Slovenia Intends to Meet Weekend Deadline to Fix Faulty Banking System

Premier Alenka Bratusek of Slovenia informed reporters that a plan to fix the country’s banking system will be drafted by Friday at the latest. Bratusek declared that they would have it “completed and corrected” at the soonest possible time, hopefully on Thursday in order to prevent another eurozone bailout.

Measures to be taken

The announcement was made right after a meeting of the premier’s left-center coalition. On Monday a draft of the stability program was published by Slovenian Daily Finance. The program contains the government’s plans to increase value added tax (VAT), place a temporary crisis tax on all salaries, and impose tax on property. These have been revealed to be the plans that are hoped to improve Slovenia’s economic situation. The government also plans to negotiate with unions for more wage cuts and further extension of a pensions freeze.

A clear and detailed action plan on how Slovenia’s banking system will be overhauled complete with a timeframe is expected of Bratusek by the weekend. The action plan must also include detailed plans on how Slovenia intends to jumpstart its economy once more and stabilize its finances. Slovenia has been in recession since 2011.

“Junk” status

Slovenia’s credit rating went down a couple of notches in the latter part of the previous month. This observation came with a warning that Slovenia’s need for an international bailout had significantly increased.

Bratusek has been serving as the Premier of Slovenia for six weeks. She said that the centre-right government that was in power before she came in adopted a budget that eventually led to a bad situation, which actually became worse than the original plan. She informed them that they had to institute certain measures.

High expectations

The premier is optimistic that the changes that will be implemented in the banking system and the other measures as well would inject 1.3B Euros to state-owned banks in Slovenia. This is tantamount to 3.7% of the GDP (gross domestic product), which will be pushing the public deficit to 7.8% of the GDP.

The draft reveals that the stability program will lower public deficit to less than 3% of the GDP two years from now instead of this year (as per request by the European Commission’s Stability Pact. The stability program will also lead to a balanced budget by 2017.

Photo Credit: Premier Alenka Bratusek