Slovenia has pledged to sell 15 state firms and raise VAT in a desperate bid to avoid an international bailout, but a reliance more on revenues than spending cuts means it risks more pressure from financial markets.
The much-anticipated stability package announced yesterday offered no timeframe for the sell-off of state firms including the country’s second largest bank, its biggest telecoms operator and the national airline. Nor did it say how much they were worth.
It also said cuts to the public sector wage bill would have to await the outcome of negotiations with unions.
Prime minister Alenka Bratusek said the package, which includes a rise in value added tax from July 1st to 22 per cent from 20 per cent, would be enough to prevent the tiny Alpine country following Cyprus in the euro zone queue for a bailout from the European Union and International Monetary Fund.
The plan will go to the European Commission today. Initial reaction to it was muted.
A spokesman for EU economic and monetary affairs commissioner Olli Rehn said the commission took note of the government's adoption of the measures: "We will study the programmes carefully in the coming weeks and present our detailed assessment and policy recommendations on May 29th."
Analysts have voiced concern that the funding might encourage complacency in the government, an unlikely alliance of parties ranging from neo-liberal centrists to leftists which faces rising public anger.
The commission is growing increasingly nervous over Slovenia’s commitment to the overhaul the EU says is needed to an economy roughly 50 per cent controlled by the state and faced with €7 billion of bad loans in local banks.
"This programme will enable Slovenia to remain a completely sovereign state," Ms Bratusek told a news conference. Her finance minister, Uros Cufer, said: "Slovenia is a plane losing altitude and we first have to stabilise that altitude."
Mr Cufer said the national fire sale would include second largest state lender Nova KBM, the largest telecoms operator Telekom Slovenia, flag carrier Adria Airways and Ljubljana Airport.
He said the state would not retain any blocking stake in the companies, but did not specify whether they would be sold this year or how much they might yield.
The former Yugoslav republic was a trailblazer for eastern Europe when it joined the euro zone in 2007 as the bloc's fastest growing economy.
Buoyed by exports of Renault cars, household appliances and pharmaceuticals, successive governments shied away from the unpopular sale of state assets, including the country’s biggest banks, and reform of the welfare system and rigid labour market.
Exports fell significantly with the onset of the global financial crisis, driving up bad loans, borrowing costs and exposing widespread cronyism and corruption. – (Reuters)