Car-scrapping bonus: first results favourable, the automotive industry still not out of the crisis



During the first half of 2009 Slovaks bought almost 41,300 new passenger cars. Compared with the same period of 2008 this was an increase of 18.4 percent. The main reason was the car-scrapping bonus which the government implemented earlier this year to revive the local automotive industry and rejuvenate Slovakia’s fleet of passenger cars.

In total, the Slovak government allocated €55 million to the car-scrapping bonus project, to subsidise the purchase of 44,200 new cars. According to the Economy Ministry, at the end of June, the number of cars purchased or ordered using the bonus amounted to 35,897 units, of which around 20,000 were delivered in the first half of 2009. That leaves 8,303 bonuses still to be used.



Analysis and forecast (↑ increasing risk)

According to the European Automobile Manufacturers’ Association (ACEA) thirteen EU countries have put a fleet renewal programme in place, including market incentives and car scrapping schemes, to soften the impact of the recession.

The bonus, however, does not enjoy general approval. The project is a tool to propel the automotive industry and positively influence other segments of the country’s economy, but critics say that the bonus has had only a minimal impact on the local car industry and that the measure has diverted funds from other industrial branches.

Political Capital Institute also indicated earlier that even though the decline of domestic demand can partly be counterweighted by the car-scrapping bonus, the percentage of the cars produced and sold in Slovakia is minor, while the foreign demand will surely continue falling back.

The governmental demand stimulation is undoubtedly helped the local automotive industry to revive, but it is still questioned whether the subservient first half 2009 tendency can last in the following period when the European economy is still unlikely to recover from the crisis.

The ambivalent project is not backed in the neighbouring country, the Czech Republic. The social democrats are for a similar system, the law was ready to be signed, but the president refused to do so (labelling the draft as protectionist), and the government does not seem to be determined to carry the project into execution, moreover the Finance Ministry announced that they never backed it.


Vehicle Scrapping Schemes in Slovakia



Source: European Automobile Manufacturers’ Association



Slovak State Language Act signed



The amended Slovak State Language Act, adopted by the Slovak parliament and signed by President Ivan Gašparovic will go into effect in September. The act declares the Slovak language to be the country’s “language of public contact” and requires that the Slovak language and Slovak place names be used in all public affairs.

The law bans the use of Hungarian in health care and welfare facility communications unless at least 20 percent of the local population is Hungarian. It calls for sanctioning “improper use of the Slovak language” or other violations of the law with fines of up to EUR 5,000.

The parliamentary parties of Hungary signed a joint statement, calling on Slovakia to repeal a new law on language use. They agreed that the new Slovak regulation goes beyond a dispute between the two countries, saying it runs counter to European practices and violates human rights declared inviolable by EU legislators. They cited multiple accords including Council of Europe charters, its framework agreement on the rights of national minorities, Ministerial Committee recommendations, the EU’s Copenhagen criteria and other accords.

The Slovak government will not give in to pressure and will not repeal the revision to the State Language Act, said PM Robert Fico. He added that Hungarian politicians cease to understand that Slovakia is an independent state, no longer under Hungarian rule. He also said that Slovakia is a country where the rights of ethnic minorities are fully respected.

The State Language Act amendment approved by the Slovak Parliament last month is in line with Slovakia’s international commitments and pursues legitimate goals, Foreign Affairs Minister Miroslav Lajcak said interpreting a related evaluation by the OSCE High Commissioner on National Minorities Knut Vollebaek. Lajcak stressed that the commissioner has not asked to change one iota in the amendment.

Analysis and forecast (↑ increasing risk)

The State Language Act is undoubtedly in favour of the leading governing parties, since playing on anti-Hungarian sentiments has always been rewarding regarding the potential votes. On the other hand, Slovakia can appear as a nationalist, discriminative country on the international level.

However, despite several MEPs, for example the German conservative Michael Gahler condemning the law, the EU institutions do not seem to be determined in stepping up against the widely controversial act. This kind of passive behaviour can be dangerous, since several countries can be encouraged for creating similarly discriminative acts.

As far as the Hungarian side is concerned, this is the first issue after a long time that resulted a wide consensus between all Hungarian parliamentary parties, so even the tense Hungarian-Slovak relationship is likely to be fraught with conflicts in the foreseeable future when Budapest is expected to keep Bratislava under attack, and after the law comes into force in September. Viktor Orbán, leader of Fidesz and potential PM after Hungarian elections due in 2010 is trying to strengthen his and his party’s diplomatic positions by giving his support to the Romanian president, Traian Basescu, running for office in this autumn’s election. If relations can be worked out with the Romanian leadership and the Hungarian political elite in Romania, the next administration will have a better chance of taking a diplomatic stance in its argument with the Slovak government, which regularly exploits anti-Hungarian sentiment in the region.