Slovenian lawmakers approved changes to the country’s pension system, which has one of the highest spending levels in the euro region, by extending the length of time Slovenes need to be employed to get benefits.
Lawmakers voted 76-0 to adopt the changes, which include a requirement of paying retirement contributions for 40 years to qualify for pension benefits, according to a live broadcast from the Parliament in Ljubljana, the capital. The previous changes rejected in a referendum last year called for extending the retirement age.
“The aim of these changes is the financial stability of the system to ensure uninterrupted payments of pensions,” Labor Minister Andrej Vizjak said in Parliament before the vote. “The reform package has been discussed with all social partners, including most of the trade unions.”
Slovenia, whose economy slid into its second recession in three years, is working on an economic overhaul to regain competitiveness and avoid seeking an international bailout to prop up its banking industry. The rejection of pension-system changes in June last year marked the start of the fall of the previous government under Prime Minister Borut Pahor and a series of credit rating cuts.
Slovenia is rated Baa2 at Moody’s Investors Service, the second lowest level in the investment category while Fitch Ratings has an A- and A at Standard & Poor’s. All three companies keep a negative outlook on the sovereign.
“The current pension reform adjusts several parameters of the pay-as-you-go system, with a focus on increasing actual and statutory retirement ages,” the International Monetary Fund said in a Nov. 29 report. “However, it will leave Slovenia among the euro-area countries with the highest pension expenditure as a ratio of gross domestic product, thus putting planned medium-term consolidation achievements in jeopardy in the longer run.”
Slovenia’s overhaul drive is being threatened by a referendum on the bank recapitalization plan and the creation of a wealth fund filed by a trade union and opposition leaders.
If the Constitutional Court allows the vote to go ahead and people reject the measures in a referendum, the Adriatic nation would probably need to ask for an international rescue package, Finance Minister Janez Sustersic has said.