Slovakia: Neighbouring Hungary is alarmed by the likely return to power of its old adversary, Vladimir Meciar, writes Daniel McLaughlin.
Slovakia's premier-elect said yesterday he would sign a coalition deal with a far-right nationalist and a former authoritarian prime minister, sealing a pact that critics fear will drag the country back towards the international isolation of the 1990s.
Populist leader Robert Fico, who will be nominated as Slovakia's new prime minister tomorrow, also rejected warnings that his controversial alliance will ruin the country's chances of adopting the euro in 2009, and wreck its reputation as one of central Europe's prime targets for foreign investment.
"Our coalition agreement clearly spells out the decision-making process, which is based on equality of the partners. We'll decide by consensus," said Mr Fico, whose Smer party took 50 of 150 parliamentary seats in a June 17th general election.
His comments will do little to allay fears at home and abroad about the return to government of Vladimir Meciar - whose heavy-handed rule made Slovakia a pariah in the 1990s - and the Slovak National Party of Jan Slota, who is notorious for derogatory remarks about the country's large Hungarian and Roma minorities.
"I am astonished that the most extreme xenophobic party is to be part of the next government," said Hans-Gert Poettering, chairman of the European People's Party, the largest in the European Parliament.
"This development is not justified by any lack of suitable partners in the Slovak parliament and it can only harm the real interests of Slovakia," he added.
Mr Fico was expected to try to forge an alliance with the Christian Democratic Union and Hungarian Coalition Party but, apparently fearful that they would do a deal with the outgoing government, he looked instead to two fringe parties.
Mr Slota's nationalists supported Mr Meciar's 1993-98 regime, which took Slovakia off the path towards European integration and saw it dubbed a "black hole at the heart of Europe" by then US secretary of state Madeleine Albright.
Centre-right leader Mikulas Dzurinda helped reverse Slovakia's decline, taking it into the EU and Nato and attracting huge foreign investment with a flat tax rate and low corporate taxes.
But despite steady economic growth, and the prospects of becoming the largest per capita carmaker in the world and adopting the euro by 2009, Slovaks ousted Mr Dzurinda last month after eight years in office.
Analysts say many Slovaks are weary of Mr Dzurinda's liberal reforms, and believe they have only benefited a metropolitan elite while the provinces still struggle with poverty and unemployment.
Mr Fico's promise of social justice, redistribution of wealth and a strong welfare state was reassuring to older Slovaks and the urban and rural poor, who have felt little benefit from EU membership and are often suspicious of Brussels and foreign capital.
But Mr Fico rejected warnings yesterday that his plan to lower value-added tax on some items and boost social spending would increase Slovakia's budget deficit, and prevent it meeting EU targets to adopt the euro in 2009.
"If there is someone endangering Slovakia's entry to the monetary union, it is the current government, because the inflation rate today is unacceptable for the monetary union," he said, while noting that preparations for euro adoption may hurt the country's poor.
"Euro zone entry means prices approaching levels in the European Union . . . I am asking how someone can live on a pension of €220 a month when prices will equal 80 or 90 per cent of levels in the European Union."
While Mr Fico has tempered his populist rhetoric, however, most economists have made plain their fears for Slovakia's future. "[The] coalition agreement was the worst possible outcome," said Kai Stukenbrock of credit ratings agency Standard and Poor's.
"The outlook has noticeably worsened," he said, of a government that "would raise concerns about the future path of economic and fiscal policy."
Hungary, remembering the tension that crackled with its neighbour when Mr Meciar ran Slovakia, is closely monitoring developments.
Brussels is doing the same, having clashed on economic and social issues with a new Polish government that also casts a sceptical eye on Brussels and free market reforms, and has joined forces with a nationalist party to cement power in parliament.