US embassy cable - 05BRATISLAVA692

C O N F I D E N T I A L BRATISLAVA 000692 
 
SIPDIS 
 
 
E.O. 12958: DECL: 08/26/2015 
TAGS: PGOV, ECON, ETRD, PINR, KDEM, LO 
SUBJECT: MINISTER OF ECONOMY, WHAT MINISTER OF ECONOMY? 
 
REF: A. BRATISLAVA 682 
     B. BRATISLAVA 677 
     C. BRATISLAVA 663 
     D. BRATISLAVA 626 
     E. BRATISLAVA 618 
 
Classified By: Ambassador Rodolphe M. Vallee for Reasons 1.4(B) and (D) 
. 
 
1.  (U) Summary.  The firing of Pavol Rusko as the Minister 
of Economy (reftels) will not likely have a major impact on 
the Slovak economy.  Though a long-term replacement remains 
uncertain, the temporary substitute, Finance Minister Ivan 
Miklos, has promised to enact measures which will verify all 
ministry transactions, implement transparent rules for state 
support of foreign investments, and ensure the completion of 
ongoing privatizations.  As a result, continued economic 
growth should progress unaffected by the political turmoil. 
End Summary. 
 
MARKET OUTLOOK 
-------------- 
 
2.  (SBU) Although the Slovak crown depreciated slightly 
following Rusko's departure, analysts stress that the drop is 
more related to the fate of the Polish zloty than that of the 
former Minister.  Traders warned, however, that early 
elections or other disruptions such as failure to pass the 
state budget for 2006 could alter that outlook.  Budget 
problems could also affect Slovakia's planned 2006 entrance 
into the euro waiting room (ERM-II) and further devaluate the 
crown.  (Note: The budget is supposed to be approved in 
December 2005.  Prime Minister Dzurinda told the Ambassador 
on August 24 that this is a key consideration in his 
political calculations of next steps in the Rusko affair.) 
Nevertheless, most analysts expect the coalition to survive 
in "one form or another;" they remain bullish on the crown 
and expect further appreciation (daily ups and downs aside) 
during the next 12 months. 
 
CHECKING THE BOOKS 
------------------ 
 
3.  (C) As interim Minister of Economy, Miklos' top priority 
is reportedly to scour through paperwork to check all of 
Rusko's dealings in the Ministry.  Coalition members have 
disclosed that they expect to discover additional 
improprieties including dubious transactions and overpayments 
of state subsidies that personally benefited Rusko.  The 
government believes that decisive action will shift the focus 
away from the turbulence of Rusko's removal and have a 
positive affect on the economy as transparency increases and 
corruption is punished. 
 
FOREIGN DIRECT INVESTMENT 
------------------------- 
 
4.  (C) Although Rusko has taken credit for attracting 
foreign direct investment to Slovakia, FDI is not expected to 
diminish after Rusko's departure.  In fact, Miklos has 
already stated that he will implement specific rules for FDI 
and end Rusko's secretive negotiations and oral contracts. 
One contact close to Foreign Minister Kukan contended that 
the country will still attract investments but will not have 
to pay the overly generous incentive packages typically 
promised by Rusko.  Such transparency is welcomed by the 
business community, as many have expressed that FDI was 
increasing in spite of Rusko, and not because of him.  In a 
recent visit of potential German investors to U.S. Steel 
Kosice, Rusko, though uninvited, burst in "late, behaved 
strangely, and looked like Mickey Mouse."  The businessmen 
commented after that, "In Germany, we have to buy tickets to 
see such a circus performance". 
 
PRIVATIZATIONS 
-------------- 
 
5.  (SBU) The lead opposition party announced August 24 that 
it would attempt to stop the privatization of the Slovak 
power company and railroad cargo rights because an unstable 
minority ruling coalition should not be permitted to 
undertake such important economic actions for Slovakia. 
Miklos, however, has promised that the privatizations will 
proceed as planned before elections in 2006. 
VALLEE 
 
 
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