By: Vida Kocjan
Members of the National Assembly have been discussing budgetary documents for the next two years in recent days. In addition to changes to the budgets for the years 2024 and 2025, they also had on the agenda a draft law on their execution and a proposal for a decree on the upper limit of public treasury expenditure.
According to the documents, the total budgetary expenditure is projected to increase by 720 million euros in 2024, reaching 16.2 billion euros. In 2025, the expenditure is expected to be 15.8 billion euros. In both cases, the government coalition plans higher spending than revenues, indicating a budget deficit. It is intended to be covered through additional borrowing by the state.
In two years, a deficit of 3.4 billion euros
According to the coalition’s projections, in 2024, the budget is expected to receive revenues of 14 billion euros, with planned expenditures amounting to 16.2 billion euros, resulting in a deficit of 2.2 billion euros. For the year 2025, projected revenues are 14.6 billion euros, with expenditures of 15.8 billion euros, leading to a deficit of 1.2 billion euros. The total deficit over the two years will be 3.4 billion euros. During this period, 1.6 billion euros is earmarked for addressing the consequences of floods and providing assistance. The remaining 1.8 billion euros will be allocated to other ongoing expenses. Interestingly, the coalition still lacks data on the specific purpose of the allocated 1.6 billion euros for flood-related consequences and aid. According to the Ministry of Finance, the majority of the planned amount will therefore remain in reserve. They further add that efforts are being made to leverage as much European funding as possible for flood damage recovery, reducing flood vulnerability, and mitigating the risks of other climate-related disasters.
Catastrophically poor absorption of European funds
However, recent disclosures indicate that the Slovenian government is drawing European funds exceptionally poorly. From the Recovery and Resilience Plan, for which the previous government led by Janša secured 2.7 billion euros for Slovenia, the European fund has so far disbursed only 281 million euros to our country. Furthermore, 231 million euros of this amount were advance payments received by Slovenia in September 2021, during the time of Janša’s government. In the current government led by Golob, only an additional 50 million euros have been “brought” to Slovenia from Brussels. President of the National Council, Marko Lotrič, has warned in recent days that only 6 percent of the set milestones and goals have been achieved, including reforms and investments. “More effort and efficient use are needed for what is on the table. The needs are substantial,” he added. Monika Kirbiš Rojs, former State Secretary and expert in European cohesion policy, has published a comparison of the absorption of European funds from the Recovery and Resilience Plan between Slovenia and Croatia. She noted that Croatia has utilised 2.2 billion euros from this fund, nearly ten times more than Slovenia.
All of this is not being discussed or written about in Slovenia; the government coalition has neglected this portion of European funds in the discussion about state budgets for the next two years. Apart from the statement by Saša Jazbec, the State Secretary at the Ministry of Finance, that they are striving to “make the most of European funds”, not a word has been heard from government representatives. However, the data holds up a mirror to them. These matters are very important, as the Golob government is unnecessarily indebting the country while simultaneously reducing investments, even though it does not publicly admit to it. Not only that, but new taxes have also been announced, and the approved funds in Brussels remain unused. The Ministry responsible for absorbing European funds is from the quota of the Social Democrats (SD), and it is led by SD personnel. The minister is Aleksander Jevšek, a former detective, and the state secretaries are Andreja Katič and Marko Koprivc, both of whom failed as candidates for parliament in the elections. This is not only their fault and significant responsibility, but also the fault of the entire government led by Robert Golob.
Critical Fiscal Council of the Republic of Slovenia
The budget for the year 2024 was adopted by the National Assembly in November of last year. According to the Minister of Finance, Klemen Boštjančič, it has now been amended due to the planned costs for addressing the consequences of natural disasters. In 2024, 1.1 billion euros are allocated for recovery. Despite coalition assurances that the budget is development-oriented, the opposition Slovenian Democratic Party (SDS) is highly critical of it. Davorin Kračun, the President of the Fiscal Council of the Republic of Slovenia, during the debate in the relevant finance committee in the National Assembly, pointed out that the budget documents were not thoughtfully prepared. He labelled the budget documents for the next two years as lacking credibility. In its opinion, the Fiscal Council stated, among other things, that the presented budget documents are not comprehensive, preventing them from preparing an assessment in line with the requirements of the Fiscal Rule Act. In 2024 and beyond, fiscal rules (a 3 percent deficit and a debt limit of 60 percent of gross domestic product) will again apply after years of the health crisis. These rules will also be in effect in the coming years. However, the government did not provide the Fiscal Council with a coordinated projection of the state sector’s balance for 2025 using the internationally comparable ESA methodology, which, according to legislation, serves as the basis for assessing compliance with fiscal rules. The response of the Fiscal Council of the Republic of Slovenia to the budget documents was the worst since the establishment of this independent body.
Deterioration of public finance picture
In the SDS parliamentary group, whose position was presented in the National Assembly by MP Rado Gladek, they warned that the budget documents indicate a deterioration of the public finance picture and the continuation of a pro-cyclical expansive fiscal policy. They pointed out the disregard for fiscal rules, and the fiscal (tax) policy is also in contradiction with a tightened monetary policy. The fact that the budget documents were prepared superficially is illustrated by, among other things, the introduction of a solidarity contribution as one of the financial sources for flood recovery at the beginning of September. However, at the end of October, the coalition abolished this contribution when it realised that the implementation was impractical. Despite this, the contribution remained as a source in the budget, leading SDS to expect a new budget revision for 2024 shortly after its adoption. This, too, is one of the inconsistencies in the preparation of budget documents. It should be noted that in the government coalition, it was claimed that they received a report from Brussels stating that the Slovenian budget plan for 2024 complies with EU recommendations. However, in the opposition SDS, they warned that the government sent a different budget to Brussels than the one they were currently adopting.
Complications
The approval of budgets has been marked by interesting complications. In the government, as of late September, they had planned that there would be no annual adjustment of social transfers, income tax brackets, and public sector salaries with inflation in 2024. They then reconsidered; the Minister of Finance announced in mid-November, after a government session, that they had agreed on a 70 percent adjustment of social transfers with inflation for 2024. They also withdrew the ban on adjusting public sector salaries. However, the freeze on adjusting the income tax bracket still remains.
The SDS and NSi parliamentary groups submitted amendments last Wednesday before the vote, proposing a full adjustment of social transfers (social assistance, scholarships, child allowances, etc.) to inflation. Members of the Gibanje Svoboda party then engaged in tactical manoeuvres. During the vote on this proposal, some began withdrawing their voting cards from the voting device, even though they were in their seats. The opposition’s amendment for a 100% adjustment of social transfers with inflation was then accepted. Some members of the Gibanje Svoboda claimed that they voted differently from what was displayed on the screen, citing a technical error. A farce ensued, with one of Golob’s MPs even attributing the confusion to cosmic rain. The Gibanje Svoboda demanded a forensic investigation and assessment by experts from the voting device manufacturers. Urška Klakočar Zupančič, the President of the National Assembly, initially stated that there was nothing wrong with the voting device but later yielded to the will of Golob’s party members. Against all rules, she ordered a re-vote on this amendment the next day. Jelka Godec, leader of the SDS parliamentary group, had previously announced that SDS members would obstruct the session in the event of a re-vote. And indeed, they did. Surprisingly, the coalition unanimously supported the SDS and NSi amendment. SDS extended special thanks to them for this. Even those members of the Gibanje Svoboda who had claimed to oppose it the day before voted in favour of the amendment for a 100% adjustment of social transfers. A burlesque and a level of absurdity not seen before in this National Assembly.
In the SDS parliamentary group, before the approval of the state budgets, they proposed about 30 amendments, but the coalition rejected all of them in the finance committee. SDS suggested redistributing funds within the budget, specifically reducing funds for migrations, and allocating them to various infrastructure and other projects, such as completing a nursing home in Osilnica. SDS also highlighted significant reductions in funding for a larger number of subprogrammes. It involves just under 340 million euros less money for individual programmes, and the list is provided separately.
The government coalition reduced funds for the following programmes:
- Support for Slovenes in the border regions and worldwide: 457 thousand euros
- Local development infrastructure: 20 million euros
- Payment of entitlements – pensions: 88 million euros
- Operational activities and readiness of the Slovenian Armed Forces: 19.7 million euros
- Infrastructure and equipment of the Slovenian Armed Forces: 29.7 million euros
- Regulation of agricultural markets: 1.7 million euros
- Integrated public passenger transport system: 129 million euros
- Investment maintenance and construction of state roads: 48 million euros
- Support for local self-government and coordination: 2.4 million euros
Total funds already allocated and then withdrawn: 338.957 million euros.