US embassy cable - 05BRATISLAVA815

C O N F I D E N T I A L  BRATISLAVA 000815 
 
SIPDIS 
 
 
E.O. 12958: DECL: 10/02/2015 
TAGS: ECON, ETRD, KDEM, LO, PGOV, PINR 
SUBJECT: MORE CABINET SHAKEUPS: LABOR OUT, ECON IN 
 
REF: BRATISLAVA 683 
 
Classified By: DCM Lawrence Silverman for Reasons 1.4 (B) and (D) 
 
1. (C) SUMMARY - Labor Minister Ludovit Kanik announced his 
resignation October 5 after admitting that he made a mistake 
in applying for EU Funds for the refurbishing of a hotel that 
he owns in the resort town of Banska Stiavnica.  Kanik's 
announcement will complicate his efforts to formalize a de 
facto merger of his Democratic Party with PM Dzurinda's SDKU 
in coming months.  His departure comes on the heels of the 
formal appointment of former ANO MP Jirko Malcharek as 
Minister of Economy, replacing the ousted Pavol Rusko. END 
SUMMARY. 
 
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LABOR MINISTER OUT OF A JOB 
--------------------------- 
 
2. (SBU) Minister of Labor, Social Affairs and Family Ludovit 
Kanik announced his resignation at a hastily called press 
conference October 5.  The surprise announcement follows two 
days of heavy media coverage of his recent application for 
SKK 22 million (USD 680,000) from EU Structural Funds for 
reconstruction of a Hotel he owns in Banska Stiavnica in 
Central Slovakia.  In the press conference Kanik admitted his 
mistake in asking for EU money, but stated that he plans to 
continue his work of integrating the parties of the center 
right in Slovakia. 
 
3. (C) Kanik is the chairman of the Democrat Party 
(Demokraticka Strana - DS), a Bratislava-centric intellectual 
party which has a small following.  DS is closely associated 
with SDKU (Finance Minister Miklos' was formerly a member of 
DS), which nominated Kanik as Minister after supporting the 
SDKU in the 2002 elections.  During an October 4 courtesy 
call with the Ambassador, Kanik said that DS was finalizing 
technical preparations for a merger with SDKU, which would be 
completed through an "extraordinary party congress" in 
December.  Some of the DS leadership, led by Vice-Chairman 
Hochel, does not agree with this move and wants to maintain 
DS as an independent party, even if they are expected to poll 
well below the five percent Parliamentary threshold.  The DS 
leadership will meet October 6, but do not have the power to 
recall Kanik from his position as chairman of the party. 
 
4. (C) Kanik withdrew his application for EU funds on 
September 14 when it was also revealed that a real estate 
company represented by his brother, Norbert Kanik, had 
received an EU grant for SKK 150 million (around USD 5 
million) to develop a ski center near Banska Stiavnica. 
According to press reports, a National Agency for Tourism 
official involved in making this grant, Jan Rudolfe, has 
since been given a position in the Ministry of Labor as 
Director for the EU Fund for Social Development.  Kanik 
previously faced several scandals for failing to pay 
mandatory payroll contributions for his employees, but his 
debts were pardoned before he became minister in 2002.  He 
was also accused of corruption for his role in several large 
privitazations in the late 1990's when he was President of 
the National Property Fund. 
 
5. (C) SDKU Deputy Chairman (and Parliamentary whip) Milan 
Hort told us that Kanik made a mistake asking for money from 
EU funds for his companies, but noted that he did the right 
thing to withdrawal his application after he was criticized 
in the press.  Hort commented that Kanik's activities cannot 
be compared with those of former Minister of Economy Pavol 
Rusko, who denied any mistakes until he was sacked (reftel). 
Still, in Hort's opinion, it is important for Kanik to leave, 
to save SDKU and Prime Minister Dzurinda from criticism in 
the run-up to next year's national elections, especially 
given the Slovak public's view of politicians as inherently 
corrupt.  According to Victor Niznansky, GOS Plenipotentiary 
for Public Administration Reform and former vice-chairman of 
the DS party, Dzurinda and Kanik held discussions well into 
the night (October 4) with Dzurinda arguing that Kanik needed 
to step down.  Not surprisingly, Dzurinda told the press that 
Kanik's resignation was entirely the minister's idea, not the 
result of pressue. 
 
6. (C) As Minister, Kanik managed the reform of both the 
social and pension systems.  The radical overhaul of the 
pension system is widely acknowledged as having been 
successful, while the reform of social and welfare benefits 
is more controversial and still considered to be a work in 
progress.  In an attempt to stress his links with the recent 
reforms, Kanik stated his resignation will take effect after 
a conference on pension reform, which starts October 12. 
Miroslav Beblavy, a member of SDKU and the current State 
Secretary for Labor, Social Affairs, and Justice, has been 
 
SIPDIS 
mentioned as a possible replacement for Kanik. 
 
--------------------------------------------- --- 
PRESIDENT FINALLY APPROVES REPLACEMENT FOR RUSKO 
 
--------------------------------------------- --- 
 
7. (SBU) After an almost one-month delay, President 
Gasparovic appointed Jirko Malcharek as the new economy 
minister on October 4.  Malcharek is a member of the group of 
former ANO MP's led by Lubomir Lintner that broke from Pavol 
Rusko to remain with the coalition (reftel).  The new economy 
minister was first elected to Parliament in 1998 with the 
Party of Civic Understanding, was a co-founder of ANO in 
2001, and won a seat in Parliament as an ANO MP that same 
year.  He has no previous experience with economic issues and 
is better known as the owner of a car racing company.  After 
his appointment was announced by Gasparovic, Malcharek stated 
that he will work closely with Minister of Finance Miklos to 
complete the ongoing privatization projects in a transparent 
manner.  One of his first priorities will be obtaining 
cabinet approval of new regulations for state aid to 
investors, which have been hastily put together after Rusko's 
departure. 
 
8. (C) COMMENT: Kanik's departure, the first resignation by a 
cabinet minister since the 2002 elections (several have been 
dismissed for conflicts with the ruling coalition), is a 
clear indication that the campaign for Parliamentary 
elections is underway.  Kanik has always been known as an 
"entrepreneurial politician" who has found his way out of 
difficult circumstances in the past.  Although he announced 
his plans to continue his political activities by working to 
integrate the "right-wing parties," it is unlikely that SDKU 
will be anxious to merge with DS.  Kanik is the driving force 
behind the union, and currently does not have the support of 
his own party for the merger. END COMMENT. 
VALLEE 
 
 
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