NEWS

Prime Minister Borut Pahor at the 46th extraordinary session of the National Assembly: 'We have been forced to revise the budget due to the volatility of the international environment'

The prime minister of the Republic of Slovenia, Borut Pahor, today attended the 46th extraordinary session of the National Assembly and, in his opening address, provided an additional explanation to the proposed supplementary budget of the Republic of Slovenia for 2011. He stressed that today marks three years since the bankruptcy of Lehman Brothers on Wall Street. This event symbolises and indicates a turning point in global finance and the global economy, where nothing will ever be the same again.  'The global economy was then hit by a severe recession and although we emerged from the worst crisis in 2009 and 2010, 2011 trends indicate that the global economy will recover significantly slower than we would have hoped', said Prime Minister Pahor, adding that debt crisis management remains one of the central issues of all modern economies, including Slovenia's economy.

   

The situation at the beginning of the recession at the end of 2008 and in 2009 was mainly resolved by deregulating the financial industry sector and by fiscally stimulating national economies. According to Prime Minister Pahor, owing to a long-term lack of structural adaptation 'a large amount of assets ended up in a leaky bag,' and, for that reason, most countries from the eurozone continue to be faced with a debt crisis.

   

After the dramatic events of 2009, when Slovenia recorded a drop in GDP, an increase in unemployment, and some other negative social and economic indicators pointing to a severe economic crisis, the country slowly but surely recovered from the recession in 2010.   'The nature of the Slovenian fiscal situation is particularly characterised by the fact that, in 2009, and the first half of 2010, Slovenian policy consciously decided to maintain social cohesion. Apart from investing in the economy, science and technology, we therefore also 'invested' a significant amount of funds in social cohesion,' emphasised Prime Minister Pahor adding that today he would make a similar decision. He explained that the only change he would make would be to ensure that the implementation of measures for maintaining social cohesion, i.e. solidarity and social justice in society, a relatively small difference between people's income and other differences among people, is subject to the adoption of such measures by the social partners that are important for the competitiveness of Slovenia's economy. He also recalled that the first raft of measures was not particularly problematic for most social partners, with the exception of the employers, who, despite their dissatisfaction, did not block their implementation; however, when the Slovenian Government undertook structural measures, i.e. important changes toward reform in the second half of 2010, it was faced with objections by the social partners claiming that their rights had been infringed. On the basis of these objections, a referendum was held where the people rejected the proposed changes.

   

Prime Minister Pahor went on to say that, for the first time in the history of the independent Slovenia, the adoption of pension legislation and its subsequent failure in the referendum had an important impact on Slovenia's position in the financial markets; however, at least for the time being, the financial markets still assess Slovenia's situation as relatively favourable in the short term. 'We have a manageable public finance deficit, i.e. the budget deficit and general government debt; however, both have reached the debt ceiling. We cannot afford a budget deficit exceeding 5 % and, by revising this budget, we are looking to avoid having an excessive deficit.  We must also not exceed the 45 % debt to GDP ratio.  According to the latest forecasts, Slovenia's economy is about to grow at a slightly slower pace than predicted, and Slovenia has therefore joined the countries in the eurozone and the European Union who are facing similar problems and trends.'

   

Prime Minister Pahor further pointed out that economic growth in Germany and France is slowing down; these two countries are important trade partners for Slovenia and the consequences of their slower economic growth are also evident in our country.  'The Slovenian Government needed to respond to that fact and so prepared a supplementary budget which would reduce spending by approximately EUR 350 million. In this way, the budget could be balanced at a budget deficit level of around 4.7 %.  This would also contribute to reducing the pressure on public debt and the money in the international markets will still be accessible to Slovenia, particularly in February and the first half of next year, when we will take advantage of the financial resources available abroad.'  According to Prime Minister Pahor, the economic forecasts are less optimistic then they were; nevertheless, Slovenia's economic growth will still be positive.

    

Prime Minister Pahor also reiterated the fact that Slovenia belongs to those countries that are still able to cope with one of the key problems that all open economies are facing – unemployment. Unemployment in Slovenia is currently stabilising at around 105 000 to 107 000 unemployed persons.  'Every unemployed person represents a problem for the person himself or herself and for his or her family, and I do not want to underestimate this; I, however, consider that by successfully resolving the crisis ahead of us, which is not only a financial, economic and social crisis but also European and institutional in nature.  Therefore, if we overcome this crisis, in the last quarter of this historical period – ranging from the fall of Lehman Brothers to the termination of the most critical period of recession – after a slightly slower economic recovery, Slovenia can still step out as a country that remains first and foremost socially coherent'. Prime Minister Pahor also emphasised that, under his leadership, the Slovenian Government has not sacrificed any class of people, neither a social class nor a generation.

   

The prime minister further explained that, during the recent crisis, institutional problems that also occurred in times of transition and in the development of the country's own institutions needed to be resolved, by which he meant, in particular, the frequent and justified anger and helplessness displayed as well as the unwillingness of the instruments of the rule of law to prevent the initial accumulation of capital inherited by this Government at the beginning of the crisis.  Over the past 20 years, the accumulation of capital has been far less supervised than we would wish it to be.  This has resulted in many tycoon-related and other stories weakening the trust in the possibility that hard work and knowledge would be sufficient to enable people to make a decent living. The public got the impression that some groups were privileged, while others were not.  All this needed to be remedied in parallel with the regulation of the economic and financial crisis.

   

With the budgets adopted from the start of our term of office until today, we have tried to regulate the public finances so as to avoid the debt crisis.  We lived in a country', continued Prime Minister Pahor, 'that was constantly facing internal political and other forms of strife, while outwardly it always proved to be a stable environment.  Today we live in a completely different situation. Apart from a turbulent domestic political, economic and social environment, which is completely normal for a democratic state, we also need to cope with an extremely turbulent environment in international finance, the international economy and economic policy. Moreover, the security situation is also a cause of concern.  This should be constantly on our minds.'  The Prime Minister further stressed that 'Slovenia does not possess sufficient economic sovereignty to tackle the crisis alone, without alliances, which, however, does not only apply to the rights but also to the obligations in resolving the crisis we are currently facing'. Slovenia belongs to the eurozone, which covers 17 countries, and is also a member of the European Union, which comprises 27 member states.  It is extremely important for our country to remain in the European monetary union.'

   

In view of the aforementioned, Prime Minister Pahor emphasised that none of our future actions must threaten our position in the eurozone.  'Neither me nor my consultants, whom I trust completely owing to their experience and knowledge, or even any foreign observers, could ever envisage that a possible institutional crisis in the eurozone would force such a small and open economy as Slovenia to step out of that area.'

   

The task of the Slovenian Government is to closely monitor developments at home and in the international environment. Owing to the downward trend in economic activities in Germany and France, the psychology of mistrust regarding the future of the euro, the possible bankruptcy of some member states and as a result of institutional changes, the trade in goods and services with countries which are our most important partners is also declining.  Within this context, Prime Minister Pahor drew attention to the circumstances in which the financial plans in place needed to be changed and therefore kindly appealed to the National Assembly to take this important circumstance into consideration.

   

In concluding his address, the Slovenian prime minister said that if this Government continues its term of office, it will make every effort to also draw up a sustainable budget for the years 2012 and 2013. With the budget, it will additionally consolidate those parameters important for long-term fiscal sustainability and, as a state, go beyond the threshold values in order to participate without constant fear and as an active member in the great changes expected in the eurozone.  'The adoption of the supplementary budget is important since it would enable Slovenia to control its budget deficit as well as public debt.  As the prime minister of a minority government and being aware of the fact that we have no advance support from the deputies, I kindly appeal to you to approve this supplementary budget after the budget debate, which I expect to be long and in all likelihood critical, and to enable the state to actively pursue its fiscal policy and therefore not turn the debt into a political issue, as this would not only burden the present, but also future generations,' stressed Prime Minister Pahor.