US embassy cable - 05BRATISLAVA602

C O N F I D E N T I A L  BRATISLAVA 000602 
 
SIPDIS 
 
 
E.O. 12958: DECL: 06/10/2015 
TAGS: ECON, PGOV, PREL, PINR, LO 
SUBJECT: FINANCE MINISTER IVAN MIKLOS: POWER BEHIND THE 
SCENE 
 
Classified By: CDA SCOTT THAYER for reason 1.4 (b) and (d) 
 
1.  (C) Summary.  The political team of Minister of Finance 
Ivan Miklos and Prime Minister Mikulas Dzurinda has succeeded 
in transforming Slovakia's political and economic fortunes in 
a short amount of time.  Miklos has won acclaim for his flat 
tax policy, and he has also managed several years of reforms 
that have turned Slovakia into an economic success story. 
His influence stretches well beyond his own ministry and 
someday he could be a legitimate challenger for the position 
of Prime Minister.  Miklos has had to withstand accusations 
of corruption, and this issue could have a profound effect on 
his political future.  Regardless, Miklos is well-regarded 
internationally and his future appears bright.  End summary. 
 
TEAMWORK 
-------- 
 
2. (C) Much of the credit for Slovakia's rapid progression 
since 1998 from political outcast to EU member and economic 
success story belongs to the policies of Minister of Finance 
(former Deputy Prime Minister for Economy) Ivan Miklos. 
Miklos, also a Deputy Prime Minister, has teamed successfully 
with Prime Minister Mikulas Dzurinda to transform Slovakia at 
a rapid pace.  According to Jan Oravec, President of the 
Slovak Entrepreneurs Association and Ivan Svejna, Chairman of 
the Board of the Hayek Foundation, Miklos and Dzurinda work 
very closely together and appear to have a close personal 
bond that goes beyond politics.  In fact, they need each 
other in order to be successful in their chosen roles.  While 
Dzurinda is the public face of the Slovak Democratic and 
Christian Union Party (SDKU), Miklos maintains a lower 
profile and concentrates on the economic reform policies that 
helped the party win reelection in 2002 and which they hope 
will do so again in 2006.  Miklos' achievements include 
instituting a 19 percent flat tax rate, transforming 
Slovakia's poor macroeconomic condition into one of strength, 
liberalizing privatization, and encouraging foreign 
investment.  In 2004, Euromoney Magazine named Miklos the 
Finance Minister of the Year. 
 
THE FUTURE 
---------- 
 
3. (C) Because of this success, Miklos would appear to be a 
likely successor to Dzurinda.  Oravec and Svejna said there 
was a "99 percent chance" that would happen eventually, but 
not in the near future.  We are somewhat more conservative -- 
Miklos enjoys being the Minister of Finance and he probably 
wants to direct further reforms in the future.  More 
importantly, Dzurinda is not ready to step aside.  Oravec 
said the Prime Minister enjoys the game of politics and would 
definitely seek a third term.  (Note: SDKU party whip Milan 
Hort, a close Dzurinda collaborator, confirmed this when he 
told poloffs, "He's young, he's in great shape, and he's 
ready to run," both in marathons and in election campaigns.) 
Since Dzurinda is relatively young (50), he might even seek 
another term in 2010 regardless of the outcome in the 2006 
elections.  Svejna speculated that at some point Dzurinda 
might even seek to control the SDKU from outside of elected 
office, and this would be impossible with Miklos, given his 
considerable intellectual skills.  Some believe that Miklos 
is not a political animal and would be suited to a career in 
an international institution such as the World Bank; 
certainly he gives the impression of being more of a 
technocrat than a politico. Miklos' time to lead the SDKU 
could eventually come, but in the near future the more likely 
move would be for Dzurinda to pick Minister of Defense Juraj 
Liska -- often characterized as a "yes man" to the Prime 
Minister -- as his heir apparent. 
 
INFLUENCE 
--------- 
 
4. (C) Miklos will likely transform his role in the GOS in 
the near term and maintain a considerable amount of 
influence.  The Ministry of Finance's (MOF) traditional role 
could diminish because of fiscal decentralization, the 
conversion to ESA 95 accounting principles when creating 
budgets, and the successful completion of tax reform. 
However, Miklos will exert additional influence over other 
ministries by controlling their budgets through the MOF.  He 
recently blocked a landmark investment incentive deal with 
Korean tire maker Hankook (although this may also have been 
an opportunity to give Economy Minister Rusko a political 
trip to the woodshed).  He will also look for additional 
reforms to pursue, such as education, the completion of 
health care reforms, as well as leading the GOS's efforts 
with the Lisbon Agenda, especially to increase information 
technologies and competitiveness.  Oravec and Svejna stated 
that Miklos had influence over the Slovak Central Bank (NBS) 
through his friend the Governor of the NBS, Ivan Sramko, whom 
he championed for the position.  Miklos has disciples 
throughout the government and private sector; as a result, 
 
 
although he is usually careful to cede publicly to Rusko, 
smart investors make sure he is well-briefed on their plans 
before moving ahead. 
 
THE DARK(ER) SIDE 
----------------- 
 
5. (C) Accusations of corruption have dogged Miklos for 
years, although they have subsided since the 2002 election 
campaign when opposition leader Robert Fico publicly claimed 
the Embassy had told him of Miklos' corrupt activities. 
Miklos sued Fico and won.  (Note: Fico persisted in his 
public statements despite being told the Embassy could not 
and would not support him.  Miklos wrote then-Ambassador 
Weiser at the time to solicit his testimony for the trial. 
When told the USG would not waive immunity, Miklos wrote 
again to say that it would be impossible for him to meet Amb. 
Weiser "under the circumstances" and never did again.) 
 
6.  (C) Miklos does have his legitimate critics: 
 
--Within the business community, Miklos' decision to review 
the MOF's SKK 1.35 billion (USD 42.2 million) fine for 
abusing its monopolistic position against Slovnaft, the 
Slovak refinery, is viewed negatively.  Shortly after the MOF 
announced the penalty against Slovnaft, the refiner appointed 
Miklos' friend and outgoing Governor of the NBS, Marian 
Jusko, to its Board of Directors.  At the time, there was 
speculation that Slovnaft was hoping to exploit the two men's 
personal relationship to have the penalties reduced. 
However, in the first review the penalties were only slightly 
reduced and Slovnaft will likely appeal again. 
 
--An advisor to Chairman of Parliament Pavol Hrusovsky (KDH) 
told poloffs the SDKU was "persuading" independent MP's to 
vote for its reform legislation by forgiving tax debts of 
their family members, claiming "after a visit to the Finance 
Ministry, their vote would be assured."  (Comment: The 
advisor did not like the method, but was not too critical 
since KDH also supported the reform legislation.  End 
comment.) 
 
PERSONAL 
-------- 
 
7. (C) Ivan Miklos is young, active (tennis and swimming), 
handsome, well-dressed, and a good public speaker.  SDKU 
secretary Kamil Homola told poloffs that, "After Dzurinda, 
 
SIPDIS 
he's the best we have on the campaign trail."  He speaks 
excellent English.  He and Dzurinda are obviously close--at 
public social events they and their wives often sit together 
and talk avidly. 
THAYER 
 
 
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