Hot spots: Slovakia.(International Section)

Prime Minister Mikulas Dzurinda's second coalition government is pushing its agenda with remarkable strength and determination, although it has only a minority position in parliament. This is even more impressive as the administration has accomplished drastic and often controversial changes that have turned what once was an economic backwater into one of the fastest growing economies in Central Europe.

Prime Minister Dzurinda took over six years ago from the populist-nationalist xenophobe Vladimir Meciar, who had literally run the country into the ground and made it an outcast in Europe. Dzurinda is now well into his second term at the helm of a fragile minority coalition government that can count on the support of only 69 deputies in the 150-member parliament. Despite their weak representation in the legislature, however, both Mr. Dzurinda's first and second administrations have clone impressively well in getting essential structural reforms legislated which, white they have been painful for much of the population, have turned the economy into one of the best-performing in the region. As for Mr. Dzurinda, he is the only Prime Minister still in office among the leaders of countries in Central and Eastern Europe that joined the European Union last May 1.

Slight and graying at 49 years of age, Mr. Dzurinda has shown a remarkable talent for putting ad-hoc alliances together in parliament for specific initiatives and purposes. Thus, when the opposition last December sought to boot his Minister for Social Affairs Ludovit Kanik out of office, the attempt was supported by only 66 of the 134 MPs who were present for the vote. But just a week earlier, 82 of 145 deputies voted for the government's draft budget for 2005. Elections are not scheduled until 2006. More than likely, Dzurinda's government will last until then, bobbing and weaving with the support of varying groups of opposition members.

When Mr. Dzurinda first took office, Slovakia's economy was in a sad state. The Slovak currency, the koruna, was plunging, interest rates were sky-high (around 30%), and the country was dangerously low on hard-currency reserves. Dzurinda moved fast with the announcement of a tough economic package that included increased energy and transportation prices and a temporary surcharge on imports. He overhauled the country's pension, welfare, and healthcare systems and took a number of steps to improve Slovakia's attraction for foreign direct investors. Last year, the government replaced its income, corporate and sales taxes with a flat-rate impost of 19%. It canceled a tax on dividends and simplified its labor laws.

Foreign investors responded by the droves. lured by low taxes, low labor costs, a skilled and underemployed work force, a pro-business government, and a strategic location in the heart of Europe, they lined up to establish a foothold in Slovakia. In 2004, the state investment agency says it signed off on 47 deals, worth USD 2.26 billion, which should materialize in the months and years ahead. This compares with 22 deals worth USD 1.55 billion in 2003. With companies such as Peugeot-Citroen, Kia, Ford and Volkswagen among investment leaders, Slovakia is well on the way to ...