Governments that decide to take over the obligations of a private company, such as Váhostav-SK, need to consider the risks of such a move, according to Ľudovít Odor from the Budgetary Responsibility Council (RRZ), an independent agency that monitors Slovakia's budgetary discipline. On his blog he explained that these risks could involve creating a precedent whereby other groups would be entitled to ask for similar assistance from the state, and this could have an impact on the public deficit and debt. In the case of Váhostav-SK, which is currently undergoing restructuring, the Government has come up with a number of measures. One of these is to buy up the claims of Váhostav creditors via the Slovak Guarantee and Development Bank (SZRB). The scheme should be financed by SZRB from a levy that is paid to a special state fund by banks. The expert claims that this levy is first and foremost set to help remedy troubled financial institutions and, while it helps improve public finances, it depletes public resources when the levy is set to salvage financial problems. "And this is the reason why it would be good if the current levies were used to curb deficits and debts. If they are wasted by the state now, there will be no cushion for a rainy day".
Nevertheless, this is not the only risk for the state when buying up the claims of small creditors. "If the state saves one group, another group can ask for the same assistance", warns Odor. Furthermore, another risk lies in the way the Cabinet wants to save such companies. "If the rules in the private sector don't enable the full compensation of claims, the missing money must come from public sources".
The Government's intervention in the case of private firms could have a negative influence on the debt and deficit of the country if assessed by statisticians as 'risky'.
