Slovenia on Thursday pledged to sell 15 state firms and raise the value-added tax (VAT) in a desperate bid to avoid an international bailout, but gave little detail and delayed the spending cuts investors say are needed to stabilize its finances.
The much-anticipated package offered no timeframe for the sell-off of state firms, including the country’s second-largest bank, its biggest telecom operator and the national airline. Nor did it say how much they were worth.
It also said cuts to the public sector wage bill would have to await the outcome of negotiations with unions.
The former Yugoslav republic was a trailblazer for ex-communist eastern Europe when it joined the eurozone in 2007 as the bloc’s fastest-growing economy.
Buoyed by exports of Renault cars, household appliances and pharmaceuticals, successive governments shied away from the unpopular sale of state assets, including the country’s biggest banks, and reform of the welfare system and rigid labor market.
Exports hit a wall with the onset of the global crisis, driving up bad loans, borrowing costs and exposing widespread cronyism and corruption that saw disastrous loans made to politically connected businesspeople.
Slovenian Prime Minister Alenka Bratusek said the package, which includes a rise in the VAT from 20 percent to 22 percent starting July 1, would be enough to prevent the tiny Alpine country following Cyprus in the eurozone queue for a bailout from the EU and the IMF.
The plan was to be sumitted to the European Commission, the EU’s executive arm, yesterday.
“This program will enable Slovenia to remain a completely sovereign state,” Bratusek told a news conference.
“Slovenia is a plane losing altitude and we first have to stabilize that altitude,” Slovenian Finance Minister Uros Cufer said.
The country bought breathing space last week when it managed to issue two bonds with a total value of US$3.5 billion, but will have to tap markets again no later than the first quarter of next year before a five-year 1.5 billion euro (US$1.96 billion) bond matures on April 2.
A spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn said the European Commission would study the plan and offer its response on May 29.