Slovenia court rejects referendums on reform laws

Reuters News

12/19/2012 9:03:23 AM - Reuters News

By Marja Novak

LJUBLJANA (Reuters) - Slovenia's Constitutional Court on Wednesday rejected opposition and union calls for referendums that could block economic reforms aimed at averting an international bailout.

The small euro zone economy, sapped by weak demand for its exports, has been struggling with budget problems including bad debts at state-owned banks.

In October Slovenia passed a law setting up a state firm that would take over the bad loans and enable the banks to be sold, and another law for a state holding which would manage all state firms and speed up privatization.

But the centre-left Positive Slovenia and a union of chemical and rubber industry demanded referendums on the laws, claiming the privatization sales could offer scope for corruption.

The government asked the Court to ban the referendums, saying the enforcement of the laws was crucial to ensure the country's medium-term financial stability.

"The delay or rejection of the laws ... at the referendums would have consequences that would be against the constitution," the Court said in a statement.

It said constitutional values like the development of the economic system, social security and international obligations of the state "have an advantage ahead of the right to demand a referendum considering the gravity of the economic crisis".

The rejection enables enforcement of the laws which the government says are crucial to ease the problems of local banks, whose bad loans amount to around 19 percent of gross domestic product (GDP), and to enable privatization.

"Given that Slovenia's government has been quite successful in approval of other key laws, like the government budget for 2013 and pensions reform, the expectations of a near-term international bailout are likely to ease," Jaromir Sindel, an analyst at Citi Research said after the court's decision.

But he warned that "a likely prolonged recession of the Slovene economy could represent a downside risk for both government finance and bad loans in the banking sector."

The government had said it expected the Court would also prohibit a referendum on the draft budget for 2013 and 2014, demanded by trade unions who oppose government plans to cut public sector wages by 5 percent next year.

Slovenia, which joined the euro zone in 2007, was badly hit by the global crisis due to its dependency on exports. Budget cuts helped push it into a new recession in the third quarter of this year.

Referendums present a big obstacle to reforms in Slovenia where anyone can demand a referendum on any newly passed law by collecting 40,000 citizens' signatures in its favor.

Last year a number of laws passed by the previous centre-left government were rejected at referendums demanded by trade unions, students' unions and the opposition which led to the fall of the government and snap election that brought to power the conservative coalition of Prime Minister Janez Jansa.

(Reporting By Marja Novak; Editing by Ruth Pitchford)