European Commission’s assessment confirmed that the Government should persist with austerity measures

During the Wednesday’s assessment of the Member States’ draft budgetary plans, the European Commission warned Slovenia about the risk of its 2017 draft budgetary plan being non-compliant with the EU rules.

Minister Mateja Vraničar Erman perceived this message as a very serious warning that Slovenia should continue with the envisaged reforms, and as a confirmation that the Government should not yet abandon all the austerity measures.

  
Vraničar Erman emphasised that the ministry is not surprised by the European Commission’s assessment. While preparing the 2017 draft budgetary plan, the Ministry of Finance took into account the planned measures in the field of the public sector salary system, pensions and social transfers. The European Commission’s assessment reflects the current status of the adopted measures. It should be pointed out that the European Commission’s economic forecast is slightly worse than the latest estimate made by the Institute of Macroeconomic Analysis and Development of the Republic of Slovenia.
 
In its assessment, the European Commission only took into account the adopted measures, while excluding the above mentioned measures which remain open. This is the main reason for a considerable difference in the expected general government deficit for 2017. In the autumn European Economic Forecast published last week, the European Commission predicted Slovenia’s general government deficit to amount to 2% of the GDP, while the Government’s estimated deficit stood at 1.3% of the GDP. This is what caused the difference in the assessed structural effort.
 
For this reason, the measures adopted in the National Assembly by the end of 2016 will be of vital importance. In terms of compliance with international obligations, the Stability Programme and the Ordinance on the framework for the preparation of the general government budget for the 2018–2020 period, which will be prepared by the Government in the spring, will also play an important role since a cumulative two-year effort to reduce the structural deficit has been monitored in line with the EU rules.
 
Slovenia is committed to respecting the state’s fiscal rule and international obligations as specified in the Stability and Growth Pact. The assessment published today conveys an important message that, during the budget planning process, Slovenia should be sensible and aware of its abilities as well as limitations. It should be emphasised that the realisation of the set fiscal objectives provides Slovenia with a favourable access to debt financing markets, which is crucial for improving the public finance quality and debt sustainability. Both the fiscal balance and greater stability should be achieved through joint efforts of all stakeholders.
 
Within the limits of its powers, the Ministry of Finance strives to contribute to the fulfilment of the relevant obligations; however, other ministries and social partners should also cooperate and establish appropriate structural reforms which could have a long-term positive impact on the structure of government expenditure. By merely increasing the budget revenue resulting from the positive economic growth, a fiscal balance and the elimination of the structural deficit will not be achieved by 2020. It should further be pointed out that the inability to realise the set fiscal objectives would hinder the decline in interest rates in financial markets, which has so far allowed fiscally responsible financing of the key priorities.