Slovenia's government has announced an austerity plan to help the debt-ridden Balkan nation avoid an international bailout. It is hoped the measures will raise enough in new taxes to help balance the budget.
Prime Minister Alenka Bratusek said the measures, which will include a value added tax raise from 20 to 22 percent in July, as well as the sale of 15 state firms, would help prevent Slovenia from going the way of Cyprus with a bailout from the European Union and International Monetary Fund.
It is hoped the measures will raise 540 million euros ($707 million) in new taxes.
"This program will enable Slovenia to remain a completely sovereign state," Bratusek said.
In order to avoid the fate of Greece, Ireland, Portugal, Spain and Cyprus, all of which have required bailouts, Slovenia will partly privatize 15 state-run companies including the country's second-largest, Nova KBM, its largest telecoms firm, Telekom Slovenia, as well as airline Adria Airways and the Ljubljana Airport.
Like many countries in the eurozone, Slovenia has been hard hit by the three-year crisis over excessive government debt.
Five of Slovenia's state-run banks have an estimated seven billion euros-worth of bad loans on their books. To avoid having the banking system collapse, the government must support these banks, and in order to do that, it needs to avoid the accumulation of more debt.
Last week, Slovenia got a bit of breathing space when it managed to issue two bonds totaling $3.5 billion. It will have to tap markets again early in 2014 before a five-year 1.5 billion euro bond matures on April 2.
A real solution?
Bratusek said the austerity measures the government has chosen will have the lowest negative impact on economic growth and will be followed up by further tax introductions next year.
She also added that a progressive "crisis tax" on wages was decided against because the new VAT increase alone would raise 250 million euros a year.
Economists say the funds raised through these measures could buy Slovenia time, but it remains to be seen how the Balkan country will solve its economic and financial problems.
Slovenia's economy has been in recession for two years, with unemployment currently at 13.5 percent and a forecast that its economic output will shrink by two percent this year.
The austerity plan must first be approved by Slovenia's parliament and will then be handed to the European Commission on Friday. The commission is expected to discuss the plan sometime this month.
tm/ccp (AP, Reuters)