VZCZCXYZ0018
PP RUEHWEB

DE RUEHSL #0462/01 2281405
ZNR UUUUU ZZH
P 161405Z AUG 07
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC PRIORITY 1132
INFO RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS BRATISLAVA 000462 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV ELAB EFIN EIND LO
SUBJECT: TARGET TOMANOVA 
 
REF: BRATISLAVA 389 
 
¶1. Summary.  Opposition parties are preparing to introduce a 
motion in Parliament in early September to call for the 
dismissal of Minister of Labor Viera Tomanova, citing 
corruption and incompetence.  Tomanova is the most visible 
symbol of social democratic/left-wing economic policymaking 
within Smer and the governing coalition, having drafted and 
passed labor code reform early this year.  Tomanova is 
supported by Prime Minister Robert Fico but widely disliked 
by her Smer colleagues and Bratislava media, creating 
opportunity for the opposition to box Fico into a corner. 
While the dismissal resolution will not pass, the public 
campaign will make it nearly impossible for Tomanova to pass 
her proposed changes in the social insurance system - which 
are problematic for American investors - and may set the 
stage for her resignation down the road.  Tomanova's 
departure would be significant since she is really the only 
Minister or prominent party figure (besides the Prime 
Minister) who publicly promotes a social democratic, leftward 
economic policy vision within Smer or the governing 
coalition. End Summary. 
 
Challenging Tomanova 
-------------------- 
¶2. On August 13, opposition parties SDKU, SMK, and KDH 
publicly announced that they would introduce a motion in 
Parliament during the first week of September calling for the 
Prime Minister to dismiss Minister Tomanova.  The motion will 
cite corruption concerns, focusing on Tomanova's recent 
decision to award a 1.5 million SKK (USD 60,000) grant the 
NGO Privilegium -- where Tomanova worked immediately before 
assuming her current position -- even though Privilegium owes 
17 million SKK (USD 700,000) from several years of unpaid 
social insurance taxes.  The corruption charges are 
relatively mild by local standards but have received 
widespread media coverage due to Tomanova's high degree of 
unpopularity and visibility with local press.  Smer has 
responded by expelling the statutory representatives of 
Privilegium from the party and the NGO has to give up the 
money.  PM Fico says he is willing to accept responsibility 
for the grant, but continues to defend Tomanova. 
 
¶3. Opposition parties do not expect to attract any votes from 
Smer, HZDS, or SNS for their Tomanova dismissal resolution. 
They know, however, that the majority of parliamentarians 
from all three ruling parties significantly disagrees with 
Tomanova on policy issues, questions her competence, and 
wishes she would quietly go away.  Key Smer officeholders 
such as Minister of Finance Jan Pociatek and Minister of 
Interior Robert Kalinak, among others, have not been shy in 
offering their frank negative assessments of her.  The Prime 
Minister, however, trusts and respects Tomanova, to the point 
that he has lashed out against media coverage of the 
Privilegium incident and carried out a recent press 
conference with her on social insurance reform.  Observers 
believe Fico will use up significant reserves of political 
capital in an effort to save her from being the first member 
of his cabinet to resign.  Fico's stubbornness is likely to 
hurt him on this issue; a recent MESA-10 poll suggests that 
42% disagree with Fico's support of Tomanova while only 20% 
agree. 
 
The real goal: stopping social insurance reform? 
--------------------------------------------- --- 
¶4. While opposition parties do not expect to see Tomanova 
step down soon (and on a certain level would rather keep her 
bumbling in the public eye), they want to apply direct 
pressure to Tomanova so that she is too weak to pass any more 
legislative initiatives.  In July, Tomanova's Ministry of 
Labor introduced a social insurance (i.e. pension, sickness 
and disability) reform proposal that would eliminate caps on 
maximum employee and employer contributions and tighten 
access on drawing funds from the system.  (Employees and 
employers currently pay 9.4% and 25.2% of salary, 
respectively, in social insurance payroll taxes up to the 
gross income cap level, which is 1,200 USD or 2,400 USD per 
month, depending on insurance category.  All salary above 
that level is not subject to payroll tax.)  The proposal is 
designed primarily to fill a 28 billion SKK (USD 1.16 
billion) deficit in the system created by partial 
privatization under the previous government, but is too 
modest to cover more than a fraction of the deficit. 
Meanwhile, the costs imposed on foreign investors associated 
with eliminating contribution caps would be considerable 
since many of their employees earn salaries above 
contribution cap levels.  US Steel, PriceWaterhouseCoopers, 
and Dell have estimated the potential cost impact to be three 
to five times higher than that of Tomanova's labor code 
reform, passed in June.  The American Chamber of Commerce 
addressed these and other concerns to the Prime Minister in a 
letter sent August 13. 
 
¶5. Given the current media circus surrounding the Minister of 
Labor, Tomanova's critics within Smer have been rather direct 
about voicing their concerns about social insurance reform. 
When the Ministry asked in late July for comments from the 
Council of Ministers, it received by early August 174 
different objections, the vast majority from Smer-run 
Ministries.  While most comments focused on technical 
details, the Ministries of Finance and Interior directly 
raised concerns about the principal provisions of the 
legislation. The primary political coordinator for Smer 
parliamentarians, Andrej Kolesik, told econoffs that Tomanova 
made grave mistakes by prematurely introducing the 
legislation without consulting her coalition partners and the 
relevant ministries, and that the legislation could not go 
forward in its current form.  The willingness of top Smer 
officials to directly oppose Tomanova's proposals contrasts 
significantly with earlier attempts within Smer and the 
governing coalition to moderate MOL labor code reform quietly 
and behind closed doors.  Many observers believe Tomanova's 
original social insurance reform proposal, so feared by 
foreign investors just a few weeks ago, is dead-on-arrival 
unless Fico takes the opposition to Tomanova personally and 
forces the issue within the coalition and in Parliament. 
 
Outlook 
------- 
¶6. The opposition campaign against Tomanova and the almost 
daily negative publicity she receives in print and television 
media have nearly eliminated her ability to accomplish 
substantive policy goals for Smer.  While Fico is highly 
unlikely to accede to pressures calling for her resignation, 
many observers believe Tomanova will likely step down some 
time next year when the public spotlight on her is 
diminished. Tomanova does not have an obvious, influential 
replacement waiting in the wings, and her departure would 
significantly reduce the influence of the old Social 
Democratic Left (SDL) party from Smer's economic policy 
making process. 
SILVERMAN