Slovenian efforts to overhaul the economy don’t match the severity of the euro-nation’s fiscal plight, European Union Economic and Monetary Affairs Commissioner Olli Rehn said.
“Adverse macroeconomic and financial developments have hit Slovenia hard in recent years,” Rehn said in a written response dated Oct. 18 to lawmakers in the European Parliament posted on its website. “The overriding concern of the commission to date has been that the reform process in Slovenia does not sufficiently match the gravity of the situation.”
Slovenia, the first post-communist nation to adopt the euro in 2007, is seeking to overhaul its economy as Europe’s debt crisis drives up borrowing costs in the 17-nation currency region. The efforts include a plan to recapitalize banks that are the focus of investor concern that the Adriatic nation may be next in line for a bailout.
Prime Minister Janez Jansa has said Slovenia can avoid seeking aid if it carries out the bank recapitalization plan, creates a sovereign wealth fund, cuts the budget deficit and changes labor laws and the pension system.
The commission, the EU’s executive arm, said in its spring forecast that Slovenia’s general government deficit will be 4.3 percent of gross domestic product this year and 3.8 percent in 2013, when gross government debt will amount to 58 percent of GDP. An updated forecast is due to be released on Nov. 7.
Slovenia’s “internal rebalancing process is proving problematic” after the economy built up imbalances in the years before the global financial crisis began, Rehn said, underscoring risks to the “long-term sustainability of the public finances.”
Last year, Slovenian voters in a referendum rejected extending the retirement age to 65. The vote was followed in subsequent months by the fall of the previous government of Prime Minister Borut Pahor and credit-rating downgrades.