Slovakia Approves 2013 Budget with 2.9% Deficit

The Slovak parliament passed on Thursday a 2013 budget aimed at slashing the public deficit to 2.94 percent of output from this year's estimate of 4.6 percent.

The center-left government is applying an austerity program and is counting on boosting revenue from higher taxes on the rich, banks and corporations as well as on changes to the pension system.

"The budget is based on a solidarity principle, with the austerity burden on the monopolies, banks, companies and individuals with above-average earnings," Prime Minister Robert Fico said after the vote.

Fico's government, in power since April, scrapped the country's business-friendly 19-percent flat tax and raised tax on corporate revenues to 23 percent.

It also raised income tax for individuals earning more than 3,300 euros ($4,300) a month to 25 percent while keeping the 19-percent tax rate on incomes under that level.

All senior politicians including the president, ministers and members of parliament will also pay an extra five-percent tax on their salaries.

The budget passed smoothly in the 150-seat parliament where Fico's social democrats command an 83-seat majority.

State spending will total 17 billion euros and revenue nearly 14 billion euros.

The budget is based on economic growth of 2.1 percent in 2013, down from an expected 2.5 percent this year.

The budget draft originally included a 530-million-euro reserve in the event of slower-than-expected growth, which had to be already used to offset a shortfall caused by falling tax revenues and a loss of economic pace.

Analysts in Bratislava said a slowdown could endanger the government's goal to cut the deficit under the eurozone ceiling of three percent of gross domestic product.

They also warned that the austerity burden on companies might discourage foreign investors from coming to Slovakia and domestic firms from creating more jobs as the country struggles with high unemployment.

Slovakia is home to several global electronics plants and car makers including Germany's Volkswagen, South Korean Kia and France's PSA Peugeot Citroen, whose production has been soaring this year despite falling demand from the eurozone.

The nation of 5.4 million joined the European Union in 2004 and adopted the euro in 2009 during Fico's first stint as prime minister.