Slovakia – Pellegrini Fails to Soothe Discontent

Prime Minister Peter Pellegrini has completed his first six months in office after taking over the top government post from Róbert Fico, who felt obliged to resign earlier this year amid the largest anti-government street protests the country had seen since the 1989 Velvet Revolution. The catalyst for the protests was the murder of a young journalist, Jan Kuciak, and his fiancée, Martina Kušnírová, which police described as a likely hit ordered to halt the reporter’s investigation into alleged ties between senior politicians, business leaders, and the Italian mafia.

The coalition of the center-left Smer-Social Democracy, the ethnic Hungarian Most-Híd, and the far-right SNS survived the crisis intact, but not without a government shakeup that resulted in the dismissal of several controversial figures, including Interior Minister Robert Kalinak, whom Kuciak identified as having ties to Marián Kočner, an oligarch at the center of his investigation. Unfortunately, revelations that some tainted figures have returned in lower-profile positions have provoked sharp criticism from the parliamentary opposition and threats of a fresh round of protest demonstrations ahead of local elections set to take place in November.

The local elections will provide the first real test of popular support for Pellegrini’s government, and a poor showing for either of the junior partners could lead to the breakup of the three-party alliance, assuming public pressure does not produce that result before the vote. In that event, an early election would most likely reinforce the trends that emerged in 2016, when three populist-national parties—SNS, Kotleba-L’SNS, and Sme Rodina—made gains at the expense of Smer, a development that would narrow the options for forming a stable majority government.

In the near term, the potential for political instability will pose a bigger risk to asset values than the threat of a global rise in tariffs triggered by a US-China trade war. Slovakia will benefit from a substantial investment from Jaguar Land Rover, which initiated a trial production run at the firm’s new plant in Nitra in early September. At capacity, the first phase of construction will support the production of 150,000 units per year, which will further narrow a current-account deficit that is forecast to shrink to just 1% of GDP this year, and output could double if a mooted second phase is given the go-ahead.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This excerpt is from our latest Political Risk Letter publication, for more information please contact us at (315) 431-0511 and sales@prsgroup.com

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