December 2015 1 POLICY PAPER Slovakia Single market Zsolt Gál . This paper is published in the framework of the project “Visegrad in the EU – How Much Do We Matter?”, whose aim is to assess the impact of the V4 countries on the EU policy making. The project is a result of the cooperation of the EUROPEUM Institute for European Policy (Czech Republic), Institute of Public Affairs (Poland) Institute for Foreign Affairs and Trade (Hungary) and Slovak Foreign Policy Association (Slovakia) and is supported by the International Visegrad Fund. December 2015 2 Summary The free movement of labour was rather a success in spite of the fact that Slovakia had little (if any) influence over the decision of the old member states to open Taking into account that Slovakia has been their labour markets without using transitional restrictions a responsible policy-taker and the formation of clear (up to maximum seven years). The labour flows from preferences and priorities regarding EU issues have been Slovakia were relatively intensive and their overall economic very limited. Thus, using a broader concept in the field of effect was positive, especially on the domestic labour the single market, we identified the following main market where they helped to mitigate high unemployment. priorities: In the field of energy security the picture is rather Drawing EU funds – maximizing the use of mixed, there are some achievements but no large financial resources from the common EU budget. improvements. Ensuring convergence – converging to the EU-15 in terms of economic development, living standards The overall picture of Slovak performance shows and quality of life by using the opportunities of the a responsible policy taker country (with still single market and the sources of EU funds. an impressive record of formal transposition of EU Gaining free access to the labour markets – legislation) which rarely comes out with its own initiatives, opening up the labour markets of other EU members has very few preferences one can clearly recognise and (especially the EU-15) to the largest possible extent sometimes even its official positions on actual EU issues are as soon as possible. missing. Energy security – support for the creation of a common energy policy; support of diversification There was only one example of a policy driver and energy solidarity while maintaining the attitude in the field of energy policy, the failed attempt of sovereignty over the energy mix and opposing the Czech-Slovak-EU initiative, the European Nuclear further liberalization. Energy Forum (ENEF) – which lacked significant results. Regarding the achievements (successes and failures) Slovakia resembles a policy killer (at least partially) we can conclude the following: only in two areas. The first is the fight against the European Commission’s third energy liberalization package in The use of EU funds has been a clear failure as it 2008, when Slovakia, as a part of a wider coalition, has been neither transparent nor effective so far. managed to weaken the originally proposed unbundling solution (i.e. the division of gas and electricity distribution Economic convergence is probably the greatest and supply networks). success story of the whole accession process. However, we argue that EU membership was not the main reason behind The second would be resistance against the Slovakia’s remarkable achievements – it was “just” harmonization of income taxes and social policies. a necessary precondition for the birth of the ‘Tatra tiger”. But here the plans never materialised, so there was no The main reason behind the fast convergence was legislative proposal on the table to oppose. It is also a comprehensive package of deep structural reforms important to note that the rejection of tax and social policy between 2002 and 2006. Taking into account that most harmonization is mostly a right-wing agenda in Slovakia. reforms were dismantled and abolished since, the future of Therefore it is not a widely shared consensual position of convergence is doubtful. Indeed the fast catching up the country, just a priority on the part of political elites process had stopped from the beginning of the crisis (2009), (Malová et al. 2005: 9-10). But that part of elites usually FDI inflows radically declined, employment is far below its presents its fierce opposition to harmonization quite loudly. pre-crisis peak and public debt has increased dramatically. For example, the short-lived centre right Radičová December 2015 3 government stated in its Manifesto that: “The Government (including the fostering of common energy policy) clearly supports the preservation of Member States’ strengthen its bargaining position vis-a-vis main suppliers, sovereignty in economic and social policies, where it does especially the Russian Federation. not clearly conflict with the needs of the single market… The Government will not give its consent to European tax harmonisation in the area of income tax” (Civic… 2010: 7, 9). Considering the future preferences and challenges the main areas are consistent with the ones of previous ten Preferences, what preferences? years. It is a hard task to search for Slovak preferences and The transparent and effective use of EU funds priorities in the EU integration process. The non-existing remains the largest and most important challenge written official EU membership strategy is only the less ahead together with the restart of the convergence process. important explanation, since there are very few mentions of Here, bold decisions (cutting of the EU funds from the preferences in other official documents as well. Quite often domestic corruption machinery around public procurements, it is even hard to find out a clear Slovak (government) deep, sometimes unpopular structural reforms) are needed. position during the negotiations on various issues within Otherwise, Slovakia might fall into the Middle Income Trap the Union. To put it simply, Slovakia used to go with and stagnate around its current level of development. the crowd during its first 10 years as an EU member. It has Deeper integration into the single market might be helpful been a typical policy taker country, which is barely coming here but its potential results are quite limited. The V4 forward with its own initiative, nor is it trying to block the countries already benefited from the liberalization of proposals with majority support. Slovakia has been most markets; in particular, the opening of monopolized sectors often interested in the deepening of the integration (e.g. energy, telecommunication and aviation) to processes rather than remaining outside (usually for pure competition with positive effects on consumers (Erste… pragmatic reasons) and trying to behave as a good student 2014: 10). In Slovakia there is still some room for higher doing an excellent job in formal transposition and competition in the energy sector and rail passenger implementation of EU law. The rather passive application of transport which remained almost untouched by new legal acts usually occurred without much controversy liberalization. (within the political elite) or even public attention at home. Taking into account the rising criticism of the free Of course this is not a unique experience, most new movement of people in a number of member states, member states (NMS) have a very similar record. renewed efforts are needed to defend the free access An analysis by the Comenius University’s Department of to labour markets. Slovakia should, in co-operation with Political Science “confirmed the predominance of a reactive others, insist on the unquestionable character of the free policy style in the NMS and occasional examples of other movement of labour within the EU. Parallel to this, the strategies employed only in strategically important issues domestic labour market needs to become more attractive and/or matters related to national identity and security” for Slovak migrants and encourage them to return home. (Malová – Lisoňová 2010: 176). Otherwise, there is an increasing risk that a high share of There are quite a few reasons why new members temporary or circular migration will turn to permanent generally and Slovakia particularly were rather silent, emigration and Slovakia is going to lose a significant part of constructive policy consumers: its most active and productive citizens. In the field of energy security, Slovakia with its regional (especially V4) partners, should continue to diversify its energy imports and with increased co-operation December 2015 4 1. The trauma of being left out European currency and termination of the transitional Due to the series of undemocratic decisions by the periods for the free movement of workers, Slovakia has populist prime minister, Vladimír Mečiar, and his attained the maximum degree of integration” (Manifesto… governments between 1992 and 1998; initially Slovakia was 2012: 6). lagging behind its neighbours in the Euro-Atlantic integration process (Nič et al. 2014: 4). Especially under Vladimir Mečiar’s third government (1994-1998) Slovakia 2. The legacy of the pre-accession became a “deviant” case among new democracies in Central negotiations and the completion of Europe (Szomolányi 1999, 2004). Slovakia’s accession to the accession process the OECD was postponed in 1996 due to a lag in market The strong effort to catch up with the neighbouring reforms and unlike its V4 neighbors, it was not invited to countries intensified the ‘natural’ asymmetric position of NATO and to the first round of EU accession negotiations in Slovakia during the accession process: the candidate 1997. Regarding the latter decision, the shameful reason country should take over the acquis communitaire and the was that Slovakia was the only candidate who failed to meet European Commission is controlling it. Under this ‘take it or the political criteria (MZVEZ SR 2014: 6). A danger of leave it’ principle, there is not much space for domestic becoming “a black hole in the heart of Europe” (warning by discussion or formation of preferences; and the Madeleine Albright, then the U.S.