Fiscal Council warns against certain measures in latest stimulus package

Ljubljana – The Fiscal Council has warned that the latest legislative stimulus package contains certain provisions that may worsen the structure of public finances, including the proposal for simplified retirement and one-off aid to population groups not directly affected by the coronavirus epidemic.

The body that monitors Slovenia’s compliance with the constitutional balanced-budget rule said in the opinion published on Tuesday that the proposed seventh stimulus package aimed at tackling issues that should be tackled with “more sustainable solutions.”

Commenting on the provision allowing retirement of workers without a justified reason immediately after they meet the conditions for old-age pension, it said “such measures could run against the requirement to provide long-term sustainability of public finances.”

It also runs against the ambition to extend the working age of the population, said the Fiscal Council, which has been maintaining since the outbreak of the epidemic that measures for tackling the health and economic crisis must be targeted and temporary.

It believes that the government should avoid measures that undermine the structure of public finances, and calls for the retirement provision to be replaced with measures that would tackle labour market issues in a systemic way.

The council added that “allocating one-off aid to population groups that have not been directly affected by the epidemic is, in the current situation of high uncertainty and closure of a large part of activities, inappropriate both from the aspect of public finances and kick-starting the economy.”

It noted that EUR 2.1 billion out of the planned EUR 2.6 billion had been earmarked from the state budget for coronavirus measures by the end of November, adding that “the remaining available funds should be managed prudently and efficiently.”

Long-term sustainability of public finances in Slovenia is exposed to risks also because of the changing demographical situation, it said, adding that the changes adopted in 2019 had only worsened the situation, while no compensatory measures had been taken.

“One of the solutions for securing a more sustainable long-term public finance situation is extending the working age of the population,” it proposed, noting that Slovenia had one of the lowest rates of active population older than 65 in the EU.

Turning back to the retirement provision, the Fiscal Council stressed that the government had not calculated its effect on public finances, which the council has estimated would cost the budget EUR 35 million a year.

Although it is a fact that unemployment increased significantly this year, it is not sensible to tackle short-term problems and structural imbalances on the labour market with measures that worsen the public finance situation, it concluded.

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