EC recommends ending Excessive Deficit Procedure for Slovenia

By bne IntelliNews May 19, 2016

The European Commission (EC) recommended removing Slovenia from the EU's Excessive Deficit Procedure (EDP) on May 18 after the country managed to bring its deficit below 3% in 2015.

In 2015, Slovenia's budget expenditures stood at €9.8bn, just above the €9.65bn recorded in 2014. The country's accumulated budget deficit in 2015 stood at €1.27bn, the ministry of finance announced on January 19. In 2015, Slovenia managed to keep its budget deficit below the target envisaged for the whole year, which was set at €1.39bn. Slovenia’s budget deficit for the whole of 2014 was €1.2bn.

On May 18, the EC issued a recommendation for a European Council decision abrogating its 2009 decision on the existence of an excessive deficit in Slovenia.

The EC said furthermore that from 2016, the year following the correction of the excessive deficit, Slovenia will be subject to the preventive arm of the Stability and Growth Pact and should progress towards its medium-term objective at an appropriate pace, including respecting the expenditure benchmark. In this context, there appears to be a risk of some deviation from the required adjustment of 0.6% of GDP towards the medium-term objective in 2016.

The budget deficit projected for 2016 is the lowest since the beginning of the financial crisis in 2008, but is still €50mn higher than originally planned due to the government’s decision to make available an additional €123mn to deal with the ongoing migration crisis. This will increase the deficit by over 0.1 percentage points from the original projection of 2.1% of GDP.

“In 2017, under unchanged policies, there appears to be a risk of a significant deviation from the recommended adjustment of 0.6% of GDP towards the medium-term objective,” the EC said on May 18.

The Slovenian government announced on April 7 it has set budget deficit targets of 1.7% of GDP in 2017, 1% in 2018 and 0.4% in 2019, as part of the draft Programme Stability (PS) and National Reform Programme (NRP), the two fiscal documents Slovenia had to submit to the EU by the end of April.

Besides Slovenia, the EC also recommended removing Cyprus and Ireland from the EDP on May 18.

EU countries have agreed that they should limit the amount governments can borrow each year to 3% of GDP and their total degree of indebtedness to 60%. The EDP is the EU's step by step procedure for correcting excessive deficit or debt levels.

Eurozone members have to submit their draft budget plans each year by 15 October, and the European Commission assesses whether they comply with the rules of the Stability and Growth Pact (SGP), a set of rules designed to ensure that countries in the EU pursue sound public finances and coordinate their fiscal policies.

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