Public Finance In Slovenia, Recent Developments And Challenges

Public Finance In Slovenia, Recent Developments And Challenges Presented by: Prof. Dr. Štrkolec Date: 15 February 2024 Slovenia - Area: 20,273 km, - Population: 2,116,972 - Structural shares of added value: • - Agriculture 1.9%, Construction 7.1%,. GDP: • growth in 2022: 5.4% • growth in 2023: 1.4% • per capita: 27,975 EUR. - Unemployment rate (2023): 3.8% - Annual inflation rate (2023): 6.1% 2018 debt. 32,2 Gov. (bill.) % GDP GDP (bill.) 70.3 45,8 2019 31,7 2020 37,4 2021 38,8 2022 41,24 79.6 48,53 65.4 47,0 74.5 52,2 69.9 58,98 Fiscal rule in the RS Constitution - Amended article 148 of the CS (2013) determines: • Medium-term balance of state budget without borrowing (revenues and expenditures) • Revenues exceed expenditures. • Exception:  Balance may be temporarily waived, but only in exceptional circumstances for the state. - Amended article 148 of the CS • Mandates rational and long-term sustainable public finance policy. • Prevents:  Excessive borrowing  Creation of high budget deficits  High levels of public debt,  Illiquidity and insolvency of the state - - Annual Acts, to maintain a balanced budget: • Forecasts of Macroeconomic Aggregates and Scenarios; • National Program of Development Policies; • Medium-term Strategy for Public • Debt - the upper limit of state • Expenditures and indebtedness; • Financing Program for the Execution of the Budget - annual; National fiscal legislation strictly in conformity with EU rules in details sets out: • preparation, adoption, implementation, and monitoring of the Budget • Reporting and control audit • The FC supervisory role, • The repair mechanisms • The fiscal discipline measures, • Inspection and internal control of public finances and Budget inspection. Budget Balancing Measures - Temporary suspension the execution Government stops: • The assumption of obligations, • The redistribution of budget funds • Propose an extension of contractual payment deadlines - Prior consent of the ministry for users, to conclude a contract, - Rebalancing of the budget - • No later than 15 days before the end of the period • For the temporary suspension of the execution of the budget, Temporary suspension the execution of expenditures again: • During the period of adoption of the budget rebalance EEG, EUROPEAN SEMESTER - November, December: • MS submit draft Budgetary plans, • Commission assesses and delivers overall Recommendations and a Specific opinion - February, March: • Commission in its Country Reports publishes:  Forecasts for the CSR implementation  Reforms to be taken by the MS (macroeconomic, fiscal, budgetary) - April, May: • - - MS submit their National Reform Programs, Stability or Convergence The CSRs are drafted after: • A detailed analysis of the Program • A thorough assessment of the progress made from the previous year's CSRS June and July: • The Council formally adopts the CSRs, (after extensive discussions in the EU bodies); Slovenia National Reform Program - - 2023 includes (among other things) reforms in the fields of: • Pensions, healthcare and housing, salaries in the public sector, • Education, • Digitalization • Taxes. The fiscal policy (Recommendation challenges are: • Substantial decrease of the Budge deficit, from:  4.1 percent of GDP in 2023 to;  2.8 percent of GDP in 2024 to;  2.2 percent of GDP in 2025 and 1.3 in 2026. • A gradual reduction of the country's consolidated debt:  From 69,9% in 2022 to 63.5% in GDP in 2026. EU 2023 Recommendation - - EU 2023 Recommendation to Slovenia: • A shift towards greener and growth-friendly taxes for the green transition. • Investment in digital transition and energy security, • Reduction of fossil fuels, • Acceleration of the use of renewable energy sources, • Strengthening the electricity distribution network, • Building energy infrastructure and rai transport. EEG has important s results in coordination of MS' policies, however: • MS are pushed in the position of executors of professional instructions and timelines of EU officials! • The question of the economic (developmental) sovereignty of the MS in relation to EU bodies is real! - However, the MS consented: • to transfer of part of their sovereign rights to the EU (even by amending their constitutions). • to strengthen the EU level by primary and secondary EU law and integral. agreements. • - - - - - EEG definitely brings benefits to the MS and the EU and is in their interest. EEG • Contributes decisively to greater stability and balanced development in the MS • Increasingly contributes to resilience, recovery, and sustainable development. However, EEG raises questions of: • The sovereignty and democratic governance of the EU, • The balance of economic and social development in MS. EEG needs to be: • Upgraded and deficiencies eliminated, • Simplified and democratically consolidated: EU needs more to: • Balance economic (fiscal, economic) and social goals (following the UN SDG), • Overcome the approach that the social sphere is regulated by EU soft law only The procedures and tasks arising from the EEG are excessively burdensome for the MS and for the EU: • Simplification and reorientation is needed - from the annual fiscal planning to the medium term! • The democratic principles must be strictly observed - those on which the EU is built, subsidiarity and proportionality! - - EEG deals with economic policies and fiscal balance in the MS, but neglects: • The MS reflection of the EU's position in the global space • Strategic issues of the EU's competitive position in the world • Aspects of global sustainable development. EEG is not only the governance of MS, but also of the EU as a whole. (not only top down, but also bottom up Recently, SDG are increasingly gaining ground in in addition to fiscal and monetary goals in EGG! - - This is an important shift, however: • Social and SDG aspects are taken into consideration in planning, in principle, • They are not part of binding EU law and are therefore less strictly adhered to. SDG will become decisive only when/if: • Legal sanctions are also imposed for non-compliance with the social and SDG parameters set by the EU and MS. - - The EEG reform must include the 2023 Commission proposals for: • More gradual paths and • The introduction of national medium-term fiscal-structural plans. A proposed stricter enforcement regime and more control over the MS plans is acceptable only: • For medium-term fiscal-structural plans, • To ensure MS deliver their commitments (economic, social, and sustainability)! - Treaty reference values: 3% of GDP deficit and 60% of GDP debt and - The excessive deficit procedure when breach of the 3% deficit criterion • Are obsolete and • Need further reflection from the point of view of the new EEG concept!