By: Vida Kocjan
Slovenia is at an important turning point in its public finances. According to estimates by the new government led by Janez Janša and the Fiscal Council, the previous government of Robert Golob allowed excessive and unsustainable growth in spending, which created a serious budgetary gap and endangered the long‑term sustainability of public finances. The situation requires swift but carefully considered action.
The new government is therefore preparing a budget rebalancing for 2026, with which it aims to return public finances to the planned framework – primarily through expenditure control, without introducing new taxes. A more detailed proposal of the rebalancing will be prepared in the coming weeks, and adoption in the National Assembly is expected in September 2026.
During the 2022–2026 term, Golob’s government carried out an extensive public‑sector pay reform, if it can even be called that (in essence, it significantly increased wages), and substantially raised social transfers and subsidies. Expenditures grew much faster than revenues, creating a cumulative structural deficit that was covered by new, additional borrowing.
Golob’s legacy: rapid expenditure growth and a looming deficit
The deficit in 2026 is increasing faster than planned, mainly due to strong expenditure growth. In the first five months of this year – still under Robert Golob’s government – consolidated public‑finance expenditures increased by 1.5 billion euros compared to the same period last year. This represents roughly 16% year‑on‑year growth, an exceptionally high figure. Particularly notable is spending by ministries, which was 980 million euros higher than in the same period of 2025.
The main reasons stem from decisions made by Golob’s government since 2022: an extensive reform of the public‑sector pay system (with gradual increases that over several years averaged more than 19%), the introduction of new social benefits, additional bonuses and transfers, and public procurement. Golob’s government systematically increased expenditures, leading to a structural deficit. The Fiscal Council repeatedly warned that such a policy was not in line with European fiscal rules and that expenditure growth exceeded revenue growth by several percentage points annually.
Last year, the deficit of the consolidated public‑finance balance was 2.5% of GDP, or roughly 1.77 billion euros. This year it threatens to exceed 3% of GDP, and some estimates even suggest around 3.5%. Such a deficit would constitute a breach of the Maastricht criteria and risk triggering an Excessive Deficit Procedure (EDP) at the EU level.
The higher deficit, resulting from policies of 2022–2026, directly affects interest costs, which have already increased by several tens of millions of euros annually over the past two years. The deficit was financed through additional borrowing. Higher borrowing costs reduce the fiscal space for investments, healthcare, education, social policy, and responses to potential new shocks.
Interest costs more than doubled
At the end of 2025, gross public debt amounted to 46.324 billion euros. In the first quarter of 2026 it stood at 46.315 billion euros, and by the end of May 2026, according to estimates, at 46.7 billion euros. For comparison: at the end of 2022, gross public debt was 41.244 billion euros. During Golob’s government, gross public debt increased by around 5.07 billion euros, or 12.3%.
In 2022, interest payments amounted to around 450 million euros; in 2025 already around 750 million euros (1% of GDP). In 2026, these costs are expected to reach around 950 million euros, or 1.3% of GDP. Without a budget rebalancing, this amount could even exceed one billion euros this year. For comparison: annual costs for each percentage point of higher public debt amount to between 40 and 50 million euros.
Data show that interest costs have risen by several tens of millions of euros annually in the past two years (2024–2026); the reason is the gradual increase in debt, as well as higher interest rates of the European Central Bank. In the first five months of 2026, during Golob’s government (which ended on 1 June 2026), costs were already noticeably higher than in the same period of 2025.
Findings of the Fiscal Council
The Fiscal Council, in its Monthly Information for July 2026, warns that without decisive action, public finances are unsustainable. It is particularly critical of the fiscal policy of Golob’s government in the 2022–2026 period, which in its view led to deviations from the rules on net‑expenditure growth and narrowed the room for manoeuvre in future crises.
According to its assessments, Slovenia was drifting away from EU fiscal rules and its own commitments under the medium‑term fiscal‑structural plan. Expenditure growth in 2025 and early 2026 was too high and was not adequately offset by revenue growth.
The Fiscal Council emphasises that the fiscal policy of the previous government in 2025 is assessed as inappropriate. The result is exceptionally high expenditure growth, which is pushing Slovenia away from a sustainable path. Without measures, the deficit will deepen further in the coming years, jeopardising the achievement of the goals of the new European fiscal framework (which requires a gradual reduction of the structural deficit and control of net‑expenditure growth).
Experts of the Fiscal Council also warn of limited room for future action – despite the pension reform and other measures, long‑term sustainability remains under pressure from population ageing and other structural challenges.
Catastrophic absorption of EU funds
EU funds represent an important part of public investment, but the situation is critical due to delays during the 2022–2026 term. Slovenia received 82.7% of allocated funds from the Recovery and Resilience Facility (RRF) by April 2026, with the deadline for full completion of milestones at the end of 2026. Part of the funds is at risk due to slow public procurement, administrative obstacles, and lack of coordination between ministries during the previous government. If implementation does not accelerate, there is a real risk of losing part of the European money.
In the implementation of cohesion policy 2021–2027, absorption in some funds lagged due to inefficient management in 2022–2025. The previous government did not remove bottlenecks quickly enough – including staffing capacity and digitalisation of procedures – which now threatens timely absorption and may lead to reallocation or return of funds to Brussels.
The new government sees faster and more efficient absorption as a key opportunity to maintain a high level of public investment without additional pressure on the budget. However, the rebalancing will also have to include stricter review and possible redirection of at‑risk projects to avoid loss of funds. Without decisive action, delays could further worsen the public‑finance picture and reduce room for domestic investment.
A revision of all EU projects from the period of Golob’s government will therefore be essential in the rebalancing.
Preparations of the new government for the 2026 budget rebalancing
The new government led by Janez Janša announced the rebalancing shortly after taking office in June 2026. The main goals are to reduce expenditure growth to a sustainable level, bring the deficit below 3% of GDP, comply with European fiscal rules and national commitments, maintain a high level of investment – especially those co‑financed by EU funds – and stabilise nominal public debt.
The planned savings will be primarily on the expenditure side – including inefficient public procurement (e.g., medical equipment). The new government does not plan new taxes.
Some ministries are already taking preventive action (e.g., the Ministry of Culture has called for a temporary suspension of claims).
Analysis and possible effects of the rebalancing
Rebalancing will not be easy. Reducing expenditure growth requires a review of all budget items, stopping or postponing less‑priority projects, and stricter oversight of public procurement. At the same time, it will help maintain the confidence of financial markets, lower borrowing interest rates, and stabilise nominal public debt.
Experts warn that excessive tightening should not jeopardise economic growth (projections for 2026 are between 1.9% and 2.3%). Balanced action will therefore be crucial: cutting inefficient expenditures while maintaining and even accelerating investments financed by EU funds.
With the rebalancing, Slovenia will also fulfil its European commitments, avoid the Excessive Deficit Procedure, and create conditions for long‑term public‑debt stability.
New government: fiscal discipline, expenditure control, no new taxes
The new government has a clear plan: restore fiscal discipline through expenditure control, without new taxes, and with an emphasis on efficient use of EU funds. The rebalancing, expected to be adopted in September, will be the first concrete step in this direction and key to stabilising nominal public debt.
Success will depend on the speed and quality of preparations, cooperation among all stakeholders, and the ability to preserve investments in the future.
Andrej Šircelj: “We have inherited a demanding legacy”
Andrej Šircelj, the new Minister of Finance: “We have inherited a demanding legacy. Expenditure growth in the first months of the year was enormous and unsustainable. Our task is to act quickly and responsibly. The rebalancing will focus on expenditure control, optimisation of public procurement, and a return to fiscal discipline. Without new taxes. The goal is to bring the deficit below 3% of GDP, keep nominal public debt stable, and ensure Slovenia is a reliable partner within the European fiscal framework. At the same time, we will maintain investments in the future – especially through EU funds.”
Dr Matej Lahovnik: “The rebalancing is a necessary and timely step”
Prof Dr Matej Lahovnik, economist and former minister: “Public finances have drifted away from sustainability in the past period. Wage growth in the public sector was partly justified, but overall excessive and not sufficiently aligned with productivity and revenue growth. The rebalancing is a necessary and timely step. It will be important that measures are not too one‑sided, and that key investments and social security are preserved, while nominal debt is stabilised. In the long term, Slovenia also needs structural reforms that will reduce pressure on public finances due to population ageing.”