Slovenian lame duck government suspends budget spending

Slovenian lame duck government suspends budget spending
By bne IntelliNews June 15, 2018

Slovenia’s ‘lame duck’ government has decided to suspend all budget spending for 2018, except for items such as social spending which it is obliged by law to finance from the state budget, the ministry of finance announced on June 14. 

The country has been in limbo since the June 3 parliamentary elections precipitated the toughest political crisis in recent history, with none of the parties in the new parliament able to form a coalition. President Borut Pahor has given the mandate to form a new government to Janez Jansa, whose Slovenian Democratic Party (SDS) won the largest number of votes, but there is no indication yet that he can gain sufficient support to set up a cabinet. For the foreseeable future, therefore, there will be no public money for investments. 

The ministry of finance says the decision to suspend the implementation of the budget is supported by data on economic growth in the first quarter from various institutions and forecasts for the rest of the year, which indicate certain risks that can negatively affect economic growth and thus the revenue side of the state budget.

The Slovenian economy resumed growth in 2014 after it contracted for two consecutive years, and growth accelerated through 2017, though is expected to slow somewhat to around 4% for the next few years. This was confirmed by the news that GDP increased 4.6% y/y in Q1 2018.

“Risks are also linked to developments in the international economic environment, where the prices of raw materials, especially oil, are gradually increasing. Global trends will also be influenced by new restrictions in international trade,” the ministry said in June 14 statement.

After the adoption of the state budget for 2018, the National Assembly adopted amendments to the Social Security Benefits Act, due to which additional liabilities for 2018, for which there are no provisions in the adopted state budget, were estimated at €50mn. The government will include these liabilities in the budget and determine the level of expenditure through reallocation of funds by searching for potential savings. 

During the temporary suspension, the ministry of finance together with other budget users will review the implementation of the budget, estimate consumption until the end of the year and determine the measures to be proposed in order to achieve the public finance targets established in the budget and the Stability Programme for 2018.

The government will then notify the parliament and, if it is unable to balance the budget, a revised budget has to be proposed within 45 days after the suspension, under Slovenia’s Public Finance Act.

Jansa is currently trying to form a government but without the support of Marjan Sarec, whose party was second ranked in the June 3 elections, this will be difficult. Sarec, also the runner-up in the recent presidential elections, says he will not form a government with Jansa.

Among the parties whose support Jansa can count on immediately are New Slovenia (NSi) and the far-right Slovenian National Party (SNS), which will return to the parliament after failing to pass the threshold last time. NSi has 7.13% and SNS 4.19. Thus, Jansa needs at least one more partner, and he has announced talks with everyone, which means that it could be any of remaining six parliamentary parties, including Sarec's despite his recent comments — there is speculation that he spoke out against a coalition with Jansa in order to improve his negotiation position.

At the same time, however, Sarec has already started talks with Jansa’s political opponents about a new government. On June 7, he met outgoing Prime Minister Miro Cerar, leader of the Party of Modern Centre (SMC), and Cerar’s predecessor Alenka Bratusek. In the June 3 elections, the SMC gained 9.75% of the vote, and Bratusek’s eponymous party 5.13%.

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