Slovenian central bank calls for wider focus in reform package

By bne IntelliNews May 9, 2013

bne -

Ahead of the parliamentary debate on the Slovenian government's draft reform programme due on May 9, Banka Slovenije Governor Marko Kranjec reiterated calls for Ljubljana to widen its focus from raising revenue to include privatisation and trimming public sector spending.

The recently-appointed government has been struggling to conjure consensus in the parliament for its economic reform programme, which needs to be implemented in order to shore up Slovenia's economy. A deep recession and banking system - mostly state owned - which is burdened by bad loans worth about €7bn, or 20% of GDP has the country fighting to avoid asking for a Eurozone bailout.

Adding to the arguments amongst the country's politicians, Kranjec said he is disappointed by the government's draft reform programme because it focuses mainly on the revenue side. "There is too much stress on raising taxes, we need a combination of that with a reduction in spending; the public sector is too big," Kranjec said in an interview on national television, Reuters reports. Slovenia could still avoid a bailout, but "fast action is needed", he added.

However, Slovenia's fractious political scene means that investors are doubtful about Prime Minister Alenka Bratusek's chance of pushing through the necessary spending cuts and reductions in the level of state ownership in the economy to avoid becoming the next Eurozone country to require a bailout.

Kranjec also urged privatisation of the banks, which are a huge burden on the economy given their virtual insolvency. However, any attempt to sell off the state's significant stakes in the banking sector would likely need to wait for the non-performing assets poisoning the system to be siphoned into a planned "bad bank".

Government sources were reported to have said on May 6 that there are plans to privatise the country's second largest bank - Nova KBM - and telecoms operator Telekom Slovenia this year.

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