  justice  system,  including  its  independence,  remains  a  challenge. 
Despite  some  improvements  in  terms  of  efficiency  and  quality,  concerns  about  the 
independence  of  the  judiciary  persist  and  the  delay  in  the  process  for  appointing 
judges to the constitutional court could affect the functioning of the justice system. 

(22)  The programming of EU funds for the period 2021-2027 could help address some of 
the  gaps  identified  in  the  recommendations,  in  particular  in  the  areas  covered  by 
Annex  D  to  the  country  report7.  This  would  allow  Slovakia  to  make  the  best  use  of 
those funds in respect of the identified sectors, taking into account regional disparities. 
Strengthening the country’s administrative capacity for the management of these funds 
is an important factor for the success of this investment. 

(23) 

In  the  context  of  the  2019  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Slovakia’s  economic  policy  and  published  it  in  the  2019 
country  report.  It  has  also  assessed  the  2019  Stability  Programme  and  the  2019 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 

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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 Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(24) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  2019  Stability 
Programme and its opinion8 is reflected in particular in recommendation (1) below. 

HEREBY RECOMMENDS that Slovakia take action in 2019 and 2020 to: 

1. 

2. 

3. 

4. 

Achieve  the  medium-term  budgetary  objective  in  2020.  Safeguard  the  long-term 
sustainability of public finances, notably that of the healthcare and pension systems. 

Improve  the  quality  and  inclusiveness  of  education  at  all  levels  and  foster  skills. 
Enhance  access  to  affordable  and  quality  childcare  and  long-term  care.  Promote 
integration of disadvantaged groups, in particular Roma.  

Focus  investment-related  economic  policy  on  healthcare,  research  and  innovation, 
transport,  notably  on  its  sustainability,  digital  infrastructure,  energy  efficiency, 
competitiveness  of  small  and  medium-sized  enterprises,  and  social  housing,  taking 
into account regional disparities. Increase the use of quality-related and lifecycle cost 
criteria in public procurement operations. 

Continue  to  improve  the  effectiveness  of  the  justice  system,  focussing  on 
strengthening its independence, including on judicial  appointments.  Increase efforts 
to detect and prosecute corruption, in particular in large-scale corruption cases.  

Done at Brussels, 

For the Council 
The President 

8 

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

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