(Repeats story from late Tuesday)
By Martin Santa
BRATISLAVA, Jan 4 (Reuters) - Slovakia's centre-right
coalition won parliamentary approval for its first budget on
Dec. 8 to rein in the fiscal deficit, but its majority remains
fragile and the formation of a new independent faction may
further dent the cabinet's strength.
The government led by Prime Minister Iveta Radicova's Slovak
Democratic and Christian Union (SDKU), in power since July,
designed the 2011 state budget to cut the fiscal deficit to 4.9
percent of gross domestic product (GDP) from an expected gap of
7.8 percent this year.
The euro zone member's unions have objected to the 1.75
billion euro austerity package and staged protests in October,
but Radicova's cabinet has stood firm. [].
Slovakia has been highly critical of a bailout package for
Greece -- which it refused to contribute to -- and has urged
greater fiscal austerity. It has said proposals for common euro
zone bonds will never be acceptable.
Radicova has dismissed speculation of Slovakia bracing for a
'Plan B', aimed at preparing for a re-introduction of the Slovak
crown, as proposed by a senior coalition member [].
Below are key political risks to watch:
SMALL MAJORITY, COALITION SQUABBLES
The coalition, which took power in July, has had several
internal clashes over policy, including tax hikes proposed by
the liberal Freedom and Solidarity (SaS) party.
The parliament was due to elect a new attorney general in
December after weeks of political in-fighting, but several
coalition deputies refused to endorse a common candidate in a
secret ballot, sparking a new wave of political distrust.
The failed vote triggered the most serious rift within the
coalition to date, raising accusations of betrayal of the
coalition agreement.
What to watch:
-- Rising tension in the coalition. The coalition controls
only 79 of 150 deputies, making it vulnerable to rebellions.
-- SaS legislator Igor Matovic has announced plans to
establish a new independent political party in 2011, but
stressed his intention to support Radicova's cabinet.
UNHAPPY UNIONS
The government is facing union resistance to cuts in public
spending, tax hikes and labour code changes.
Thousands of union workers protested against the austerity
package, but the cabinet is highly unlikely to go back on
measures already passed.
Government, business and unions are negotiating a revision
to the labour code. The government wants to roll back the extra
powers given to the unions by the last government and increase
labour market flexibility, hoping to reduce unemployment of over
12 percent and attract new foreign direct investment. It is
unclear when a bill could come to parliament.
What to watch:
-- a debate on an amended labour code could trigger more
clashes between employers and unions. Unions have said they are
ready to stage new protests.
SLOVAK-HUNGARIAN RELATIONS
The two neighbours have a history of discord, with Hungary
accusing Slovaks of oppressing its ethnic kin, and Bratislava
bristling at its former imperial master's efforts to promote
Hungarian culture in Slovakia.
Radicova's coalition includes the Most-Hid party,
representing mostly ethnic Hungarians, which has acted as a
moderating influence on the fractious relationship.
-- Parliament on Dec. 10 softened a law that stipulated that
only the Slovak language could be used in public by limiting its
effect to public offices and by halving the fine.
[].
What to watch:
-- The government is proposing to scrap a law passed by the
previous government that strips citizens of their Slovak
nationality if they take the citizenship of another country.
There is no timeframe yet.
CORRUPTION, BUSINESS CLIMATE
The government says it wants to improve business climate,
crack down on corruption and boost law enforcement -- major
concerns for investors under the previous leftist government.
Transparency International's latest corruption perception
index showed Slovakia ranked in joint 59th place in the world
2010, lower than its Central European neighbours Poland, Hungary
and the Czech Republic.
What to watch:
-- The government has pledged to increase the transparency
of public procurement projects, publish government tenders
online and enhance the functioning of the courts to reduce
delays.
-- The government also plans to ease labour market
regulation and boost flexibility.
For political risks to watch in other countries, please
click on []
(Reporting by Martin Santa; Editing by Kevin Liffey)
