Supplementary Budget and the Threats of Strike
The 2012 budget was passed by parliament in November 2010 and was based on now outdated projections. The former government froze the budget in December 2011 to enable the new government of Janez Janša to draft a new version.
The old budget envisaged spending of about EUR 10.3bn, but this would put additional strain on the deficit which reached 6.4% of GDP in 2011. This year, budget revenues will be lower, at about EUR 7.8m, according to estimates released by the Finance Ministry at the end of February.
Two weeks later, the Institute of Macroeconomic Analysis and Development (IMAD), a government think-tank, projected Slovenia's economy would shrink by 0.9% this year following a 0.2% contraction in 2011. IMAD also downgraded its earlier projection for 2013, from 2% to 1.1%.
But central bank projections came out even grimmer; according to its estimates earlier this week, Slovenia's economy would shrink by as much as 1.2% this year.
The government wants to cut the budget deficit to 3% of GDP. According to Finance Minister Janez Šušteršič, little had been done in the last few years in terms of balancing public finances. What is more, the deficit has been growing year after year, the minister said last week, stressing this made "very decisive measure" the more urgent.
The government plans to achieve its goal by cutting spending and implementing certain tax breaks to help kick-start Slovenia's economy.
Spending cuts this year are to save about EUR 818m, while as much as EUR 949m is envisaged to be saved in 2013. The government plans to achieve this primarily by cutting public sector wages, and by reducing material costs, capital assets, investment transfers and subsidies.
Although the government maintains the measures would be agreed with social partners, the latter insist they were given too little time to analyse the government proposals. They say the cuts would hit the weakest parts of society hardest. Moreover, the cuts are unjust towards public servants, the unions say.
An increasing number of public sector trade unions are threatening to stage a strike on 18 April, including the entire KSJS confederation of public trade unions, which represents 74,000 workers.
Private sector trade unions meanwhile threaten to call a referendum on the government austerity package. The ZSSS confederation of trade unions said that in case the measures make it through parliament and cannot be stopped in any other way, the union would invoke the right to call a referendum.
The most contentious austerity measures include cuts to public sector wages and the scrapping of holiday allowance, but the actual reductions are still being negotiated. The government also decided to slash food, travel and daily allowances.
Austerity measures also tackle the prices of healthcare services and envisage the merging of public institutes and agencies; unemployment benefits are to be shortened and reduced, holiday allowance for pensioners and student meal subsidies in July and August are to be scrapped, while child care allowances are also to be reduced.
Several rounds of negotiations have so far failed to bring the sides to an agreement. A third version of public sector austerity was presented by the government today, while on Thursday the social partners expect to receive a package of measures aimed at the revenue side of the budget.
Despite union and opposition calls for revenue-side measures, the government has announced it would not increase taxes with the exception of excise duties.
Instead, it is planning a series of measures for a gradual reduction of the tax burden on companies and individuals. Together with the supplementary budget, the government is to send into parliament a package of tax breaks for companies, investment and R&D. Personal income tax brackets will also be adjusted, with the rate for the highest, 41% tax rate, to be raised.
Austerity package negotiation have also cast doubt on the existing timeline for the new social pact. Only three out of nine union groups signed the agreement on Tuesday, while four others said they would only sign it when an agreement on the supplementary budget is reached. The deadline for the social pact is 20 June.