Debt Collection and Bankruptcies in Slovakia: A Study of Institutional Development

The independence granted to the judiciary in 1991 and the facilities for enforcing judgements made available in 1995 have greatly contributed to the success of Slovak transition. These reforms initiated an institutional evolution which proved remarkably robust. One of the consequences was that the enforceability of credit contracts has increased. Unfortunately, this progress has been compromised by a variety of measures taken to cope with a persistent fiscal crisis. These makeshift measures have often been detrimental to the flow of credit. Government also took numerous steps to soften budget constraints of ailing companies. Usually, this postponed their collapse but did not prevent it. The capacity of the judicial system has remained grossly inadequate, yet evident opportunities for capacity enlargement have not been exploited.