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Budget funds for stimulus package sufficient, say PM, treasury

Ljubljana, 24 March - Prime Minister Janez Janša and Finance Minister Andrej Šircelj have assured the public that the funds to finance the coronavirus stimulus package announced on Tuesday are sufficient, with reliable sources available to tap into.

Ljubljana
PM Janez Janša.
Photo: Nebojša Tejić/STA
File photo

Addressing the press conference at which the package to help businesses and the population was unveiled, Janša said the government was not planning a special supplementary budget tor the measures taken to mitigate the coronavirus crisis.

He said that a special framework outside existing fiscal rules and limitations was being set out at the EU level, a framework that would be expanded at the level of monetary policies of the European Central Bank (ECB) as well as at the level of EU and eurozone instruments.

"There's currently no concern about a lack of current liquidity to meet the needs," said the prime minister, referring to the planned measures to help business and the population and current public expenditure.

Minister Šircelj noted that the taskforce preparing the stimulus plan had estimated its value at around EUR 2 billion, adding that the Finance Ministry's calculation of the financial impact of the measures would be ready by Thursday evening, when the relevant bills were ready.

"The sources to finance those measures exist and are secured, realistic and reliable," said Šircelj, pointing to EU and domestic funds.

He assessed that Slovenia could count on EUR 1.1 billion from an instrument to be formed by the Eurogroup based on the European Stability Mechanism and EUR 2.5 billion as part of the ECB council's decision on an increased bond-buying plan.

The state will approve guarantees through SID Bank and special-purpose funds so that commercial banks can help the population and businesses with borrowing and loan repayment. In one of the measures the Bank Assets Management Company will be allowed to buy non-performing loans.

Money from cohesion funds will be diverted to where the money is needed more.

Slovenia is also in talks with the International Monetary Fund on an instrument that will allow additional guarantees, and with the World Bank, according to Šircelj.

He said that government borrowing would be within the set annual limit. The budget financing plan for the year sets the cap on state borrowing at EUR 1.58 billion.

Considering the still relatively favourable terms in the market, borrowing is possible and in a way pays off, said the minister, as the past more costly borrowing is being replaced by cheaper borrowing.

"These measures will cause nothing unusual, exceptional finance-wise, the financial system is stable," said Šircelj, expressing regret that some businesses and sole traders suspended their operations because they did not believe the state would take care of them.

Similarly, economist Jože Damijan maintains that financing the crisis mitigation and stimulus package should not be a problem for Slovenia.

He estimates a minimum state intervention should be between EUR 2.6 billion and up to almost EUR 6 billion, while Slovenia already has about EUR 3 billion liquidity in the budget.

The economist expects the state will issue EUR 5 billion of 10- and 20-year bonds. The state can borrow in international markets at low interest rates, while there is also considerable potential at home with EUR 20 billion in savings deposits.

In a webinar hosted by the Ljubljana School of Business and Economics, Damijan argued that a fast and substantial intervention was needed to reduce the damage to the economy caused by the pandemic.

He welcomed most of the measures set out by the government today, but dismissed the solidarity allowance for pensioners and a cut in public office holders' pay as populist, and labelling as discrimination the plan that the self-employed get only 70% of the minimum wage, while infected farmers get 80%.

He believes the government should fully compensate companies for the loss of income and wages for employees and self-employed. As a follow-up he suggests a transfer of EUR 500 for each adult and EUR 150 for each child to be able to spend more after the crisis at the budget cost of EUR 800 million.

Among several other measures he also proposed a six-month moratorium or rescheduling of loans of affected business and individuals.

ep/sm/zm
© STA, 2020