Portorož - Economist Jože Damijan praised the government's decision to regulate energy prices but subsidies for food producers will also have to be considered and investment kick-started. He also said at a financial conference in Portorož on Tuesday that inflation had become a permanent feature and warned about the threat of stagflation.

Damijan said that supply shocks resulting from bottlenecks in supply chains and rising energy prices could bring about stagflation.

This situation could further translate into wage growth, which could lead into an inflationary spiral, he said at the 39th financial conference, organised by the Ljubljana Stock Exchange and the business newspaper Finance.

Central banks have only indirect mechanisms to deal with the situation, said Damijan, who believes that inflation cannot be brought down except through recession.

The economist labelled Janša's government decision to regulate energy prices in this situation as "a good response".

However, the energy companies that will lose out will have to be compensated for, which will increase the country's public debt.

Subsidising food growers should also be considered, and in the event of recession pressure, kick-starting investment will have to be the next step, said Damijan.

Marjan Divjak, head of the Finance Ministry's treasury directorate, stressed that Slovenia was committed to keep lowering its debt and was thus in a considerably better situation than before the outbreak of the financial crisis in 2008.

With considerable geopolitical risks, inflation could become a permanent feature, which will also affect people's purchasing power, according to Divjak.

At the same time he warned that the crisis must not bring the planned sustainable transition to a standstill.

The participants were also addressed by Samantha de Bendern, associate fellow of the Royal Institute of International Affairs, Chatham House, who warned that Europe had turned a blind eye to the outbreak of a war that could have been expected.

The war in Ukraine could, in the best-case scenario, continue into the autumn, but in the worst-case scenario it could last much longer, she said.

The energy crisis as a result of relations with Russia could be an opportunity for Europe to make a real transition to green energy, de Bendern believes.

According to Jernej Omahen, who works for American bank Goldman Sachs, banks are much more resilient than in 2008, and the entire banking is much safer and will thus not amplify possible single extreme events.