Slovakia is breaking new ground to pay for its government spending. Through citizen bonds, she borrowed half a billion euros from the people. An interesting idea or a political diversion maneuver?
The “investor” was sold out after three days, the “Patriot” on the fourth day. The new government bonds in Slovakia, especially for citizens, are as lurid, who have been leaving like warm cakes since the beginning of the week.
Finance Minister Ladislav Kamenicky was one of the first buyers. “Of course I would like to show what trust I have in these bonds. I bought both myself,” said the politician. “In addition, we want to show people in Slovakia how easy it is to buy bonds.”
Up to 3.3 percent return
Slovakia borrows a total of 500 million euros. Only 400 million were planned at the beginning of the week. Day two was added to the great interest. At five banks, all interested parties – including foreigners – are included from 1,000 euros. In contrast to us, there are no fees.
The terms are two and four years. The returns are three and 3.3 percent, so they are higher than with current fixed deposits, the director of the Slovak debt agency, Daniel Bytcane: “We see the security of the government bonds as the main advantage for citizens. In addition, the income from these bonds is not taxed,” says Bytcane. “So the citizens receive a net return. They do not have to do anything either, because interest rates are automatically credited, and when the bonds are due, the bank transfers to the checking account.”
Inflation cannot be compensated
A state bankruptcy is highly unlikely. There is only a risk if citizens want to sell their bond early. Then you only receive the market price, the Slovak state warns in many information campaigns. Investment consultant Dominik Hapl in general considers this to be urgently needed. “The Slovak investor is a very conservative investor. Unfortunately, he holds a large part of his funds on current accounts, which is not good, because there the money loses purchasing power every year. And we know from estimates by the central bank that inflation will be up to five percent in 2025.”
However, this is the main reason for criticism of the citizens’ bonds. Inflation cannot be compensated for with a return of around three percent. This financing tool is also not profitable for the state, complains about the opposition. “These bonds are sold with an interest rate that is unfavorable for the state. If the state really wanted to lend money for its consolidation, it could do it differently,” says conservative MP Jozef Hajko.
EU procedures for deficits
Hajko continues to criticize the public debt anyway. The EU has initiated a deficit procedure against Slovakia. Since the re -election of the controversial Russia friend Robert Fico, some rating agencies have been doing the creditworthiness of Slovakia.
For the Slovakian finance minister, the success of the citizens’ bonds now shows how great the trust of the Slovaks is in the current government. For the pro -European opposition, on the other hand, the action is not much more than a distraction from the government -critical mass protests and the problems of the state.
