The Slovenia Times

EU Commission expects "substantial fiscal effort" from Slovenia


In the recommendations, which are very similar to those issued last year, Slovenia is called to pursue its fiscal policy in line with the requirements of the preventive arm of the Stability and Growth Pact, "which translates into a substantial fiscal effort for 2018".

After exiting the excessive deficit procedure last year, Slovenia is currently in the preventive arm, where the Commission's monitoring is focused on medium-term budgetary goals, particularly a balanced budget.

The Commission proposes achieving a fiscal stance that contributes to both strengthening the ongoing recovery and to ensuring the sustainability of the country's public finances.

While last year's recommendations included an annual fiscal adjustment of 0.6% of GDP for this year, the latest document highlights a risk of some deviation from that requirement, based on the Commission's spring 2017 forecast.

In 2018, in the light of Slovenia's fiscal situation and notably of its debt level (almost 80% of GDP), the Commission expects the state to make a further structural adjustment of 1% of GDP towards an appropriate medium-term budgetary objective.

Slovenia should moreover adopt and implement the proposed reform of the healthcare system and adopt the planned reform of long-term care, increasing cost-effectiveness, accessibility and quality care, the Commission wrote.

The recommendations highlight in particular the importance of respecting the envisaged timeline for the healthcare and health insurance act, which should be passed by the end of the year.

Another recommendation listed in the first section is fully tapping the potential of centralised procurement in the health sector.

Also, Slovenia should adopt the necessary measures to ensure the long-term sustainability and adequacy of the pension system, as the country's population is ageing faster than that of most member states.

"Slovenia faces high risks on the long-term sustainability of public finances and its long-term sustainability gap indicator is the highest of all EU Member States, stemming from the projected increase in pension-related public spending, healthcare and long-term care expenditure," the document reads.

In the second segment, Slovenia is urged, much like last year, to intensify efforts to increase the employability of low-skilled and older workers, particularly through targeted lifelong learning and activation measures.

The Commission points out that over 40% of all long-term unemployed are over 50 and almost half of them are unemployed for two years or more, while the employment rate of low-skilled workers also remains low and well below the pre-crisis level and the EU average.

The final recommendation section merges segments three and four from last year and states Slovenia should "improve financing conditions, including by facilitating a durable resolution of non-performing loans and access to alternative sources of financing".

Slovenia is moreover called to ensure the full implementation of the strategy for the bad bank, to reduce the administrative burden on business deriving from rules on spatial planning and construction permits and ensure good governance of state-owned companies.

The document points out that state involvement in the economy remains high despite the privatisation programme initiated in 2013.

The fiscal and economic implications of high state ownership and poor corporate governance at state-owned firms are estimated at EUR 13bn or about one third of GDP in 2007-2014, primarily due to financial sector stabilisation measures and foregone profits of state-owned enterprises compared to their private peers.

The Finance Ministry said in its response the recommendations from Brussels were expected, adding that the Commission acknowledged the government's efforts, which had mostly been focused on short-term improvements.

The ministry agreed with the Commission that long-term consolidation of public finance must continue, but added that economic growth in Slovenia was currently positive but fragile so it must not be smothered with excessive cost-cutting although expenditure must not be allowed to grow too quickly either.


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