Analyst: In Terms of Investment, Slovakia Not Ready for Changes to EU Budget (2)

Bratislava, 19 January (TASR) - The draft of the new multi-year budget of the European Union (EU) changes the priorities and the method of financing public investments, expert analyst of public finances at the Slovak central bank NBS Marian Labaj noted in his latest blog, adding that Slovakia has long relied on European resources in this area, with investments from the domestic budget among the lowest in the region. "Slovakia is not (yet) ready for this evolution. In practice, this will mean a greater need to finance motorways, railways, digitisation of services, or the construction of hospitals from the state budget. However, without better project preparation and responsible budget planning, this won't be possible," assessed the expert. Labaj pointed out that since joining the EU, Slovakia has relied heavily on European sources for investment. Domestic sources don't even cover the wear and tear of public assets, and their share of gross domestic product (GDP) has stagnated between 2-3 percent over the past decade. "Among the ten countries that joined the EU with us, we have long been at the bottom of the region. For example, in ten years, the Czech Republic has invested on average a third more than us from its own resources, and the Baltic countries as much as two-thirds more," he emphasised. According to him, the new European budget for 2028-2034 will put pressure on "bridging" financing from the current budget or on debt. He pointed out that currently, the vast majority of EU funds are spent on two traditional areas, with the first being cohesion policy supporting regions, which finances the modernisation and development of roads, railways, public buildings, schools, and hospitals, as well as supporting entrepreneurship and employment. The second is the common agricultural policy, which is based primarily on subsidy payments to farmers and rural development projects. "These areas should be now combined into a single instrument, in which funding will be linked to the achievement of reform milestones. The Recovery and Resilience Facility already works in a similar way. In this way, the EC is trying to push for more efficient use of common funds. However, one of the consequences is greater uncertainty in the timing of disbursements, as the flow of money will be tied to the fulfilment of various conditions and objectives," stated Labaj. In addition, member states will be much more dependent on their own ability to finance investments. The proposed new budget also reduces the overall resources available for traditional EU policies. The Union is facing new challenges, which are linked to new priorities such as promoting technological competitiveness, climate adaptation, the defence industry, security, transport mobility, and energy. The volume of "guaranteed" support for Slovakia is thus likely to decrease, while the system of planning and budgeting public investments in Slovakia is not prepared for such changes, stated the analyst. "We aren't creating enough space in the public budget to cover the wear and tear of public property, let alone new incentives for modernisation. The resources that we could allocate from taxes for investments are insufficient," he warned. According to Labaj, Slovakia must therefore improve in this area. "We need to re-evaluate the volume and structure of budget expenditures so that we have room to partially finance investment needs from current revenues. For areas that EU funds will no longer cover sufficiently, we should also have our own investment plan based on national resources," he added. NOTE: This story has been extended to include the final three paragraphs. am