Slovak PM secures higher-spending 2023 budget after government collapse

Slovakia's parliament approved a 2023 budget on Thursday after caretaker Prime Minister Eduard Heger reached a deal this week with a former ruling partner to support spending plans aimed at softening the blow of high energy prices. The budget, with a deficit seen at 6.4% of gross domestic product, higher than in 2022, will lift taxes on Russian crude, gas transportation, spirits and gambling, while lower the value-added tax for restaurants and other hospitality services.

Slovakia's parliament approved a 2023 budget on Thursday after caretaker Prime Minister Eduard Heger reached a deal this week with a former ruling partner to support spending plans aimed at softening the blow of high energy prices.

The budget, with a deficit seen at 6.4% of gross domestic product, higher than in 2022, will lift taxes on Russian crude, gas transportation, spirits and gambling, while lower the value-added tax for restaurants and other hospitality services. The deal prevented Slovakia, a euro zone member, from starting 2023 with a provisional budget that would have limited new spending, a risk it faced amid months of political fighting that resulted in the fall of Heger's government last week.

Parties are still in talks on chances of forming a new government or calling an early election in 2023. The budget faced criticism, with Energy Minister Karel Hirman warning a tax on gas transport would hurt pipeline operator Eustream and threaten gas flows amid an energy crisis set off by Russia's invasion of Ukraine.

Sole refinery Slovnaft has also criticised a tax targeting excess profits in the sector. Lawmakers approved a lower-than-planned tax rate of 55% as part of the budget deal. Heger had agreed the budget deal with former economy minister Richard Sulik, whose SaS party left the coalition in September and voted last week against it in a no-confidence motion that led to the government's collapse.

Heger's cabinet is ruling now in a caretaker capacity. Some parties, accusing Heger's government of creating chaos and not doing enough in the energy crisis, have called for elections ahead of the regular vote due in early 2024, but they still lack votes in parliament to enable that.

The 2023 budget will push the deficit up from 5% of GDP in 2022, well-above the European Union's 3% ceiling. The central bank has forecast state debt to climb to 59.3% of GDP this year, below EU averages, and ease slightly in 2023.

As part of the budget deal, Finance Minister and Heger's OLANO party chief Igor Matovic, who has clashed often with Sulik, should resign.

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