Action plan due for euro zone straggler Slovenia
The new government of struggling euro zone member Slovenia is expected to announce on Thursday an action plan aimed at avoiding a bailout, reportedly including privatisations, “crisis” taxes and austerity cuts.
Prime Minister Alenka Bratusek’s programme, which will be sent to Brussels, is crucially also expected to set a timeframe for the “bad bank” to stop Slovenia’s lenders from drowning in a sea of debts.
If two-million-strong Slovenia’s plans fail to convince, it faces becoming the sixth member of the 17-nation euro zone to need assistance after Greece, Ireland, Portugal, Spain and Cyprus.
Moody’s last week cut its rating on Slovenia two notches to “junk”, the economy has been in recession since 2011, unemployment stands at 13.5 per cent and voters are fed up with their political leaders.
Having seen the tough terms that the latest casualty, Cyprus, was forced to accept for its bailout earlier this year -- including a hit on bank deposits over 100,000 euros (HK$1.02 million) -- has made Ljubljana keen to avoid the same fate.
EU Economic Affairs Commissioner Olli Rehn said Wednesday that “depending on how convincing, concrete and reliable” Slovenia’s plans are, Brussels will decide about the next steps by the end of May.
According to leaked details, Bratusek is eyeing a “crisis” levy of 0.5-5.0 per cent on all wages, to hike next year value-added tax (VAT), a tax on property and other measures to boost state revenues.
The centre-left government will also negotiate with public sector unions a further wage cut and an extension of a pensions freeze. Candidates for privatisation include the national phone company.
Ljubljana expects to inject up to 1.3 billion euros (HK$13.2 billion) into the banks -- 3.7 per cent of gross domestic product -- pushing this year’s deficit to 7.8 per cent of GDP, well above the three-per cent EU ceiling.
But it remains to be seen whether Bratusek, who has been premier for seven weeks and only became an MP last year, can get the other political parties on her side and win over disgruntled trade unions.
Work on the draft document continued late on Wednesday when Bratusek met opposition MPs and assured them she would include some of their proposals in the action plan, which will be completed only at Thursday’s government session from 0800 GMT.
Analyst Matevz Tomsic expressed scepticism, saying the programme will “hardly convince the European Union” since too much focus was on raising taxes and not on cutting spending.
“It seems like the government sees the current level of spending as unchangeable and is only looking at how to finance it with taxes,” Tomsic, a professor at the Nova Gorica University, said.
Dusan Semolic, the head of Slovenia’s largest union ZSSS, said Wednesday after meeting Bratusek that the VAT rise would “suffocate” the economy even further and hit those on low incomes the worst.
Bratusek’s predecessor Janez Jansa’s party SDS said the measures were heading “in the wrong direction”. “It’s like trying to extinguish a fire with fuel,” Jansa wrote on Twitter.