The Slovenia Times

New government unlikely to avoid further fiscal consolidation


Regardless of the parties' wishes, the new government will have limited wiggle room due to the fiscal rule, which requires structurally balanced public finances in the mid-term. Nominally, Slovenia recorded a slight budget surplus last year, but in terms of structural balance, it remains in deficit.

The outgoing government has adopted the updated Stability Programme, a set of fiscal policy measures it needs to submit to the European Commission in conjunction with the National Reform Programme, but the document gives the new government room to adopt its own measures as it sees fit.

It appears that, at least from the perspective of fiscal policy, a new government will not be hard to form as a majority of parties speak of rational public spending in addition to other measures to achieve long-term fiscal stability.

The ruling Modern Centre Party (SMC) advocates continued fiscal stabilisation, but warns against radical measures so as to prevent a negative impact on the public health and educational systems.

The junior coalition Pensioners' Party (DeSUS) advocates tax restructuring, encouraging exports and increasing subsidies for science.

The remaining coalition partner, the Social Democrats (SD), believes Slovenia has managed its debt well. The party would raise taxation of property and capital income to the EU average.

But the government's track record has not convinced the opposition Democratic Party (SDS), which leads the polls. It has told the STA that the current fiscal consolidation framework is inappropriate. Similarly, the non-parliamentary United Right believes the incumbent government's fiscal policy is not development-oriented and is a drag on the economic recovery.

The SDS said it would introduce structural reforms and ensure that state assets are managed transparently. It would cut unnecessary spending in the public sector and manage public debt more efficiently.

The opposition New Slovenia (NSi) believes in modernisation of key state systems. Public debt must be cut and structural reforms introduced to rid businesses of unnecessary burdens to increase productivity. The party proposes tax cuts and limiting public expenditure.

Similarly, the non-parliamentary Marjan Šarec List (LMŠ) would cut red tape, restructure taxes and reduce public spending. The non-parliamentary People's Party (SLS) would go even further - it proposes amending the fiscal rule to enforce yearly spending cuts of 1%.

The Alenka Bratušek Party would not take radical steps, but would restructure both budget revenue and expenditure.

Unlike the majority, the opposition Left and the non-parliamentary Solidarity are not firm believers in fiscal consolidation through spending cuts.

The Left would increase the share of collected taxes and decrease funding for unneeded spending such as defence. It would radically increase the corporate income tax, companies' welfare contributions and the taxation of luxury assets.

Solidarity would invest in science, technology and education, the fields it believes lead to stable public finances in the long run.

A novel approach is advocated by the non-parliamentary Pirate Party, which would regulate crypto industries, legalise cannabis and digitalise the public sector to ensure fiscal consolidation.

Almost all parties would change the public sector pay system, the biggest single budget outlay, to various degrees. The SLS would abolish it altogether, while some parties, including the SMC, would extract certain professional groups such as the police, the army and the firefighters from the system.


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