LJUBLJANA: Slovenia's parliament on Friday imposed a cap on public spending in an attempt to convince foreign investors that the small eurozone country will not need an international bailout.
The 78-8 vote in the assembly approving the new measure means Slovenia's constitution will be changed to require that the government's budget be balanced, that is, it will not be allowed to spend more than it earns in taxes.
The budget should be balanced by 2015, as demanded by the European Union.
Once an example of a successful socialist welfare state, Slovenia is racing to convince foreign investors it has a credible strategy to reduce debt and stay solvent, despite widespread concerns among economists that it could become the sixth state in the 17-strong eurozone to seek a financial bailout.
Slovenian lawmakers have clashed for months over enshrining the balanced budget requirement into the constitution.
The new prime minister, Alenka Bratusek, had previously insisted the budget could not be balanced before 2017, but gave in to demands to aim for 2015, as demanded by the opposition and the EU.
As part of its austerity drive to bring down its debt, the Slovenian government has introduced a two percent hike in the retail sales tax, and pledged to privatize 15 state-owned companies in an austerity package that will be discussed by the European Commission when the EU's executive arm evaluates Slovenia's crisis measures.
On Friday, Parliament also tightened laws on holding referendums on unpopular austerity proposals. Such votes in the past have quashed government-proposed measures, such as pension system reforms.
``The Commission welcomes the very broad support of Slovenian lawmakers in today's votes on constitutional changes introducing a balanced budget rule and restricting recourse to referendums on fiscal policy,'' EU spokesman Simon O'Connor said.
``This is a strong signal of Slovenia's commitment to sound public finances, which are an essential foundation for sustainable growth and job creation in the country.''
At the center of Slovenia's crisis are three state-controlled banks which have an estimated 7 billion euros of bad loans on their books. Slovenia needs to support these banks to avoid a collapse of its banking system.
To avoid heaping more debt on to its accounts, the government is introducing the austerity measures. Slovenia's public debt is set to surge to 71 percent of annual gross domestic product in 2014, up from 54 percent last year.
While Slovenia's level of debt is small compared to other members of the 17-country eurozone _ such as Greece with a debt-to-GDP ratio of 156 percent _ this rapid increase in debt is worrying economists.
The government is likely to face outrage from pensioners and public sector workers as it makes pay cuts to reduce debt. Bratusek told the parliament Friday that Slovenia must get its house in order for its own sake.
``We are doing this for ourselves,'' she said in response to claims by lawmakers that she made the U-turn because of pressure from Europe.
indiatimes.com
The 78-8 vote in the assembly approving the new measure means Slovenia's constitution will be changed to require that the government's budget be balanced, that is, it will not be allowed to spend more than it earns in taxes.
The budget should be balanced by 2015, as demanded by the European Union.
Once an example of a successful socialist welfare state, Slovenia is racing to convince foreign investors it has a credible strategy to reduce debt and stay solvent, despite widespread concerns among economists that it could become the sixth state in the 17-strong eurozone to seek a financial bailout.
Slovenian lawmakers have clashed for months over enshrining the balanced budget requirement into the constitution.
The new prime minister, Alenka Bratusek, had previously insisted the budget could not be balanced before 2017, but gave in to demands to aim for 2015, as demanded by the opposition and the EU.
As part of its austerity drive to bring down its debt, the Slovenian government has introduced a two percent hike in the retail sales tax, and pledged to privatize 15 state-owned companies in an austerity package that will be discussed by the European Commission when the EU's executive arm evaluates Slovenia's crisis measures.
On Friday, Parliament also tightened laws on holding referendums on unpopular austerity proposals. Such votes in the past have quashed government-proposed measures, such as pension system reforms.
``The Commission welcomes the very broad support of Slovenian lawmakers in today's votes on constitutional changes introducing a balanced budget rule and restricting recourse to referendums on fiscal policy,'' EU spokesman Simon O'Connor said.
``This is a strong signal of Slovenia's commitment to sound public finances, which are an essential foundation for sustainable growth and job creation in the country.''
At the center of Slovenia's crisis are three state-controlled banks which have an estimated 7 billion euros of bad loans on their books. Slovenia needs to support these banks to avoid a collapse of its banking system.
To avoid heaping more debt on to its accounts, the government is introducing the austerity measures. Slovenia's public debt is set to surge to 71 percent of annual gross domestic product in 2014, up from 54 percent last year.
While Slovenia's level of debt is small compared to other members of the 17-country eurozone _ such as Greece with a debt-to-GDP ratio of 156 percent _ this rapid increase in debt is worrying economists.
The government is likely to face outrage from pensioners and public sector workers as it makes pay cuts to reduce debt. Bratusek told the parliament Friday that Slovenia must get its house in order for its own sake.
``We are doing this for ourselves,'' she said in response to claims by lawmakers that she made the U-turn because of pressure from Europe.
indiatimes.com
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