Slovenia Adopts Debt Cap to Stave Off Crisis

LJUBLJANA, Slovenia (AP) -- Slovenia's parliament on Friday adopted a cap on public spending to try to convince foreign investors that the small eurozone country will not need an international bailout.

The 78-8 vote in the assembly means Slovenia's constitution will be changed to require that the government budget be balanced -- that is, it will not be allowed to spend more than it earns in taxes. The budget should be balanced by 2015, as demanded by the European Union.

Once an example of a successful socialist welfare state, Slovenia is racing to convince foreign investors it has a credible strategy to reduce debt and stay solvent, despite widespread claims by economists that it could become the sixth state in the 17-strong eurozone to seek a financial bailout.

In addition to a two percent hike in the retail sales tax, the government has recently pledged to privatize 15 state-owned companies in an austerity package that will be discussed by the European Commission when the EU's executive arm evaluates Slovenia's crisis measures.

Slovenia's public debt is set to surge to 71 percent of annual GDP in 2014 as the state faces huge costs saving its banks, which hold some 7 billion euros ($9 billion) in bad loans. The first ex-communist country to adopt the euro in 2007 has seen its public debt level more than double from 22 percent of GDP in 2008 to 54 percent last year.

Slovenian officials clashed for months over enshrining the balanced budget requirement in the constitution. The new prime minister, Alenka Bratusek, had previously insisted the budget could not be balanced before 2017, but gave in to demands to aim for 2015, as demanded by the opposition and the EU.

The government is likely to face outrage from pensioners and public sector workers as it makes pay cuts to reduce debt.

Bratusek told the parliament Friday that Slovenia must get its house in order for its own sake.

"We are doing this for ourselves," she said in response to claims that she made the U-turn because of pressure from Europe.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2451718, ~/Articles/ArticleHandler.aspx, 9/25/2016 5:25:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes