The Government of the Republic of Slovenia adopted the National Reform Programme for 2013-2014 and authorised the Ministry of Finance to refer it to the European Commission.

The National Reform Programme is the Government’s mid-term plan defining priority measures and projects aimed at realising the objectives defined in the Europe 2020 growth strategy. The document forms the main part of the European semester, the content of which is linked to the stability programme.

In accordance with the rule on economic governance, the National Reform Programme adheres to the priorities adopted in the 2013 Annual Growth Survey and includes Slovenia’s response to specific recommendations made by the European Council in June 2012. The programme also includes crucial measures which, among others, the Government plans to implement as a priority to re-start growth while considering the existing macro-economic basis and limitations imposed by the second priority, fiscal consolidation.

Attachments to the Programme also include the reports required by the European Commission on measures taken under the 2012-2013 NRP, i.e. concrete planned or implemented measures which respond to specific recommendations to Slovenia within the 2012 European semester.

The key economic policy measures of the National Reform Programme are based on the following assumptions:
Slovenia has sound macro-economic foundations.
Slovenia faces macro-economic imbalances, including over-indebted companies and toxic loans in banks
The household sector is among the least indebted in the EU, and public debt is below the EU average Slovenia also suffers from institutional deficiencies in the decision-making process, which impede its ability to respond swiftly, decisively and effectively to changes in the environment.

In order to re-start economic growth, Slovenia will have to eliminate these deficiencies and imbalances. Imbalances in the Slovenian economy are manageable and can be eliminated with the right combination and schedule of measures. Redressing the imbalances will provide for conditions that will enable growth and job creation.

To re-start growth, Slovenia will take measures to overhaul the banking system and reduce company indebtedness.

The economic policy goals are defined within three key pillars:
1. Institutional reforms of decision-making processes
2.Measures to re-start short-term economic growth
3.Improving competitiveness for long-term sustainable growth

Institutional changes are crucial to strengthening the fiscal framework with clear rules to encourage fiscal discipline, the reform of referendum and electoral legislation and to corporate management.

Short-term measures to re-start growth include measures to overhaul the banks, reduce debt and restructure companies, improve corporate management and strengthen the privatisation process. The measures to achieve fiscal balance are presented in greater detail in the Stability Programme 2013-2014, and include measures to lower the fiscal deficit and stabilise government debt in the long-term to less than 55% of GDP.

Measures to improve competitiveness and for long-term sustainable growth include a wide spectrum of measures aimed at  strengthening the rule of law, accelerating foreign investment, introducing flexibility to the labour market, ensuring the efficiency of the public sector, promoting entrepreneurship and caring about health and the environment.

The Government discussed the draft National Reform Programme at its fifth regular session on 18 April and referred it to the National Assembly and the Economic and Social Council for their opinion. The draft was discussed at the meeting of the Economic and Social Council on 26 April and 8 May and by the following working bodies of the National Assembly: the Committee on Finance and Monetary Policy on 26 April 2013, Committee on the Economy on 26 April 2013, the Committee on Education, Science, Sport and Youth on 26 April 2013, the Committee on Labour, the Family, Social Policy, and Disability on 8 May 2013, and the Committee on EU Affairs on 8 May 2013.

The relevant discussions at the Economic and Social Council and the committees of the National Assembly will be included in the final version of the Programme.

The Stability Programme and its annual updates on the basis of new macro-economic forecasts and economic policy guidelines must be referred to the European Commission every April within the so-called European Semester together with the National Reform Programme. Due to the formation of a new Government, the European Commission agreed to Slovenia referring both documents by 9 May 2013. The document has been taken into account that Slovenia has been officially undergoing the excess deficit procedure, and is required to lower debt to less than 3% of GDP by 2013 in accordance with the recommendations of the Council of the EU.

Slovenia’s priorities are measures to re-start economic growth and achieve fiscal stability. The measures to promote growth are presented in greater detail in the National Reform Programme 2013–2014. They will be based on strengthening bank stability, lowering debt and re-structuring companies. Transferring bad assets from banks to the Bank Assets Management Company (DUTB) and ensuring capital adequacy at a level comparable with the EU average are key measures to improve financial conditions.

To purchase bad bank assets, there will be a DUBT bond issue, with a government guarantee, of up to 4 billion euros. The transfer of bad assets from banks to DUTB is to be carried out in several steps and completed by the end of September 2013, which will gradually increase government debt. The debt will decrease in the next few years depending on sales dynamics and the liquidation of assets, as DUTB will purchase the bonds with assets acquired from sales.

In addition to transferring bad assets from banks to DUTB, banks will receive additional capital. On the basis of reviewing their balance sheets and the results of stress tests performed by the Bank of Slovenia, the banks will need up to 900 million euros of additional capital by 31 July, which will have a one-off effect on raising the deficit in 2013.

The main goals of Slovenia’s fiscal policy in this programme period are:

(i) structural balance by 2017, which will enable the deficit to be lowered below 3% of the GDP by 2015;
(ii) stabilising government debt to below 55% of the GDP.

The goal of lowering the deficit to below 3% of GDP will be achieved in 2015 due to worse macro-economic trends, particularly by reducing public expenditure and partly by increasing revenue. With reference to expenditure retrenchment, funds for public sector pay will continue to be capped, which requires additional measures that are already the subject of negotiations with the unions and which will have a financial effect this year. Measures to curb expenditure on pensions will also continue, as well as the restrictive policy on social transfers. With the revised budget, the funds earmarked for goods, services and investment will also be lower. By the end of the year, the Government will present a second package of measures permanently targeting expenditures, which will be evenly distributed over all sectors. These measures will be presented in the next Stability Programme.

The most important permanent measures in terms of revenue:
increasing the normal VAT rate [note] by 2 percentage points and lower VAT rate by 1 percentage point as of 1 July 2013,
introducing a crisis tax as of 1 January  2014 if it is impossible to reach a consensus on sufficient additional reductions in expenditure, introduction of a property tax as of 1 January 2014.

In addition, the gradual reduction in corporate tax, which was introduced last year, will be suspended, while taxes will be imposed on the sale of lottery tickets and on some beverages containing sugar, and court fees will be increased.

After eliminating the excess deficit in 2015, fiscal consolidation will continue toward the mid-term fiscal goal of permanent fiscal balance in 2017.

Due to the overhaul of the banking sector, debt will increase over the reference limit of 60% of GDP; however, this will be gradually reduced to less than 55% of GDP (the 2012 level) through the sale or liquidation of assets acquired by the Bank Asset Management Company.

The Government has set the following goals in this programme period regarding the institutional framework of public finances:

1.introducing the fiscal rule into national legislation in order to improve fiscal discipline and responsible planning and the use of public funds, thereby fulfilling the commitment made with the signing of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union;

2.ensuring greater fiscal transparency by including all compulsory levies in public budgets and limiting financing public or general items from outside the budget;

3.increasing flexibility in the use of public funds by respecting more strictly the integrity of the budget and including earmarked funds in the integral budget;

4.improving the efficiency, use and supervision of public funds

5.improving the efficiency of tax collection, particularly by merging the tax and customs administrations into a single Financial Administration.

[note]  The legal basis for this measure is provided by the Value Added Tax Act, while the purpose is the same as defined in the Fiscal Balance Act.

The Government approved the draft text of the decision of the National Assembly approving the disposal of investments of the Republic of Slovenia, the pension fund KAD, the compensation company SOD, Modra zavarovalnica insurance company, DSU management and consultancy company and the PDP financial holding company.

The draft decision authorises SOD as the manager of assets owned by the Republic of Slovenia, and KAD, SOD, Modra zavarovalnica, DSU, d.o.o., and PDP, d.d. to dispose of their investment in 15 companies. This approval is required under Article 38 of the Sovereign Holding Act until strategic documents (classification) are adopted. When this decision is approved by the National Assembly, these companies will be able to continue or proceed with all procedures until final sale.

The proposed decision of the National Assembly means that the latter has agreed to the disposal of assets in the following companies, where the procedure has already begun:
1.Adria Airways, d.d.
2.Aero, d. d.
3.Elan, d.o.o.
4.Fotona, d.d.
5.Helios, d.d.

The proposed decision of the National Assembly means that the latter has agreed to the disposal of assets in the following companies, where the procedure has not yet commenced:
1.Aerodrom Ljubljana, d.d.
2.Adria Airways Tehnika, d.d.
3.Nova KBM, d.d.
4.Telekom Slovenije, d.d.
5.Cinkarna Celje, d.d.
6.Gospodarsko razstavišče, d.o.o.
7.Paloma, d.d.
8.Terme Olimia Bazeni, d.d.
9.Unior, d.d.
10.Žito, d.d.