Slovenia announces austerity plan
Slovenia's government has announced an austerity plan designed to raise 540 million euro in new taxes as part of an effort to balance the budget and avoid seeking an international bailout.
The small Alpine country, once a model of socialist economy, is racing to convince investors it has a credible strategy for raising the funds to stay solvent and avoid becoming the fifth euro country after Cyprus to ask for financial aid.
In addition to the hike in the country's sales tax from 20% to 22%, the government said it will partly privatise 15 state-run companies including the country's second-largest bank, Nova Kreditna Banka Maribor (NKBM); communications operator Telekom Slovenija; airline Adria Airways; Ljubljana airport and Elan ski manufacturer.
The austerity plan has to be approved by Slovenia's parliament and will be handed to the European Union's executive arm, the Commission, which is expected to discuss it this month.
Slovenia is a member of the 17-strong group of EU countries that use the euro. The eurozone has been struggling with a three-year crisis over too much government debt which has already seen Greece, Ireland, Portugal, Spain and Cyprus receive emergency loans. Slovenia is keen not to become the fifth member of that bailout band.
At the centre of Slovenia's crisis are five state-controlled banks which have an estimated seven billion euro of bad loans on their books. Slovenia needs to support these banks to avoid a collapse of its banking system. To avoid heaping more debt on to its accounts, the government is introducing the austerity measures.
Premier Alenka Bratusek said that the government decided to choose the state tax hike, and will introduce further taxes next year, claiming the measures will have the lowest negative impact on economic growth.
"We are aware that tax increases won't have a positively impact on the economy and the recovery, but we have opted for the least harmful option," Ms Bratusek said. "I believe this will satisfy the European Commission."