Final fiscal policy constraints relaxed
Ljubljana, 17 December - Most of the final fiscal policy constraints remaining in place since the economic and financial crisis were relaxed towards the end of the year. The policy move placated wide swathes of the public, in particular public sector unions and pensioners, but it has also raised concern among fiscal hawks.
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Photo: Hina/STA
The new government took office in autumn facing pent-up demand for higher wages, pensions and transfers to local government that had the potential to turn into a full-blown crisis even before the 100-day grace period expired. The solution was rises that fell short of expectations but still constituted a hefty fiscal bill.
Combined, broad spending (pensions and healthcare included) is projected to rise by more than EUR 1bn to EUR 20.6bn in 2019, with direct budget expenditure rising from the previously planned EUR 9.7bn to EUR 10.16bn.
The policy change means that Slovenia has largely abandoned the path of austerity that has guided its fiscal policy for much of the past decade, though the treasury said if would pursue as yet undetermined structural changes to mitigate the overall fiscal impact.
The Fiscal Council, watchdog of Slovenia's fiscal prudence, has warned that the move will push the country back into the structural deficit territory. Debt and deficit are projected to narrow, but largely due to the effects of rapid GDP growth.
Some experts have warned that this is potentially dangerous since GDP growth is gradually slowing down while global headwinds to growth are picking up speed, others have said it is high time Slovenia abandoned austerity and improved finances of households, which bore the brunt of the austerity measures.