The Slovenia Times

Will Slovenia's Reform and Stability Programme Satisfy European Commission?



he macroeconomic imbalances procedure (MIP) is a relatively new mechanism - introduced in December 2011 - and has never been used so far.

Slovenia and Spain were the first two countries where the European Commission found excessive imbalances. The European Commission will announce on Wednesday whether procedures will be launched against either of the countries.

It will present its evaluations of EU members' reform and budget plans and recommend further measures based on the promises in the national documents sent to Brussels in early May.

According to the sources who spoke with the STA, working in Slovenia's favour are the decision to include the golden fiscal rule into the Constitution, changes to the referendum system and the agreement with trade unions on pay cuts in the public sector.

On the other hand, Slovenia expects to hear a repeat of warnings regarding the need to clean bank balance sheets, push ahead with privatisation, the deleveraging of companies and improving its competitive edge, as well as calls to reform the pension system and labour market.

No official statements could be acquired from sources in Brussels about the Commission's evaluation for Slovenia. Unofficially, the Commission has doubts that EUR 900m will be enough to recapitalise the troubled Slovenian banks, as planned by the government.

Slovenia can therefore expect to be urged by the Commission to take fast and decisive measures for fixing the ailing banking sector, which is saddled with bad loans.

Moreover, due to the doubts on the credibility of Banka Slovenije's assessments of the recapitalisation needs of Slovenian banks, Slovenia may be called to carry out an independent study of the state of state-owned banks.

During a visit to Brussels last week, Prime Minister Alenka BratuĊĦek said that Slovenia would be willing to take a renewed look at the assessments of the country's central bank, but under the condition that this would not further delay measures to start the cleaning of balance sheets with the bad bank.

The sources also said that Brussels has highlighted the need for culpability to be established for the bad decisions in the Slovenian bank sector which have brought about the current problems.

Apart from an answer on whether the MIP will be launched against Slovenia, the country will also get word whether the European Commission will extend the deadline to bring its excessive budget deficit under control.

Sources in Brussels say that Slovenia may count on getting the deadline extended, as has already been the case with Greece, Portugal and Spain.

The European Commission approves such extensions for countries which have made sufficient efforts to bring the deficit back under 3% of GDP, but which have been hit by unforeseeable external factors such as a recession.

Slovenia can also count on an extension because EU policies have begun to shift from strict austerity to reform efforts.

The assessments of budgetary and reform measures of member states are the final state of the European semester, a cycle of close coordination of budgetary and reform measures in the bloc, which was introduced as means of bolstering economic policy-making in response to the crisis.

For Slovenia the assessments will be more important than ever this year as it works to avoid having to seek a bailout. Slovenian and EU officials have so far been vehement in denying that Slovenia needs aid, while the Slovenian government has promised swift and concrete measures to quash any doubts about this.

The conclusions of the European Commission are expected to be debated by EU finance ministers at their meeting on 27 and 28 June.


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