Presenting the budget bills for 2013 and 2014 in parliament on Monday, Prime Minister Janez Janša said they sent a clear signal to domestic and foreign partners that Slovenia is adopting serious and prudent measures.
Janša said that the budget bills - envisaging EUR 8.6bn in revenue and EUR 9.6bn in expenditure for 2013 and 8.4bn and EUR 9.3bn respectively for 2014 - is one of five strategic steps Slovenia needed to exit the crisis.
The budgets honours Slovenia's commitments regarding the deficit, continuing the consolidation of public finances to secure a long-term a deficit of below 3% of GDP.
The measures it entails also include painful and unpopular ones, such as a 5% cut of the public sector wage bill, but this step is needed as the public sector has so far not felt the crisis as drastically as the real economy, he said.
He said that the size of public sector had grown in recent years beyond what the state can afford, which also led to excessive borrowing that is no longer possible.
A wrong response to the crisis led Slovenia to the brink of an abyss, which is why "it will be probably necessary to walk backwards for a while".
He said the government would offset the public sector cut with growth in investments, whose volume is increasing significantly in the coming two years, also with the help of available European funding.
Janša warned that fast economic recovery could not yet be expected next year, including potentially as result of tensions in the Middle East which could drive up energy prices. "It is our responsibility to be ready for the scenario."
Janša defended the fixing of the banking sector as a prerequisite for growth, while saying that the rest of the economy also needed to be put in order.
He added that the budget proposals were adopted in difficult circumstances, as real GDP had fallen below the level of five years ago. Almost a decade has been lost in terms of GDP per capita, while the real volume of investments has fallen to 1999 levels.
Employment is where it was seven years ago, while on the other hand the 160,000 people working in the public sector is by far the largest number in history.
The proposed budget policy does not mean the dismantling of the welfare state and the abolition of the public sector, but merely preserves them at an economically sustainable level that also considers future generations, Janša added.
The PM's views were echoed by Finance Minister Janez Šušteršič, who said the budgets were based on the presumption that the labour market and pension reform would be adopted and the issue of banks' bad claims addressed promptly.
Touching on the contentious raising of the VAT rate for selected services, including for print media, he said that an across-the-board tax raise would have been too risky in times of crisis.
Rejecting criticism that the government was targeting the media with the move, he said that all papers, including government-friendly ones, would be affected. He is nonetheless still ready to lend an ear to additional remarks and potentially make changes.
Source: The Slovenia Times
