Hot topics

Slovenia Business Week no. 42: Budget Geared Towards Euro Adoption, PM Says

The main objective of the 2006 and 2007 budgets is to create macroeconomic conditions which will allow Slovenia to adopt the euro 2007

Prime Minister Janez Jansa told parliament on Monday, 10 October that the main objective of the 2006 and 2007 budgets is to create macroeconomic conditions which will allow Slovenia to adopt the euro 2007.

According to him, the government had thought about drafting only the budget for 2006, but this would require changes to the legislation. It is therefore clear that the 2007 budget will have to be adjusted to the new circumstances once they arise.

Finance Minister Andrej Bajuk also stressed in his presentation of the budget bills that the 2007 budget will have to be supplemented, notably because the EU is yet to adopt the 2007-2013 budget framework.

"The government will do everything it can to make the 2007 budget year the first year of micro-budget planning that will be placed in the broader, more transparent and stable long-term development framework," Jansa said.

This process started with the creation of the Development Strategy and continues with the adoption of these strategically important documents and the preparation of the reform package, he added.

According to the prime minister, once the government decides on the intensity of the proposed reforms and the EU budget for 2007-2013 is adopted, it will draft a resolution which will define development priorities until 2013 and set the financial framework.

"This will be a great moment of truth for everyone," Jansa said: we will finally face our future - the realistic framework in which we can place our aspirations to improve Slovenia's prosperity.

According to the prime minister, the most financially demanding challenges include upgrading the rail network and power grid, completing the motorway network and creating a globally competitive education system.

Underlining the priorities of the budget bills for the next two years, Jansa noted that funding has been increased for promotion of businesses and investment, research, education, balanced regional development, health, environment and the justice system.

According to Bajuk, programmes for promoting competitiveness were allocated 24.5% more funds than last year, whereas funds for maintenance and construction of state roads increased by 63.2%, which he says will help balance regional development.

In addition, funds for health are up 32.8% and for environment protection 36.8%. Another notable increase is the rise from 90% to 95% of the EU average for subsidies for farmers.

Bajuk as well as Jansa said that the budgets have been prepared taking into account tweaks to the tax legislation that the parliament is to confirm this year: changes to the income tax act, corporate income tax act and the VAT act.

Moreover, cuts in payroll tax are factored in. "This will improve Slovenia's competitiveness, which is one of the key objectives of the development strategy and as such priority for the government," Bajuk stressed.

The payroll tax will be cut by 20% next year and then gradually phased out by 2009.

Jansa noted that funding for projects associated with international obligations for the EU and NATO is also increasing. However, at the same time the state is cutting spending on goods and services that it uses, as well as on wages in public administration.

According to Jansa, the main objective of the government's macroeconomic policy is to have a sustainable budget deficit, and reduce the structural deficit through 2010.

Budget revenues for 2006 are projected at SIT 1,756.4bn (EUR 7.33bn). With expenditures at SIT 1,857.9bn (EUR 7.76bn), the projected deficit is at 1.4% of GDP.

The deficit is to shrink to 1.2% of GDP in 2007 on revenues of SIT 1,861.1bn (EUR 7.77bn) and expenditures of 1,954.2bn (EUR 8.16bn).

According to Bajuk, the state will have to increase indebtedness by SIT 100.2bn (EUR 418m) to cover the deficit next year, and SIT 93.5bn (EUR 390m) for 2007.

Now that the budgets have been presented in parliament, lawmakers can start filing amendments until 20 October.


Source: Slovene Press Agency STA

Author: STA