Slovenia is bracing itself for tough times ahead as the government plans to implement its reform program from July 1st. Slovenians will face challenging times as taxes will be hiked for the first time since the country was rocked by financial crisis. The government has justified the move saying it will help raise €1 billion for the state budget.
In the past few months, the Slovenian government has taken some significant decisions to revive the struggling economy and instill a sense of hope among people. Mood in the country has generally been quite tense due to economic and political uncertainty. Analysts believe the reform program will be instrumental in saving billions of euros, bolstering sectors and bringing a cheer among Slovenians.
The Slovenian government is currently focusing on consolidating public finances to support its reform programs. Its top priority is to first create a stable economic environment to attract investors and address unemployment issues. In this direction, the government earlier adopted an action plan that focused on the troubled banking system.
While it is quite unlikely that Slovenia will be able to recover from the crisis before 2014, the government is undertaking steps at the macroeconomic level to bring the situation under control. The government has further said that it is committed to promote privatization and undertake all the necessary steps that can help avoid a bailout.
Last month, the government sold all state-held shares in the country’s largest supermarket chain, Mercator to raise capital. It was the biggest privatization in recent years and brought some much-needed relief for the government which has indicated that similar deals will follow soon. About 15 state-owned companies including the country’s second largest bank Nova KBM are expected to be privatized in the coming days.
The banking sector, which has been the biggest cause of concern is on the top of the government’s priority list. According to sources, the government is planning to create a ‘bad bank’ that will take bad loans. The decision to split the banking sector is intended to help the government address serious issues such as weak corporate governance, excessive risk-taking and lack of supervision machinery.
Despite all the plans to stabilize the economy, the Slovenian government received a major setback after international rating agency Fitch downgraded its rating by one notch. The agency noted that Slovenia’s fiscal and macroeconomic outlook has deteriorated significantly to explain the decision to revise the country’s rating from BBB to A-.
Notably, Fitch’s rating cut follows the recent rating downgrade by Moody’s. Reacting to the announcement, Slovenian Prime Minister Alenka Bratusek had said that her government was considering legal action against Moody’s for announcing the downgrade during an issue of dollar dominated bonds. To make matters gloomier for the government, the European Commission in Brussels also warned that Slovenia is quite likely to become the eurozone’s sixth bailout case.
With the country plagued by sharp GDP fall and rising unemployment, economists and financial experts say that the government has to act faster and take some difficult decisions that will bring back prosperity.