The Slovenia Times

Austerity needs credibility



Urgent austerity measures for the stabilisation of public finances, which is the first step toward building a new platform for renewed economic growth, critically needs credible and trustworthy government policy overall. It shouldn't be forgotten that credibility was the key issue with Borut Pahor's cabinet, who prepared quite a number of good projects that were ruined by inter-coalition disputes and low credibility.
It can easily be agreed that the first general steps of the new Government have somehow stopped the trend of the falling economic image of Slovenia in international markets and within the EU. Quick steps toward rebalancing the budget, lowering the deficit toward 3% of GDP, signing the social pact with the unions and preparing constitutional changes incorporating the golden fiscal rule. All this indicates is that in terms of urgent economic measures, the Government seems to be on the right track. Even the decison to stop the controversial Universiade project to be held in Maribor in 2013, shows that the Government means business, regardless of whether politically 'friendly' projects are the question. Considering all of this, particularly the efforts of the 'calm' Finance Minister, the economic functioning of the Government can, for now, be assessed as good.
The first real test for the Government will be the implementation of all of the measures with the same amount of creativity and calmness, defining the proper combination with measures to stimulate economic activity. At this point, it is obvious from general comments from the unions and the opposition, that the proposed austerity will not solve the crucial economic questions - falling GDP, rising uneployment... are populist statements but can become reality in the long term. The first step is clear, the Government must balance public spending with real fiscal income, the unions will just have to accept that we have run out of resources for financing the existing organisational structure of the public sector. The State Treasury is simply empty, we can deal with that or wait for a Greek scenario. But they are right in where they expect solutions, realistic and operational projects for new growth. Here we will see if the 'development' part of the new Government is as comparable in creativity as the 'austerity' part.
The second real test for the new Government is to establish general credibility among citizens. If, with the announced austerity measures, we have somehow stabilised our external financial image, we can observe a disturbing erosion of general credibility of the leading Government officials at home. Employing an excessive number of new cabinet employees in some cases, raising the wages of new cabinet employees in some Ministries whilst at the same time announcing layoffs in the same departments, for example, the police. In addition, endless disputes between Lista Virant and SDS about moving prosecution from the Justice Ministry to the Interior Ministry and on the top of that, the affair of the counterfeit high school certificate of the DeSUS Party MP, where we witnessed surprising hypocrisy from the DeSUS Party Leader and Foreign Minister, Karl Erjavec and puzzling silence from the Prime Minister. If the Government does not immeditaly put the brakes on and take a self critical look in the mirror, we will probably see that Borut Pahor was not the only problem in the recent years.


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