Slovak leftist leader Robert Fico said he would start coalition talks with opposition parties on Tuesday and played down the chances of forming a government with the centre right, an outcome favoured by financial markets.
President Ivan Gasparovic met Fico and formally handed him the task of forming a coalition following his Smer party's victory in an election on Saturday with only 29 percent of the votes and a third of the seats in parliament.
The party make-up of a coalition could decide the fate of free-market reforms in Slovakia, which entered the European Union in 2004, and determine whether it adopts the euro single currency as planned in 2009.
"We are going to invite all the parties for talks. We are going to start with the opposition parties ... then we will continue with the ruling parties," Fico told a news conference.
The 41-year-old lawyer campaigned on promises to roll back the economic policies of centre-right Prime Minister Mikulas Dzurinda, including his flagship 19 percent single rate for income, corporate and value added taxes.
"Two VAT brackets and a special tax for monopolies and banks will be very important conditions," Fico said. Dzurinda's reforms made Slovakia a favourite among investors and generated one of Europe's fastest economic growth rates. But many ordinary Slovaks were upset by welfare cuts, higher utility prices and healthcare reforms that introduced fees for visits to the doctor. Unemployment remains high.
Financial investors would prefer a Smer coalition with two centre-right parties, the ethnic Hungarian party and Christian Democrats, convinced they would prevent a policy U-turn.
But asked whether he favoured such a coalition, Fico said: "This is not our most attractive option."
His other choices include luring in a centre-left party led by former prime minister Vladimir Meciar and a fringe nationalist party. Markets fear such a scenario because both parties want to delay Slovakia's euro zone entry.
Fico repeated he respected the 2009 entry target, but investors are sceptical about his commitment and the Slovak crown dipped 0.3 percent to 38.22 against the euro after his comments. "If Fico prefers this coalition, this is the worst possibility from the market view," said Marek Gabris, economist at CSOB Bank.
"Investors are afraid because the opposition parties have suggested euro adoption could be put off several years. They are also afraid the fiscal policy could become looser," he added.
Fico could face weeks of talks before he can forge a viable coalition. Dzurinda could still stay in power if Smer fails to find enough partners among the six parties that have entered parliament.
In a sign of how tough the task may prove, Daniel Lipsic, a Christian Democrat leader, said the party should go into opposition rather than join Smer.
The party has also ruled out co-operation with the centre left if it keeps Meciar as leader, and Dzurinda would need the votes of both parties to have a shot at a record third term.
Comments
Comments are closed.