S&P: Slovak Republic finances still with risks

Standard & Poor's said that the draft central state budget approved by the new government of the Slovak Republic (A/stable/A-1, Slovakia) provided a welcome signal of the government's commitment toward Eurozone accession by 2009.

Nevertheless, the outlook for public finances still contains downward risks, the agency added, noting that the draft, which aims for a general government deficit at 2.9% of GDP in 2007, including the cost of second-pillar pension reform after introduction of the second pillar in 2005, still requires approval by parliament, in which the government holds a sizeable majority.

"Missing the envisaged accession date on account of lax public finances could lead to downward pressure on the ratings," said S&P credit analyst Kai Stukenbrock.

Contrary to initial concerns following the election of the new government, the budget does not reflect much of the populist, pro-welfare and anti-reform rhetoric apparent during the election campaign and presented in the government's manifesto, the agency noted.

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