Political uncertainty in Slovakia, with early elections likely to take place in September, has led to an overall slowdown of legislative work at the unfavorable time of a raging energy crisis, according to CMS Partner Sona Hankova.
“The topic that has been dominating the news cycles lately is the recent vote of no-confidence in the Slovak government,” Hankova begins. “We currently have a limited regime in which the current government is performing its duties.” She reports that a EUR 10 million referendum had been held on whether the constitution should be changed to allow for the early termination of the electoral term of the National Council of the Slovak Republic, but it “failed to achieve anything because less than 30% of the electorate came out to vote (51% was required).”
Hankova goes on to report that the parliament recently agreed that “early elections will be held on September 30. At the same time, what was settled were the amendments to the constitution which paved the way for early elections” she explains. Given such a state of political turmoil, it is not surprising that legislative efforts have largely slowed down.
“Everybody is waiting to see what the outcome of the current situation will be,” Hankova says. “Most importantly, the market is eager to see if any new measures for combating the energy crisis are passed. Right now, as things stand, citizens and households and smaller regulated businesses are protected by the government placing limitations on gas and electricity prices – but larger entrepreneurs are yet to be taken care of,” she continues. “Smaller businesses have their prices capped at EUR 99/megawatt-hour for gas and EUR 199/megawatt-hour for electricity, while the state will compensate the part of the energy costs that exceeds the above price caps at a rate of 80%.
Other business entities outside the regulated segment of the electricity and gas markets are bearing the full brunt of the current unfavorable market situation – their payments for energy supplies have increased several times,” Hankova says. “Industry is struggling and without any specific measures in place, the overall feel is that the government was not supportive enough.” Without the proper tackling of this crisis, there might be “bankruptcies and defaults across industries soon.”
Furthermore, Hankova reports that the Slovak FDI screening regime was recently updated. “Foreign businesses and investments are subject to monitoring or review which can be mandatory or voluntary, depending on the target industry. Further delegated acts are expected to specify this regime and shed more light on its scope,” she says.
Finally, Hankova reports that rising inflation is impacting businesses everywhere. “A strong uptick of inflation numbers led to, for example, some real estate sector sellers adopting a mostly sit-and-wait approach. With financing being increasingly difficult to access, and mortgages becoming more expensive – the situation is becoming all the more challenging.”
Still, not all is gloomy, and Hankova does report that, for the legal sector at least, there has been plenty of work. “Conversely to tradition, this January has been very vibrant, thanks to a number of M&A transactions that took place in late 2022, which led companies to undergo post-integration and post-merger steps,” she notes.