The Slovenia Times

EU Assessment of Slovenia's Efforts Positive

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Slovenia and Spain are the only countries found to be experiencing macroeconomic imbalances, but the Commission decided not to take action just yet, having determined that budgeting and reform plans are "ambitious".

Moreover, in-depth monitoring entitled "Alert Mechanism Report 2014", shows that "the pace of structural reforms has picked up" and "key progress" is being made in bank restructuring, according to the report.

In April, the Commission concluded that Slovenia was experiencing excessive macroeconomic imbalances, particularly involving risks to financial stability stemming from fragile corporate balance sheets, compounded by rigidities in labour and capital markets and high state ownership that limits the adjustment capacity of the economy.

In today's report the Commission highlighted a deterioration in Slovenia's net international investment position and losses in export market shares as well as poor export dynamics.

On the internal side, the private sector debt has decreased, driven by negative credit flows to both households and non-financial corporates.

Notwithstanding the fact that the private debt is below the threshold, debt is particularly weighing on firms, which are unable to generate the cash flows needed to maintain working capital and pay down debt, the report says.

The Commission also looked at the implementation of its recommendations and warned Slovenia that the adopted pension reform only stabilised pension expenditure until 2020 after which it will rise significantly above EU average.

Banks' dependence on state aid is significantly undermining fiscal sustainability, however the bad bank is mainly ready to take over bad claims, the Commission believes.

As regards restructuring for growth and competitiveness, Slovenia missed the September deadlines for a legal framework for out-of-court restructuring and a strategy for capital investment management.

The Commission moreover warns that no progress has been made since May in efforts for an effective managing of a number of regulated professions and with respect to the underfunded competition protection watchdog.

In employment, relatively little has been done to solve the lack of coordination between the supply of skills and demand for them. The Commission moreover urged a close monitoring of the effectiveness of active labour market policy measures.

Slovenia will now be subjected to a new in-depth review, the results of which will be released in February or March. The Commission will assess whether the imbalances are being tackled or whether action will have to be taken.

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