- Milton Friedman
Roughly a decade ago,
At this state of misery, a new Slovakian Prime Minister Mikulas Dzurinda began his mandate with a bulk of economic reforms which included the education reform, health sector reform, tax reform, social security reform, labor market reform as well as the entire reconstruction of public administration. A youthful team of reformers included experts who graduated from Harvard,
"The country's low-cost yet skilled labor force, low taxes, liberal labor code and favorable geographic location have helped it become one of Europe's favorite investment markets."
According to numerous reports,
A group of youthful and enthusiastic economists under the leadership of Ivan Miklos was aware of the importance of the privatization of banking and financial sector. Previously restricted financial system under the possession of the government did not offer credible enhancement mechanisms to entrepreneurs and individuals. A quick, transparent and relatively fast privatization of almost entire financial sector included the undergoing series of structural changes, financially weak banks were eliminated and three largest state-owned banks were immediately privatized. Today, the financial sector consists of 18 commercial banks and three largest banks are 100 percent under the ownership of foreign investors. Interest rates were liberalized without the preliminary enforcment of Maastricht conditions (within ER mechanism) needed for a country if it wants to enter the European Monetary Union as well as credit condtions were reset and credit limits eliminated. Slovakian financial sector is small but far most efficient than most of
In 2003, Slovakian government undertook serious steps in reforming a very rigid labor market. Renovated Comprehensive Labor Code was legislated. It allowed greater flexibility at hiring and firing workers. The flexibility of labor market essentially contributed to the Slovakian shift to freer economy (CATO, 2003). The labor market is among the least regulated in
According to international research studies,
The privatization of government enterprises and state assets was fast, non-troubled and transparent. In 2001, Austrian Erste Bank and Italian Banca Intesa acquisted the package of governmental stakes in the following banks; Slovensky Sportelna and VUB Banka. In 2002, the government sold the stakes of gas distrubtion company Slovensky Plynarenski Priemysel to EDF, RWE and Ruhrgas. The infrastructural change was accompanied together with rapid economic transformation (IMD, 2006).
The main features of labor market reform had been the shift towards greater flexibility of labor market itself. This particular objective was reached through (a) more flexible labor contracts, (b) stimulating working extra-hours and (c) less complicated hiring and firing of workers. According to data from TREND, approximately 80 000 graduates left
Ivan Miklos and the group of economic reforms were the first serious signs of economic change in
The efficiency of government policies increased dramatically under the mandated leadership of Mikulas Dzurinda and Ivan Miklos. In World Competitiveness Ranking of the IMD in 2006, Slovakian government was ranked 17th according to the factor of efficiency. In 2005, tax burden measured as the percentage of the GDP was among the lowest in the OECD group of countries. Tax burden did not reached 30 percent of the GDP. Government spending decreased from 50,5 percent of the GNP in 2002 to 40,5 percent of the GNP in 2004. However, some forecasts have been made and show continually-adjusted signs of decreasing governmental consumption. Between 2000 and 2005, only
However, the whole picture of Slovakian economy is far from being an ideal fairytale. Several challenges are still to come ahead. A bulk of incentives in order to energize the economy has been recommended by McKinsey&Company. It recommends the following advice:
Source: McKinsey&Company Report on
Economic reforms undertaken by Ivan Miklos and other younthful and enthusiastic group of economists made
At the following elections, Slovakian voter chose extreme leftists to be in charge of the country. Those parties even formed coalition with the party whose leader is former dictator of Slovakia Vladimir Meciar. With the election of leftists, right-wing extremists and nationalists, Slovakian economic freedom is about to be in danger. However, the people of