The assessment of Slovenia's updated stability and convergence programme is "positive overall" despite the conclusion that the objectives have been met only partially, Finance Minister Andrej Bajuk said on Tuesday after EU finance ministers confirmed the European Commission's recent report.
Bajuk agrees with the Commission's view that the programme is "lacking in ambition". "This will become evident in the coming days with the release of the closing balance for 2004, which testifies that Slovenia achieved more last year regarding the deficit than it said it would in the programme," he said.
He also believes that the expected deficit for 2005 can be curbed more than planned, although this is associated with certain unplanned expenditures which are a result of poor planning. Bajuk mentioned expenditures of the Education Ministry and a hasty approach to state guarantees issued in 2004.
"Only SIT 666m (EUR 2.8m) has been earmarked for possible cash-in of the guarantees, but we actually need SIT 8.7bn (EUR 36.3m)," Bajuk explained. But this situation can be remedied with the supplementary budget so that objectives for this year will be better or at least as good as planned, he explained. Slovenia's projected budget for this year is at 2.1 percent of GDP.
Bajuk further noted that Slovenia's programme might have scheduled too many reforms towards the end of the period, and stressed it might rely too much on the 2007-2013 EU budget which is still in negotiation. The premise is that Slovenia will continue to be a big net receiver, which is not guaranteed, he said.
All, this, according to Bajuk, represents a challenge for the government and entails certain risks. He also sees a big challenge in the Commission's recommendation that Slovenia should embark on pension and health system reforms to improve the long-term sustainability of public finances.
"We are an ageing society which means higher costs for the pension and health systems. Reforms are very important and we must pursue them," he added, acknowledging the Commission's recommendations.
The Commission's report, released in mid-February, urged Slovenia to "seize every opportunity to accelerate the reduction of its deficit and to improve the long-term sustainability of its public finance". Slovenia's updated stability and convergence programme until 2007 was assessed as "plausible", but lacking in ambition.
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