Recession-hit Slovenia adopts austerity measures

Slovenia, which exports about 70 percent of its production, was the fastest growing euro zone member in 2007 but was badly hit by the global crisis and is struggling with a new recession

Recession-hit Slovenia adopts austerity measures

World Bulletin/News Desk

Slovenia's parliament approved a package of austerity measures on Friday aimed at reducing the budget deficit, preventing further credit rating downgrades and allowing the country to return to international credit markets.

Prime Minister Janez Jansa's four-month-old conservative cabinet expects the package, which includes cuts in public sector wages and benefits from June, to bring the fiscal gap to 3.5 percent of gross domestic product this year from 6.4 percent in 2011.

"From the macroeconomic point of view such a package was absolutely necessary and is very useful ... but over the next year Slovenia needs to go further, particularly adopt the pension reform," Saso Polanec of Ljubljana's Faculty of Economy told Reuters.

Slovenia, which exports about 70 percent of its production, was the fastest growing euro zone member in 2007 but was badly hit by the global crisis and is struggling with a new recession after a mild recovery in 2010.

The European Commission said earlier on Friday that Slovenia's economy was expected to contract by 1.4 percent this year amid lower export demand and poor domestic spending after a contraction of 0.2 percent in 2011.

The centre-right government, which took office in February after December snap election, in March forecast a contraction of 0.9 percent for this year.

The government agreed with all major trade unions, which staged a massive strike by public sector workers against the austerity programme last month, that they will not try to block the measures by a national referendum.

In Slovenia, a referendum can be called with 40,000 citizens' signatures and last year four unrelated laws, among them a crucial law that would raise the retirement age, were rejected at a referendums demanded by trade unions.

This eventually led to the ousting of the previous centre-left government in September. Once a law is rejected at a referendum, parliament cannot pass similar legislation for a year.

Slovenia's credit ratings have been cut several times since September and last month the government had to postpone an issue of a 1.5 billion euro ($1.94 billion) bond - whose maturity it did not specify - after the yield demanded exceeded 5 percent.

"The measures passed today are a positive signal to the markets but the yields will not fall immediately. I expect the government may have to postpone the bond issue till the autumn," Polanec said.

Güncelleme Tarihi: 12 Mayıs 2012, 10:47

Muhammed Öylek

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