Slovak coalition partners reshuffle cabinet to solve government crisis

Slovak coalition partners reshuffle cabinet to solve government crisis
Igor Matovic will switch from premier to finance minister.
By bne IntelliNews March 30, 2021

Slovak Finance Minister Eduard Heger will become the new prime minister on March 30, after obtaining the support of all four coalition partners. Prime Minister Igor Matovic will take up Heger's post, in a staight swap with his populist OLaNO party colleague. Heger will announce the new list of ministers after his meeting with Slovak President Zuzana Caputova on March 30.

The reshuffle looks as if it will end for now the country's coalition crisis, which has paralysed the government for almost the entire month, but questions remain whether OLaNO party leader Matovic will try to keep control of the government, which could push the centre-right Freedom and Solidarity party to quit again.

"The president is ready to accept the resignation of Igor Matovic tomorrow morning and task Eduard Heger with the forming of the new cabinet,” confirmed presidential spokesperson Martin Strizinec.

OLaNO, For the People and We Are Family supported the switch on March 28, while Freedom and Solidarity (SaS) gave its consent later, saying that it’s ready to return to the governing coalition.

"I'll also present the president with the new government's list of names," declared Heger, a former economist, refusing to tell who will be in his new cabinet. Heger has been running two ministries for the past few weeks, finance and health, after the former health minister Marek Krajci resigned.

According to news site, the new health minister will be Vladimir Lengvarsky, who currently runs the Central Military Hospital in the Zilina region. 

"Any further development will hinge on the personal decision of General Lengvarsky, the prime minister and the Slovak president," said Defence Ministry spokesperson Martina Koval Kakascikova, quoted by the Slovak News Agency. 

Given the epidemiological situation is improving in Slovakia, the new health minister will enter the office in more favourable circumstances than when Krajci left it. "In Slovakia, we're currently moving step by step towards improving the situation, which is evidenced by a slight decrease in the number of people in hospital and a constant increase in the number of people that have been vaccinated," said ministry spokeswoman Zuzana Eliasova.

According to her, the gradual increase in the number of people vaccinated together with adherence to anti-epidemic restrictions will help to control the virus and possible further waves, as is seen in surrounding countries.

The experts expect the turning point in the fight against coronavirus to be Easter, recommending the public to restrict meetings with each other and attend religious services only virtually.

As of March 28, Slovakia recorded more than 2,500 positive cases, with 46 new deaths. 3,367 people are treated in hospitals. 

Heger, who bne IntelliNews predicted would be the new premier, was the only OLaNO politician who apologised for what Matovic said after the departure of Krajci - the "world's most absurd resignation" – while attacking his coalition partners. "I think he is a kind of calm unifier,"  Bratislava regional governor Juraj Droba of SaS said about Heger. 

However, the opposition Smer-SD party of the former PM Robert Fico called on Caputova to reconsider appointing Matovic as finance minister. "If the president signs this, it's a shame for a thousand years. An uneducated, language incapable, unprepared tax fraudster is to become finance minister," said Fico, adding that Matovic will have even more power as finance minister. Under Fico's government Matovic was fined for tax irregularities.  

"Igor Matovic has currently become the most powerful man in Slovakia, holding in his hands not only the prime minister but also the entire government. Those enjoying the statesman-like gesture he has made are totally naive," said Smer-SD vice-chair and former finance minister Ladislav Kamenicky. 

According to a statement by Voice-SD of former PM Peter Pellegrini, after a month of insults, the coalition parties came up with ´a laughable switcheroo´ of Matovic and Heger. “A convicted tax fraudster [sic!] will thus become finance minister, and everyone who’s recently resigned from the government will return," it read. 

The extra-parliamentary Slovak National Party thinks that the decision to swap the posts of two will only prolong the demise of the government. "[SaS chair and former economy minister] Richard Sulik has definitely proven that his claims have no value. Unfortunately, the random group of people in the government will continue to trouble the country," the party said.

"He’ll just swap chairs and have the puppet premier Eduard Heger on his strings," commented the head of another extra-parliamentary party Progressive Slovakia Irena Bihariova, adding that Matovic can now blackmail his coalition partners via the state budget. 

According to Raiffeisen Analyst Boris Fojtik, this should cool down the situation in Slovakia and the country can go back to dealing with the coronavirus crisis, vaccination and the economic recovery. 

“No matter how the political instability ends up, it will not be a trigger for country rating re-evaluation nor will it even influence financial markets. The umbrella of ECB is wide enough to cover such situations,” he said. 

Given the industry is globally the least affected sector by the COVID-19 crisis, Slovakia has reported better GDP results than during the financial crisis in 2009. In 2020, its GDP dropped by 5.2% year-on-year. 

After months of strict restrictions, sectors like services, accommodation and retail have posted negative figures, thus resulting in a negative GDP figure in 1Q21. “At the same time, industrial production posted a short-term decrease at the beginning of the year. Due to the lack of demand and components (chips) shortage, the struggles of industrial production may continue also in the coming months. However, the base effect will ensure that this year's average growth will be positive,” Fojtik noted.

Raiffeisen expects the Slovak economy to recover by 5% in 2021, mainly due to the successful vaccination process not only in Slovakia but also in Europe as a whole, supported by external demand, a revival of tourism and all connected services in 2H21. 

“Last but not least, better sentiment should result in the growth of investments. The start of NGEU [Next Generation EU Recovery] programme should be also helpful here, but the largest effect we expect in 2022. Still, despite this impetus in the form of the recovery plan, economic growth may decelerate next year but to still solid level of 3.5% y/y,” he added.