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Viewing cable 06BRATISLAVA121, EARLY ELECTIONS NOT EXPECTED TO IMPACT ECONOMY

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Reference ID Created Released Classification Origin
06BRATISLAVA121 2006-02-13 15:35 2011-08-26 00:00 UNCLASSIFIED Embassy Bratislava
VZCZCXRO5148
PP RUEHAG RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSL #0121/01 0441535
ZNR UUUUU ZZH
P 131535Z FEB 06
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC PRIORITY 9524
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS SECTION 01 OF 02 BRATISLAVA 000121 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/NCE 
COMMERCE FOR MROGERS AND STIMMINS 
TREASURY FOR AALIKONIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PGOV LO
SUBJECT: EARLY ELECTIONS NOT EXPECTED TO IMPACT ECONOMY 
 
REF: A. A. BRATISLAVA 101 
 
     B. B. BRATISLAVA 100 
     C. C. BRATISLAVA 99 
 
1. (U) SUMMARY: Parliament's unanimous approval to hold early 
elections June 17 (vice September) is not expected to have 
much impact on the economy.  Outside of a slight depreciation 
of the Slovak Koruna following the Christian Democratic 
Movement's (KDH) defection from the ruling coalition, most 
experts have focused on how a shortened timeframe will impact 
the Government's remaining economic agenda.  The government 
announced its plans to complete the privatizations that are 
already underway (airports, power and possibly rail cargo), 
while others (regional electricity distribution and heating 
plants) will be left for the next government.  A June 
election also has the benefit of providing a new government 
more time to settle into office before having to prepare the 
2007 state budget.  END SUMMARY. 
 
2. (U) The Slovak Koruna depreciated by 1 percent (from 37.35 
SKK/EUR to 37.75 SKK/EUR) following KDH's announcement 
February 6 that the party would leave the government, the 
first significant decline since Slovakia's November 
announcement to enter the European Exchange Rate Mechanism II 
(ERM II).  The subsequent decision by Prime Minister Dzurinda 
to hold early elections, and unanimous Parliamentary approval 
for June 17 elections, have helped stabilize the currency, 
which stands at 37.54 SKK/EUR as of February 13. 
 
-- NO NEW PRIVATIZATIONS, BUT NO REASON TO STOP THOSE ALREADY 
WELL UNDERWAY -- 
 
3. (U) The government has already achieved its main economic 
goals for this Parliamentary session by entering ERM II in 
November and passing the FY 2006 budget in December.  In 
January the Prime Minister announced that his government 
would focus on completing privatizations until the end of 
March, at which point it would leave any remaining plans to 
sell off government assets to the next government.  On 
February 1 the cabinet approved the most visible and 
controversial deal, privatization of Bratislava and Kosice 
airports to a consortium including Vienna's Schwechat airport 
and Slovak private equity group Penta.  Likewise, the sale of 
41 percent of the shares of Zapadoslovenska energetika (ZSE), 
a regional power distributor in western Slovakia, to EON, a 
German company that already owns 49 percent of the company, 
will likely continue. 
 
4. (U) In the last remaining weeks of its session, Parliament 
must take action for the government to finalize the 
privatization of 66 percent of Slovenske Elektrarne to 
Italian power utility Enel.  One of Enel's conditions for the 
completion of the approximately USD 900 million deal is that 
Parliament pass a law authorizing state funds for the 
decommissioning of nuclear power plants.  Despite their 
departure from the ruling coalition earlier in the week, 
KDH's leadership has indicated that they will support the 
legislation, which should give the ruling coalition enough 
votes to approve the measure. 
 
5. (U) Prime Minister Dzurinda is being much more cautious in 
the pending sale of Zeleznicna Spolocnost Cargo Slovakia 
(ZSSK Cargo), a national railway freight handler.  The 
government has already received the final bids for the 
tender, and last Tuesday the Privatization Commission 
recommended to the government that the consortium of Rail 
Cargo Austria and Slovak finance group J&T be selected as 
winners.  (Note: U.S.-based Rail World is also participating 
in the tender with Slovak finance group Penta.)  Dzurinda 
announced last week, and again over the weekend, that he 
would only continue with the cargo deal if he had agreement 
from the opposition parties.  He has suggested, however, that 
halting the deal at this time would lead to unspecified 
damages to the government in the form of lawsuits and/or a 
lower sale price in the future.  Privatization of the two 
remaining regional power distributors, Stredoslovenska 
energetika (SSE) and Vychodoslovenska energetika (VSE), to 
their existing strategic investors has been postponed until 
after the election.  The government has also decided to put 
off any action on the privatizations of six municipal heating 
companies. 
 
-- COMMENT -- 
 
6. (SBU) Early elections are unlikely to have any significant 
short-term impact on the Slovak economy or the government's 
remaining economic agenda, which was already minimalist in 
 
BRATISLAVA 00000121  002 OF 002 
 
 
nature.  In the long run they may prove beneficial by 
providing the next government more time to make appointments 
to key economic ministries and get their house in order 
before submitting a budget to the Parliament in October for 
fiscal year 2007.  The budget process will be closely watched 
by Brussels now that Slovakia is in ERM II. 
VALLEE