The Slovenia Times

Finance on times after "golden age" of public spending


Ljubljana - The business newspaper Finance says on Tuesday that "we live in a time when budget funds seem to be absolutely no problem for the first time in the history of Slovenia", but it wonders how the country will cope once sobering up comes after this "golden age" of public spending.

Budget spending is reaching levels unheard of in independent Slovenia. This year's outlays are to reach almost EUR 15 billion, while still topping EUR 13 billion in 2023, and the budget deficit is to drop from this year's EUR 4 billion to a still high EUR 1.5 billion in 2023.

The government attributes the relatively high spending to the effects of the pandemic, and Finance also points to the effect of the EU 2014-2020 budget period ending and to EUR 2.5 billion in EU recovery money the country has to spend by the end of 2026.

However, there are many uncertainties in the post-coronavirus world, such as inflation, a supply crunch, a loose monetary policy, a potential new global crisis, climate change, and potential risks of Slovenia's financial system.

The price of borrowing for Slovenia is starting to gradually rise after it hit its lowest last summer, which raises the question of how favourable financial markets will treat Slovenia's debt.

The question is also whether economic trends and processes at EU level will be favourable to Slovenia so that it can have a soft fiscal landing helped by economic growth or will wages, social transfers and pensions have to be cut as was the case after the last financial crisis.

The question is also whether Slovenia will know how to effectively use all these extra billions to raise productivity and thus strengthen its long-term development potential. In the opposite case, it will have a hard time given the expected demographic challenges.

And last but not least, the question is what the super-election year 2022 brings after all the election candies have been distributed.

A Janez Janša government adopted an omnibus austerity bill in 2012 to severely cut the country's public spending. But the political reality has changed since, with populism in Slovenia and Europe going wild. Centre-right parties do not talk about the state having to act as a thrifty housekeeper anymore.

Under the headline How Painful Will Sobering Be after Golden Times of Public Spending, Finance thus wonders who will have to take potentially unpopular measures in the future - the right-oriented government which has discovered the beauty of a big state, or a left-oriented government, whose stability would in this case be probably quickly undermined.


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