Annual Review of Slovenian Business and Economy

Ljubljana, 11 December - Extensive efforts were underway in Slovenia at all levels in the past year in a bid to get the country ready for the adoption of the euro on 1 January 2007. Even before completing its two-year stint in the ERM II, a grooming phase for the euro, Slovenia's bid to join the eurozone was endorsed by the EU. Political efforts to secure Slovenia's membership in the eurozone were accompanied by an extensive public awareness campaign, which seems to have produced the goods as Slovenians claim that they are well informed about the arrival of the single currency. However, a key test is still to come: the greatest fear of Slovenian consumers is that the switch to the euro will bring unjustified price hikes, which could dampen the enthusiasm of Slovenian consumers in the currency. The arrival of the euro will coincide with the implementation of new tax legislation in Slovenia, adopted as part of the government's reform efforts. Reform proposals were watered down in most areas compared to initial proposals - the tax reform was no exception to this. The proposed flat tax was scrapped in favour of a streamlined version of the current progressive personal income tax system. Talks on reforms aimed at increasing the flexibility of employment legislation ran aground due to fierce opposition from the trade unions to proposals put forward by the government. Meanwhile, differences on the nature of the reforms in the government are said to have led to the resignation of Development Minister Joze P. Damijan after only three months in the job. Despite the setback, the government pressed ahead this year with privatisation efforts by adopting privatisation models for telco Telekom Slovenije, Slovenia's second largest bank, NKBM, and the energy sector. A plan for selling ownership stakes held by the state-run KAD and SOD funds was also adopted. Meanwhile, government-sponsored legislation aimed at introducing voluntary membership of business chambers took its toll on the Chamber of Commerce and Industry, whose plans to restructure were overshadowed by the first announcement of plans to establish new chambers by interest groups. In the meantime, Slovenian economic growth continued to blossom: the Institute for Macroeconomic Analysis and Development, a government think tank, predicts that the country will end the year with growth of 4.7%. The inflation rate is anticipated to stand at a healthy 2.7%.