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Europe 2020 in Slovenia

The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 18 months. They are tailored to the particular issues the Member State is facing and cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Country-specific Recommendations prepared by the Commission is done at the highest level by national leaders in the European Council.

Country overview

The recession is accentuating the deleveraging challenge for over-indebted enterprises. Financial distress is reportedly rising in both publicly and privately-owned enterprises, which is a major cause of high levels of non-performing loans. As a result, large domestically-owned banks have recorded sizeable losses, necessitating further recapitalisations and depressing lending to healthy firms. Barriers in the business environment and weak corporate governance in state-owned enterprises hinder investment and FDI, and the labour market is segmented and insufficiently flexible. Past cost-competitiveness losses have thus not been reversed and export market shares continue to decline.

Slovenia has launched some of the reforms that are necessary to address the CSRs of the 2012 Council Recommendation. There has been some short-term consolidation of the public finances. Parliament adopted a constitutional basis for establishing a general government budget balance/surplus rule in structural terms. However, further consolidation measures and improvements in the medium-term budgetary framework are needed. A pension reform was adopted in December 2012, but it reduces the burden on public finances only until 2020. To maintain financial sector stability, parliament adopted legislation for bank restructuring, but the envisaged asset quality review is still pending, bank balance sheets remain to be cleansed, bank governance has to be improved and, relatedly, bank privatisation plans are at an early stage. An important reform tackling labour market rigidity and segmentation was adopted in March and is due to be followed by the necessary regulation of student work. The public sector wage bill has been reduced, but the minimum wage has continued to rise, and there is room for improvement in the matching of workforce skills with employer needs. The Slovenia Sovereign Holding (SHH) is not yet in place and announced legislative amendments may jeopardize necessary corporate governance improvements and envisaged privatisations. A quick sale of the 15 companies recently slated for full privatisation, including several major firms, will signal a more welcoming business environment and help to attract much-needed FDI. Albeit with some delay, the process of deregulating professional services has started, and the Competition Protection Agency has been established.

2013 European Commission's recommendations for Slovenia in brief

The Commission has issued nine country specific recommendations (CSRs) to Slovenia to help it improve its economic performance. These are in the areas of:

 

  1. Sustainable public finances
    Despite considerable consolidation efforts, Slovenia has not managed to bring its government deficit below the 3% threshold set out in the excessive deficit procedure (EDP). It should therefore reinforce its budgetary strategy to comply with the EDP by 2015, strengthen its fiscal framework, and implement structural reforms, which will have a positive effect on growth.
  2. Long-term sustainability of pensions and long-term care
    Slovenia is amongst the Member States forecast to sustain the largest proportional rise in pension expenditure and ageing costs in the EU by 2060. Recent pension reforms go in the right direction, but do not address the situation beyond 2020. Cost-efficiency measures should also be sought in long-term care.
  3. Wages and labour market
    Slovenia should ensure that wage developments support its external competitiveness and create jobs. It should counter the rise in unemployment by ensuring that recent reforms improve labour market segmentation. The government should also step up active labour market policies and address the skills mismatch, for example, by improving vocational education and training.
  4. Balance sheet repair and divestment of state-ownership in banks
    To address pressures in the banking system, which have led highly indebted banks to rely on the state, Slovenia should arrange an independent review of the entire system, stand ready to re-capitalise further banks, if necessary, and adopt a comprehensive banking sector strategy.
  5. Regulation of banking sector including supervision
    Linked to the recommendation above, Slovenia should also review the supervision of the banking sector and act to strengthen its capacity and transparency.
  6. Regulated services and business environment
    Slovenia has a high number of regulated professional services and it should step up efforts to remove unnecessary restrictions to their entry and practice. Slovenia should improve the business environment, including by ensuring the effective functioning of the new Competition Protection Agency.
  7. Judicial proceedings
    Judicial proceedings in civil and commercial cases are unduly long in Slovenia, which hinders business activity and deters foreign direct investment. Slovenia should make further efforts to address these problems.
  8. State-owned enterprises
    The size and weakness of Slovenian state-owned enterprises holds back economic development and and contributes to existing imbalances. The government should use its strategy for state-owned enterprises to set out which are core economic assets and takes steps to privatise those which are considered non-core. Ownership of state-owned enterprises should be transferred to the new Slovenian Sovereign Holding (SSH) and both state-owned enterprises and SSH should be transparently and effectively managed.
  9. Corporate restructuring
    Many Slovenian non-financial corporations are over-indebted and face financial distress in current market conditions. Slovenia should remove administrative and legal obstacles to corporate restructuring for viable companies and increase the efficiency of bankruptcy procedures.

See how Slovenia compares with other EU Member States in key areas


European Semester Documents