However, to maintain even this lower financial and budgetary absorption capacity, intensified activity of competent authorities and institutions, in particular in the area of preparation of quality and synergy-oriented projects, will be necessary. The EC has meanwhile specified the procedure for the calculation of contributions from the new member states, which, according to preliminary estimates of the Slovak Finance Ministry, should reach around SKK 13 billion in 2004 (i.e. around 1.1% of GDP). The final amount of the contribution will be determined at the December EU summit. As regards transfers of import duty revenues, from the standpoint of the effects of Slovakia's accession to the EU, the fact that Slovakia will have to transfer 75% of its annual import duty revenues to the EU Common Budget will be important. Even though the prevailing section of the current revenues from Slovak imports will disappear after Slovakia's accession to the EU, import duty revenues from imports to the enlarged EU passing the Slovak-Ukrainian border will be acquired.

Based on these differences, Slovakia's total import duty revenues following accession to the EU will fall from SKK 3.6 billion in 2001 to around 0.5 billion in 2004. Following Slovakia's accession to the EU, major changes will also occur in state budget support of agriculture as a result of the adoption of the Common Agricultural Policy (CAP). The essence of these changes will be the new arrangement of agricultural subsidies. In view of the need to get closer to the lower world prices of agricultural products and the necessity to simultaneously approach EU standards, the European Commission proposed that direct payments to candidate countries in 2004-2006 be substantially lower than the level of payments in the Union (25%, 30% and 35%). Nevertheless, all candidate countries refused this stance of the EC. In the negotiating process, the Slovak Republic raised the request to align the commodity support with the existing level. If the Slovak agriculture is to meet the demand for foodstuffs in its effective commodity structure, an increase in certain production quotas should also be requested in the negotiating process. According to rough calculations, the overall effect of Slovakia's accession to the EU from the standpoint of the above key items of public finance appears to be positive.

Risks that could reduce this positive impact include the inadequate utilisation of resources from EU structural funds, which would disrupt the balance between receipts from and payments to the EU, and the potential foreign debt caused by the acquisition of extra-budgetary resources for the financing of projects related to the implementation of EU standards and regulations. Economic policy recommendations

To fulfil the Copenhagen criteria, which require the creation of a functioning market economy, it is necessary to maintain macroeconomic stability (balance) as an essential condition for sustainable economic growth at a high pace. The elements of imbalance, typical for the developments in the Slovak economy in 2002, will not be eliminated by market forces and should be eliminated at the very beginning of the next political cycle (at the turn of 2002/2003). In the forthcoming period, the economic policy should focus less on suppressing the effects of imbalance and more on the effort to reform the problematic segments of the public sector and eliminate other sources of imbalance. It is not advisable to postpone the removal of the remaining price deformations until accession to the EU. In the interest of approaching the conditions of functioning of a standard market economy and in view of the expected equalisation of price levels between Slovakia and EU countries after its enlargement, it would be suitable to eliminate these deformations still in the pre-accession phase.

The substantial growth in the Slovak economy's qualitative competitiveness should be considered as a priority of the medium and long-term economic policy in the preparatory phase of Slovakia's accession to the EU, as well as after accession. At the same time, competitiveness should not be narrowed down to foreign trade, even though that is where it is eventually manifested. It should be seen particularly as an indicator of the qualitative performance of the whole economy. Therefore, much greater attention should now be paid to the inflow of foreign direct investment (FDI), which, in the current stage of preparation for accession to the EU, should be regarded as the determinant of how quickly Slovakia will overcome the technological and innovation gap, and the lag in real productivity and overall qualitative competitiveness of the Slovak economy. From this standpoint, it is necessary to substantially improve the overall approach of the government and individual enterprises to the FDI issue. Attention needs to be paid above all to the preparation of FDI, especially with respect to the active search for foreign investors, orientation of enterprises on international production co-operation and the improvement of investment conditions.