Slovenia pledges to sell 15 firms, raise VAT to avert bailout
SLOVENIA pledged on Thursday to sell 15 state firms including its second largest bank, biggest telecoms operator and national airline under a crisis package to avert an international bailout.
Prime Minister Alenka Bratusek said value added tax would rise from 20pc to 22pc from July 1 but that the government was still in talks with unions on planned cuts to he public sector wage bill.
She said the budget deficit would soar to 7.8pc of national output this year and that the government aimed to bring it down to 3.3pc in 2014.
"This programme will enable Slovenia to remain a completely sovereign state," Bratusek told a news conference.
Finance Minister Uros Cufer said the government would initiate the sale of 15 state firms, including No. 2 state lender Nova KBM , the largest telecoms operator, Telekom Slovenia, flag carrier Adria Airways and Ljubljana Airport.
He said the state would not retain any blocking stake in the companies, and that the package would result in total savings of around €1bn in spending cuts and revenues.
"Slovenia is a plane losing altitude and we first have to stabilise that altitude," Cufer said.
The former Yugoslav republic is racing to raise funds to stay solvent and heal its ailing banking sector, which has seen bad loans soar to €7bn after demand for the country's exports plummeted with the onset of the global crisis.
The crisis has exposed widespread cronyism and corruption in an economy still 50pc controlled by the state.
Slovenia's European Union partners have been pressing Ljubljana to slash state control over the economy and the bloated public sector. But Bratusek's coalition government has struggled to chart a united policy, and faces a backlash from unions. It was unclear whether the measures would be enough to satisfy the EU.
The country bought some breathing space last week when it managed to issue two bonds with a total value of $3.5bn, but will have to tap markets again no later than the first quarter of 2014 before a 5-year €1.5bn bond matures on April 2.
The government decided against a new, progressive "crisis tax" on wages, saying the VAT increase alone would bring in €250m per year.
But Bratusek said the government needed to agree with unions to cut public sector spending by €250m-€300m to avoid having to introduce the crisis tax on wages next year.