Anticipated elections took place on March 10, after Iveta Radicova’s (SDKÚ-DS) centre- right coalition government collapsed last October when parliamentarians voted against the strengthening of the emergency fund of the euro area (EFSF). This was assimilated to a negative confidence vote. After a campaign tainted by the ‘Gorilla’ affair which raised corruption allegations on many candidates, poll results were very uncertain. Against all expectations, the voter turnout was as high as for the 2010 legislatives and left wing party SMER-SD of Robert Fico – a former Prime Minister in 2006-2010 - won overwhelmingly with 44% of the votes. SMER-SD consequently secured 83 seats out of 150 of the National Council. It will form a one-party government as other parties refused to join in a coalition.

Impact on country risk

Governing alone should pave the way for a stable four-year term unless Robert Fico’s government is caught up by the mishaps related to its previous term: suspicion of corruption over distribution of EU structural funds and media scandal after the government's attempt to cover up the matter. The SMER-SD government should contrast with the previous coalition on three main aspects. Firstly, Fico declares to be resolutely pro-European, being “for the safeguard of the euro zone and for the defence of the euro as a strong currency”. Secondly, while Mrs Radicova largely cut into public expenses in order to bring public finances in equilibrium, Fico intends to restore the welfare state. He plans to abolish the unique tax rate of 19% (VAT, income tax and corporate tax) and raise the income tax to 25% for the richest Slovaks and the corporate tax to 22% for companies whose profits exceed € 30 million annually. Fico aims to establish a special tax of 0.7% on bank deposits as well. Even if the country returned to growth in 2010 and 2011, this year’s forecasts are much gloomier so that the new government will be forced to caution not to deteriorate the now favourable investment environment and the recent progress in reducing the budget deficit. Finally, relations with Hungary (and with its large minority living in Slovakia) might become less harmonious.

Analyst: Florence Thiéry, f.thiery@credendogroup.com