By: Vida Kocjan
After more than four months, the government coalition has “succeeded” in preparing a law on renewal, development, and provision of financial resources following the catastrophic August floods in the country. Last week, the law was adopted in the National Assembly.
The law, which intervenes in various areas, is intended to enable a rapid restoration and normalisation of conditions in the affected areas and lay the groundwork for further development and increased resilience to natural disasters. However, the debate revealed that not everything with the law is as it should be, as the proposed law did not have unanimous support in the National Assembly. The law was presented by the head of the government’s flood and landslide recovery service, Boštjan Šefic. According to him, the law regulates the reconstruction from the ground up, starting with the third phase, which involves the recovery after the disaster on August 4th, 2023.
Government at a snail’s pace
Let’s recall. A large part of Slovenia was hit by a natural disaster of significant proportions on the night of August 4th. In the aftermath of the natural disaster, we have heard from government representatives and coalition MPs multiple times that the government responded quickly and effectively to this calamity. However, the facts speak differently. In the debate in the National Assembly, MP Zvone Černač, speaking on behalf of the Slovenian Democratic Party (SDS), pointed this out. He emphasised that the protection and rescue system, firefighters, the Slovenian Armed Forces, local communities, and numerous volunteers responded quickly and effectively. “Thanks to all of them, the consequences of the natural disaster are smaller than they would otherwise be,” he said.
Furthermore, Černač reminded that Prime Minister Robert Golob did announce a swift government response in the days following the disaster. This occurred through the submission of an amendment to the law on addressing the consequences of natural disasters. However, this was mainly because the amendment had already been prepared due to another, albeit smaller, natural disaster, and it would have been processed after August 15th in any case. Thanks to this, the initial response was appropriate, but subsequent steps were not, Černač added.
From promises to only − promises
A week after the natural disaster, Robert Golob also promised that they would build prefabricated structures. “We are already in contact with the largest manufacturers of prefabricated houses in Slovenia. According to their assurances, they have the capacity for a hundred houses per month. A hundred houses!” Four months have passed since Golob’s statement. So far, with the help of the government, no replacement structure has been ordered. “Not a hundred per month, not a single one has been ordered, let alone erected,” emphasised Černač.
Controversial quick expropriations
According to the assessment of the government’s reconstruction service, as many as 335 structures in flood-affected areas are no longer suitable for habitation. However, the current, significantly delayed law from the government coalition (Svoboda, SD, and Levica) emphasises quick expropriations rather than ordering replacement structures and fulfilling Golob’s promises. SDS strongly opposes fast property expropriations, pointing out that an appeal does not stay the enforcement of the demolition decision, and the structures must be removed within a year at the latest. Nowhere in the new law on renewal and development are there provisions regarding the timelines for acquiring or installing replacement structures. As a result, residents in flood-affected areas whose structures are no longer suitable for living are extremely concerned. However, this does not deter the coalition from continuing its path, understandable only to them.
But that is not all. Golob’s coalition has amended the law with an amendment that allows for the quick expropriation of all structures in areas where measures to prevent natural disasters are planned. This includes structures suitable for living that were not damaged in the last disaster.
Černač reminded that SDS had opposed these fast expropriations in the amendment to the intervention law and continues to oppose them in the current law. They proposed that all negotiated options for obtaining a replacement structure or receiving compensation should be explored first. Only in extreme cases should the expropriation institution be invoked, but in accordance with the provisions of existing legislation that provide the rightful claimants with adequate legal security.
Regarding the renewal law, a little over a month ago, SDS proposed numerous amendments and improvements to the draft, including those that would ensure greater transparency and easier implementation. However, the coalition accepted only one proposal from SDS, which is related to the control of fund utilisation conducted annually by the Court of Audit of the Republic of Slovenia.
New taxation for the economy
While the Renewal Law brings some good solutions, including administrative simplifications, it unfortunately introduces a new taxation for the economy. The government plans to collect almost a billion euros (975 million) from the economy. Both the opposition (including SDS and NSi) and business associations have warned that this taxation is a wrong measure. They pointed to a period of negative economic growth, emphasising that additional taxation is entirely unnecessary because the law’s rationale indicates that there are sufficient funds for implementing the measures without placing an additional burden on the economy.
The government stated in the law’s rationale that around one billion euros (specifically 1.034 billion) will be needed for the measures outlined in the Renewal and Development Law. They estimate financial resources or additional revenues at over 1.6 billion euros (specifically 1.635 billion). The expenditures already made are estimated at 412 million euros.
Additional sources not included
In SDS, it was pointed out that the revenue figure does not include funds from the European Solidarity Mechanism amounting to 400 million euros, nor the redistribution of cohesion funds announced by Prime Minister Robert Golob four months ago, totalling 800 million euros. The funds from the Recovery and Resilience Plan are also not included. Without the additional taxation of the economy, as envisaged by the coalition with the new Renewal Law, there will be more than 2 billion euros available. This is significantly more money than the government estimates is needed for the renewal measures under the new law. The answer to why these sources were not included in the government’s calculations may lie in the fact that these funds are under greater scrutiny than the so-called domestic sources.
Where will the money go?
Regarding where the surplus money, according to government calculations, will go, Finance Minister Klemen Boštjančič explained at a press conference last week. He assured that there is no dilemma about how the additional funds will be spent. In response to sharp criticism from the business sector and parts of the public and politics, he stated that there is a very critical discussion in the public about these additional funds, but there is neglect of all the funds already disbursed from existing budgetary sources. The state has allocated almost 470 million euros for recovery and assistance after the disaster. Previously, the figure mentioned was 412 million euros, meaning there is a difference, but not one that covers several hundred million euros. Boštjančič also stated that most of the incurred damage is on infrastructure, which will be renovated using public funds. According to him, the estimate of direct damage is just under three billion euros, and the reconstruction costs will be significantly higher. Here too, it is a game of numbers. Initially, they talked about 500 million euros in damage, then increased it, reaching almost 10 billion euros. Today, the damage is estimated to be “just under three billion euros”. Who could understand them, who could believe them? However, Boštjančič admitted that besides post-flood recovery, the state will have to finance other tasks continuously. Now we are at what experts have been warning about. The government of Robert Golob is collecting money for selected non-governmental organisations (including those from Metelkova in Ljubljana). It is also the first time that the finance minister publicly started calling for donations, which has caused discomfort in the public.
The law intervenes in the areas of assistance to the economy and the population, as well as in the fields of construction, agriculture, environmental protection, water management, and water infrastructure. It defines certain tax exemptions, regulates public finance revenues, protects cultural heritage, and provides appropriate conditions for the development of regions most affected by this natural disaster.
Janez Janša: Key points on the Renewal and Financing Law
President of SDS Janez Janša stated: “The government does not even hide that, under the guise of reconstruction, it is raising taxes for other purposes: funding non-governmental organisations from Metelkova, millions for RTV Slovenia, extravagant spending by ministries and ministers, purchasing old computers…”
Additional public finance sources intended for financing reconstruction:
- Temporary five-year tax on the balance sheet total of banks at a rate of 0.2% (with an upper limit of 30% of profit from regular operations): 400 million euros.
- Use of the net and balance sheet profit of the Slovenian Sovereign Holding (SDH): 260 million euros.
- Five-year increase in the corporate income tax rate from 19% to 22%: 975 million euros.
The collection period for both additional tax sources will be between 2024 and 2028. The inflows from these additional sources are estimated to be around 1.6 billion euros over the five-year period.