New Slovak government will rely heavily on compromise

Significance

Smer-SD has agreed to form a coalition with three other parties -- the Slovak National Party (SNS), Most-Hid and Siet -- which passed the 5% threshold to enter parliament at elections on March 5. Given expectations for more political horse-trading between the partners, parliament's formal ratification of the government's four-year policy agenda is unlikely before end-April.

Impacts

• Increased political uncertainty following the election is likely to depress business and investor confidence in 2016.
• Despite compromising with its new partners, Smer-SD's dominance of the main ministries is likely to increase political tensions.
• Intra-party disagreements in key areas of policy raise the possibility of an early election due to strain on the coalition.
• Greater spending on healthcare and education will result in a wider-than-expected budget deficit in 2016-17.