The Slovenia Times

Brussels to Monitor the Macroeconomy


The Commission determined that the twelve countries need in-depth monitoring in its first report on the prevention and correction of macroeconomic imbalances, presented to the European Parliament in Strasbourg on Tuesday by Commissioner for Economic and Financial Affairs Olli Rehn.

Among the reasons for the monitoring in Slovenia, the Commission listed "fast accumulation of internal imbalances with high growth in unit labour costs, private sector credit and house prices."

Furthermore, the highly leveraged banking sector is under considerable strain as the economy is now in the early stages of a difficult deleveraging process, says the report.

Rehn said that in Slovenia's case, the high level of debt of companies, and development of real estate sector must be reviewed.

The Finance Ministry said in a response to the report that Slovenia was aware of the problems stemming from the debt of the private sector, adding that company owners are the ones responsible for solving these problems.

Escalating debt problems increase the number of insolvency procedures, said the ministry, adding that the companies' need for fresh capital is no news.

As regards high growth in unit labour costs, the ministry said pay policy and better efficiency will be decisive factors. The government intends to approach the issue by encouraging the competitive position of the Slovenian economy.

Apart from Slovenia, the Commission ordered monitoring for Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Italy, Hungary, Spain, Sweden and the UK.

This comes after ratings firm Moody's lowered credit ratings for Italy, Spain, Portugal, Malta, Slovenia and Slovakia, and gave a negative outlook for France, Britain and Austria.

The Commission's report is a part of the First Alert Mechanism introduced by the EU to identify macroeconomic imbalances before they reach unstable levels. This is a part of a comprehensive set of rules that stepped into force on 31 December 2011 also dubbed as six-pack.

If the in-depth review shows macroeconomic imbalances in a member state, the European Commission will issue recommendations and steer the drafting of national reform programmes which the states will have to send to Brussels in April.

If the country fails to follow the Commission's recommendations, the Commission will launch the corrective procedure in which the state will have to submit an action plan with an exact time line to mend the macroeconomic imbalances. If the action plan is insufficient, a financial punishment is foreseen.


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