EU FUNDS: SMER STRENGTHENS ITS POSITION VERSUS SNS

UNCLAS BRATISLAVA 000823 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EU KPAO LO PGOV SUBJECT: EU FUNDS: SMER STRENGTHENS ITS POSITION VERSUS SNS ¶1. (SBU) Summary: On October 8, the GOS cabinet announced its distribution plan for EU funds from 2007-2013. The new government's basic funding priorities appear to remain consistent with EU fund priorities proposed by the previous government, but authority over more than 1.7 billion Euros in "knowledge-based society" funding was stripped from the Slovak Nationalist Party (SNS)-run Education Ministry, and transferred to Deputy Prime Minister Dusan Caplovic (Smer) and to the Smer-run Ministry of Economy. SNS-led ministries still retain authority over more than 40 percent of the Eurofund budget, but Smer has clearly strengthened its hand at the nationalists' expense. End Summary. Basic Data -------------- ¶2. (U) The 2007-2013 Eurofunds distribution plan breaks down funding levels by Ministry. Key funding areas and GOS proposed amounts are listed below, with funding levels proposed earlier this year by the Dzurinda government provided in parenthesis. Ministerial and party control is provided in the third column. - Transportation 3.2 bil (3.4 bil) Transport/Smer - Environment 1.8 bil (1.45 bil) Environ/SNS - Regional Development 1.6 bil (1.47 bil) Reg Dev/SNS - Information Technology 993 mil (0) Dep. PM/Smer - Research and Development 883 mil (2.6 bil) Education/SNS - Employment/Social 864 mil (600 mil) Labor/Smer - Competitiveness 772 mil (0) Economy/Smer - Education 600 mil (800 mil) Education/SNS - Bratislava Funds 447 mil (82 mil) Various/Unclear - Health 250 mil (200 mil) Health/Smer It is worth noting that 11.5 billion Euro equals approximately 420 billion SKK, or 60 billion SKK per year. By comparison, planned expenditures in the 2007 Slovak federal budget are 343.4 billion SKK. Eurofunds constitute a huge potential funding source for the Slovak government, and the ruling coalition's ability to fulfill its many campaign promises depends in part on its ability to spend Eurofunds quickly and effectively. Note: HZDS-led ministries have no control over EU development funds. Background and Analysis -------------- ¶3. (U) For the past 100 days since the governing coalition was formed, Prime Minister Robert Fico's Smer party has been negotiating with Jan Slota's SNS party over control of 2007-2013 Eurofunds. While SNS received only three relatively obscure ministries when it joined the ruling coalition, those three ministries (Education, Construction/Regional Development, Environment) were slated to receive over 6.3 billion Euro based on the last Eurofund budget proposed by the Dzurinda government earlier this year. The Education Ministry would have received the lion's share of the proposed funding, reportedly 3.2 billion, primarily for research and development and infrastructure improvements for schools and universities. ¶4. (SBU) Smer officials had been critical of the Dzurinda government's slow disbursement of EU funds, but admitted to Emboff privately that they had no significant philosophical differences with the priorities outlined for EU funds. Their main goal was to restructure funding programs so that SNS did not gain as much power over funding as Slota believed he had secured when forming the ruling coalition. To this effect, Smer appointed Caplovic as Deputy Prime Minister for the Knowledge-Based Economy -- a new title created with the publicly unspoken assumption that funding for his office would be on the way. Finance Minister Jan Pociatek also expressed strong interest in acquiring control over funding for knowledge-based society programs. ¶5. (U) In the final agreement, over 1.7 billion Euro was transferred away from the Ministry of Education toward the creation of two new entities: the 993 million Euro Information Technology program run by Deputy PM Caplovic and the 772 million Euro Competitiveness and Economic Growth program, to be administered by Minister of Economy Lubomir Jahnatek. In addition, Bratislava regional funds were increased significantly. While the details of the Bratislava funds and the Jahnatek's new program are not yet concrete, it is expected that the former will be used primarily to upgrade educational infrastructure in the region, while the latter is said to focus on research and development strategies. It appears that, after the restructuring, knowledge-based economy/educational programs will receive essentially the same funding levels as they would have in the previous government. SNS-run ministries did not lose funding in all areas, however. The SNS-run Ministries of Environment and Regional Development received budget increases that were offered to compensate SNS for the much larger cuts at the Ministry of Education. ¶6. (SBU) Comment: Smer continues to consolidate control of policy and money by weakening the influence of its coalition partners on major governmental matters without completely starving them of funding or ability to deliver to their core voters. It is too early to assess how Eurofund restructuring will affect the quality of GOS research and development, educational, or information technology programs, nor can we assess how it affects USG ability to work with the GOS on knowledge-based economy/educational initiatives. In any case, the Education Ministry has traditionally been one of the least dynamic and effective ministries in the GOS, so transfer of responsibilities may be a welcome change. At this time the Deputy PM does not have the staff to administer its newly acquired resources. Nevertheless, if the GOS can carry out the organizational restructuring needed to deliver more effective EU-funded programs, the government's new proposal has potential to improve GOS policy implementation. End Comment. VALLEE