(Bloomberg) -- Slovakia’s parliament passed a €2.7 billion ($3 billion) consolidation package to reduce one of the highest budget deficits in the European Union, brushing aside criticism from the opposition that the plan may hurt economic growth.
Lawmakers in Bratislava approved on Thursday measures including an increase in the corporate and value-added tax rates, along with the introduction of a new levy on bank transactions.
Prime Minister Robert Fico’s government needs to implement measures totaling some €1.7 billion to help lower the fiscal deficit to 4.7% of gross domestic product in 2025 from 5.8% of GDP this year. The nation’s public finances have come under increased scrutiny since December 2023, when Fitch Ratings downgraded the country’s credit score, citing a “deterioration in public finances and an unclear consolidation path.”
“We need to reverse the rising debt trend,” Finance Minister Ladislav Kamenicky said during the parliamentary debate. “The plan is clear: by 2027, we aim to reduce the deficit to 3% of GDP.”
Starting next year, companies with annual revenue of more than €5 million will face a corporate tax hike to 24%, and all businesses will pay a 0.4% tax on bank transactions. The standard VAT rate will also rise to 23% from 20%.
Still, fresh spending proposals have raised the total consolidation requirement by an additional €1 billion.
The package also faced criticism from opposition lawmakers, who warned it would harm the country of 5.4 million’s economic competitiveness and deter foreign investment.
“These measures will stifle economic growth and accelerate inflation,” said Marian Viskupic of the liberal Freedom and Solidarity party.
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