OECD Urges Slovakia to Scrap Transaction Tax, Cut Spending, and Shorten Parental Leave

The Organisation for Economic Co-operation and Development (OECD) has issued a fresh economic review of Slovakia, recommending significant changes to the country's fiscal consolidation strategy and warning that recent policy choices are hampering economic growth. The OECD called on Slovakia's ruling coalition to focus budget consolidation on cutting expenditures rather than raising taxes, arguing that tax increases cause substantial damage to economic output. Among the specific measures the organization criticized is Slovakia's financial transaction tax — a levy on bank transactions introduced by the government as part of its effort to reduce the fiscal deficit — which the OECD recommended abolishing. The international body also criticized what it described as overly generous energy subsidies and recommended shortening Slovakia's parental leave scheme, which is among the longest in Europe. Finance Minister Ladislav Kamenický rejected the recommendation on parental leave. The review highlights structural weaknesses in the Slovak economy at a time when the government, led by Prime Minister Robert Fico's Smer-SD party, is under pressure to reduce a fiscal deficit that has drawn scrutiny from the European Union. Slovakia entered an EU excessive deficit procedure, meaning Brussels is monitoring its public finances and requiring corrective action. The OECD's chief economist Stefano Scarpetta delivered the findings, reinforcing concerns that the coalition's current mix of tax hikes and spending measures may not be the most effective path to fiscal sustainability. The tension between the government's chosen approach and international recommendations underscores the difficult trade-offs Slovakia faces as it attempts to stabilize its public finances without choking economic growth.