By: Vida Kocjan
In the past year, Slovenia’s public debt has started to rise again. Robert Golob’s government plans significantly higher spending than revenue for the next two years, amounting to €3.1 billion over this period. At the same time, the coalition approved the government’s intention to allow Slovenia to borrow almost €4.6 billion in 2025 and slightly more than €4.3 billion in 2026, totalling €8.9 billion. The state budget debt stood at €38.8 billion at the end of 2023, nearly €2 billion higher than at the beginning of the year.
The public finance deficit is also increasing, meaning expenditures exceed revenues. The ruling coalition has adopted budgets for 2025 and 2026. The deficit is expected to reach €1.9 billion next year and €1.2 billion the year after. Over two years, they plan to spend €3.1 billion more than they will generate, despite projecting record revenues.
Skyrocketing expenses and anticipated higher taxes
Finance Minister Klemen Boštjančič stated last week that expenditures are rising by €1.3 billion to a total of €17.1 billion, with €130 millions of this increase attributed to labour costs. These additional costs stem from salary reforms, addressing pay disparities, and this year’s promotions.
Projected revenues are also set to rise, amounting to €15.2 billion. This growth will be influenced, among other factors, by temporary targeted levies (a new tax) introduced under the flood recovery law following last August’s floods. Among the measures mentioned by Boštjančič are increases in corporate income tax and the introduction of a bank balance sheet tax. The government also anticipates higher excise revenue.
For 2026, revenues are planned at €15.9 billion, with expenditures at €17.1 billion, resulting in a €1.2 billion deficit. Boštjančič emphasised that flood recovery efforts remain a priority in these budgets. Additionally, the government has highlighted measures to strengthen the economy, healthcare, education, innovation, housing, and climate policies. How these will unfold remain to be seen; promises, however, are something we are all tired of.
Critical opposition and lack of transparency
The opposition (SDS and NSi) has been critical. They point to escalating geopolitical tensions and what they see as an inadequate government response. They also believe the budgets are poorly structured and open the door to non-transparent spending.
“The budgets lack a developmental focus, are non-transparent, conceal figures, and enable further non-transparent spending of taxpayers’ money, a hallmark of this government,” remarked MP Rado Gladek (SDS) during the budget discussions. He cited examples, including the “purchase of a dilapidated property on Litijska Street and computers still lying unused in storage.”
High borrowing and guarantees on the rise
In 2025, the Slovenian government, under the coalition’s decision, will be able to borrow up to €4.6 billion, and in 2026, slightly over €4.3 billion. The maximum scope of new guarantees the state can issue to legal and natural persons is capped at €1 billion annually.
Spending freely in 2024
For 2024, the ruling coalition led by Robert Golob planned a significant increase in the budget deficit, primarily driven by higher social transfers and subsidies. According to the Office for Macroeconomic Analysis and Development (UMAR), the public finance deficit was halved in the first nine months of 2024 but remained substantial at €432.7 million. This reduction was due not to lower public spending but to higher tax revenues and one-off inflows from European funds.
Borrowing as a pillar of policy decisions
The ruling political parties often justify borrowing with claims of supporting the welfare state, infrastructure investments, or crisis management. Left-leaning governments, including the current coalition, tend to expand public spending by increasing public debt. However, this approach risks burdening future generations, reducing economic sovereignty, and increasing dependency on international financial institutions.
The leftist borrowing paradigm
The Golob government focuses on expanding social rights, financing the green transition, and supporting NGOs. These goals demand substantial financial resources, leading to the expansion of the public sector, investments in the so-called green transition, and a tailored welfare state. This expansion involves raising public sector wages and hiring more workers, increasing long-term fiscal obligations. The latest salary adjustments alone will add €1.4 billion in additional public sector wage expenses. While referred to as “salary reform”, these adjustments mainly represent incremental pay raises, and not all public employees benefit equally.
Left-leaning governments also prioritise investments in the green transition, a term that has become very familiar under Golob’s leadership. Projects aimed at reducing greenhouse gas emissions often involve high initial costs without immediate economic benefits. The third focus is the welfare state, which includes increasing pensions, subsidies, and social transfers – often exceeding economic capacity. In this regard, Robert Golob’s government stands out: they are increasing nearly everything except pensions.
Critique of debt policy: Fiscal instability
International financial institutions, such as the International Monetary Fund (IMF) and the European Commission, have warned that long-term debt increases without adequate structural reforms could lead to fiscal instability. Rising interest rates in financial markets make borrowing more expensive. Slovenia may need to allocate a larger portion of its budget solely for interest payments. An aging population exacerbates pressure on pension and healthcare systems, while the share of the working-age population shrinks. Countries that have pursued similar policies in the past, such as Greece, later had to implement drastic austerity measures under the supervision of international lenders. Under the left-leaning Golob government, Slovenia seems to be heading in this direction.
Solutions and alternatives
Slovenia can maintain fiscal stability if the government implements structural reforms. Pension reform and healthcare system optimisation could reduce long-term budgetary pressures, but there are no signs that the Golob administration will act in these areas. Promises and rhetoric are one thing; serious and diligent work is another. The government must also stimulate the economy by investing in high-tech industries, digitalisation, and supporting entrepreneurship, which could drive gross domestic product (GDP) growth. Additionally, limiting public spending is crucial. Rationalising the public sector and reviewing ineffective subsidies could improve the country’s financial standing. None of these measures, however, seem forthcoming.
For greater transparency and accountability
Debt is not inherently problematic if funds are directed toward projects with high returns. However, the current debt policy ignores long-term fiscal constraints and risks overburdening future generations. Economists warn that Slovenia requires a more responsible economic policy aligned with European guidelines and focused on sustainable development. Citizens must demand greater transparency and accountability from the government regarding the use of public funds. Unfortunately, in this regard, citizens often fail to act.
Public debt growth since 2008
Until 2008, Slovenia’s public debt ranged from 21% to 27% of GDP. Rapid debt growth began thereafter, peaking in 2015 at 82.6% of GDP, primarily due to bank bailouts and pressure on public finances – a consequence largely attributed to the left-leaning government under the compliant Prime Minister Alenka Bratušek. Public debt then gradually declined but surged again during the COVID-19 crisis due to extensive borrowing for healthcare and economic measures. By 2024, Slovenia’s public debt began rising once more. Macroeconomists stress the need for careful debt management to avoid burdening future generations. Additionally, demographic and economic challenges will significantly impact the country’s long-term fiscal stability.
Public budget debt by year (in millions of euros)
- At the end of 2009, the national budget debt was €11.083 million.
- In 2011, it rose to €15.157 million.
- In 2014 (during Alenka Bratušek’s tenure), the debt increased to €26.015 million.
- In 2018 (during Marjan Šarec’s tenure), the debt grew to €29.181 million.
- This year, by the end of October, the debt has already reached €41.284 million.
Source: Ministry of Finance of the Republic of Slovenia