Cause and Effect in European Politics and Law

Slovenia too is threatened by a debt crisis

Dessislava Dimitrova, Ralitsa Kovacheva, June 28, 2011

After a weak support of the voters, the several unsuccessful referenda on key reforms and EU’s internal problems, Slovenia’s Government, among all, has become a minority government on Monday. Out of 99 members of Parliament, the Government now has only 33 representatives in it, after the Zares party withdrew from the coalition cabinet of Prime Minister Borut Pahor.

Following Zares’s decision, three ministers have also left their seats and only two parties remained in the coalition – the Social Democrats and the Liberal Democrats. The cabinet’s refusal for reshuffle forced the pensioners’ party DESUS to pull out from Government just a few months ago. So far, three ministers, those of Public Administration, Economy and Culture, have filed their resignations, while the Parliament’s speaker, also a member of Zares, will remain on his post, but as a representative of the opposition.

Earlier this month the Slovenians unanimously rejected in a referendum the Government’s proposal to raise retirement age to 65 from 63 years, after refusing to back a government law on short-term jobs for students and pensioners in April. Both events confirmed the results from the recent polls, showing that 20 years after Slovenia gained its independence, the support for the cabinet is continuing to fall. According to the latest polls, just 15.3% of the Slovenians support the current cabinet, while ten years ago the support stood at 63%. At the 15th independence anniversary it was 45%.

Despite the weak support and the apparent failure to cope with the problems, Pahor is determined to lead the minority government until the next general elections, scheduled for next year.

Until then, however, the country will have to revise its budget and cut public spending by over 455 million euro. Pahor has already announced that he will use the vote on budget revision to ask for a confidence vote. At the same time, the coalition partner – the Liberal Democrats - are against such a vote, because it leads to snap elections and the party could remain outside Parliament.

Besides the political crisis, the country also seems to be seriously threatened by an economic downfall too. While everybody in Europe is talking about Greece, Ireland and Portugal these days, hardly anyone is paying any attention to this tiny country, which is a member of the eurozone.

The central bank governor, Marko Kranjec, has explained recently, that if the country does not tackle its costs, budget deficit and debt, it could be the next country, grabbed by the debt crisis. It is quite interesting that, according to him, the reason for the rise of the budget deficit would be the aid for companies such as the state-owned railways and the country’s biggest bank, which is also state-owned.

The problem has been registered in the main recommendations of the European Commission to the new member states, based on the review of their National Reform Programmes and Convergence Programmes (or Stability Programmes for the eurozone countries). Under them, the state continues to have a high degree of participation in the economy and “certain segments of the services sector are sheltered from competitive pressures and are characterised by high mark-ups and high concentration, raising costs throughout the economy”. Slovenia is planning to accelerate the implementation of the Services Directive and to identify state capital investments suitable for sale, but there are no specific details on this issue, the Commission notes.

Ljubljana has to reduce its deficit from 5.6% in 2010 to below 3% until 2013. The government strategy envisages this to happen mainly through cutting public spending, but the Commission is quite critical towards the lack of definite measures and details on how this target will be met. Despite the outcome of the referendum, the Commission recommends the retirement age to be increased and incentives for later retirement to be introduced.

No one can deny that the situation in Slovenia reminds the one in Greece at the moment. Of course, a similar crisis in Slovenia would not rock Europe the way Greece did, but it could impact the countries in the region, which, despite being independent for 20 years, still depend on each other in terms of economy.