Convergence Report as Expected, Finance Ministry Says

Ljubljana, 20 October

The European Commission convergence report is completely realistic and in line with expectations, Finance Minister Dusan Mramor commented on the document published on Wednesday. Central bank vice-governor Andrej Rant meanwhile said the document highlighted some incompatibilities which the bank knows must be dealt with.

Minister Mramor pointed out that the report failed to state that Slovenia, unlike other countries, passed a pension reform as early as 1999, which guarantees stable public finance until 2028.

Mramor though agreed that Slovenia will have to lead the policy of healthy fiscal consolidation and moderate wages, and continue structural reform, as stated in the report.

Greater market flexibility and further liberalisation of the economy will be the main contributors to the creation of a favourable environment for price stability and greater potential growth, according to him.

The situation must be maintained in which wage growth will lag behind productivity growth, according to Mramor. He also said liberalisation was required in areas where it is possible to create competition.

The convergence report says that Slovenia only meets two of the four convergence criteria that a country must fulfil to introduce the euro. One of them is inflation, which is still too high.

Mramor said that inflation was dropping in Slovenia unlike in most other countries. If oil prices had not increased by 70 percent this year, Slovenia could practically have met the relevant Maastricht criterion, according to Mramor.

The report says that Slovenia has had a moderate process of curbing inflation, while drawing attention to sluggish implementation of the goals of the stability and growth pact, i.e. the need to do away with the budget deficit in the mid term.

Central bank vice-governor Rant said that certain corrections will have to be made in aligning the Bank of Slovenia act with the EU legislation.
"The next such report can be expected in two years when Slovenia should meet all criteria according to our expectations and be fit to adopt the euro," he added.

The European Commission noted in its report that the Bank of Slovenia act is not fully compatible with Article 109 of the Treaty and with the statute of the European Central Bank (ECB).

According to the report, the formulation of the central bank's objectives will have to be changed to state that it supports the general economic policy and will make efforts to protect financial stability. The second objective - safeguarding financial stability - must be subordinated to the first one.

"Slovenia must align this legislation by the time it adopts the euro. Procedures will be started in time," said Rant.

Convergence Report as Expected, Finance Ministry Says

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