Slovakia has implemented two important rounds of structural reforms in the past five years. First, following the 1998 elections, which put an end to a period of dirigisme and international isolation, key liberalisation reforms resulted in growing inflows of foreign direct investment and large-scale industrial restructuring, triggering a significant improvement of trend productivity growth. There was a strong increase in unemployment during this period, notably among low-skilled workers, while wages remained lower than in comparable OECD transition economies, providing Slovakia with an important cost advantage. Then, following the September 2002 elections, a new government was formed, representing a modification of the previous coalition, and undertook a set of more politically demanding reforms destined to address the structural shortcomings that have hampered the evolution of a vigorous domestic business sector...