By Marja Novak
LJUBLJANA (Reuters) - Slovenia's incoming coalition government will cut public spending and aim to improve tax collection as it focuses on reducing the budget deficit to within EU limits, Prime Minister Miro Cerar told parliament on Thursday.
The euro zone member narrowly avoided an international bailout to support its ailing banks in December and investors are anxious to see the return of political and financial stability.
The incoming government has said it aims to cut the deficit to 3 percent of gross domestic product, the European Union's official ceiling, next year, from an expected 4.2 percent this year.
"Our fiscal policy will be restrictive, we have to reduce public spending and increase the efficiency of tax collection," Cerar said at the start of the session. Parliament is due to vote on his center-left 16-member cabinet later on Thursday.
Cerar reiterated that the new government plans to boost growth by selling state assets, attracting more foreign direct investment, and by helping companies restructure and improving corporate governance - all issues that have largely been on the backburner since Slovenia became independent from Yugoslavia in 1991.
He did not elaborate on privatization but incoming Finance Minister Dusan Mramor said on Monday the government would pursue privatization as planned by the outgoing center-left cabinet. [ID:nL6N0RG3KV]
"I will aim to keep a strong coalition ... which has obliged itself to lead Slovenia out of the crisis, to bring stability, higher political and legal culture to Slovenia," Cerar said.
His center-left SMC party won a snap general election in July and formed a coalition with Desus party and the Social Democrats. The three parties together hold 52 out of 90 seats in parliament.
Investors welcomed Mramor's announcement that privatization would continue but said the government would struggle to cut the deficit to 3 percent of GDP next year, as demanded by the European Commission.
"It's going to be tough for the government to come up with the 3 percent deficit but there are other larger countries who face the same problem therefore it will be decided at the EU level how we deal with (those) countries," said Alexander Dibelius, president at Goldman Sachs' global industrials group.
He urged Cerar's government to make Slovenia more attractive to foreign investors by ensuring political stability, creating an attractive tax regime and launching a reliable privatization process.
Successive Slovenian governments opposed the sale of state assets until the Prime Minister Alenka Bratusek earmarked 15 companies for sale last year as part of efforts to steady public finances after rescuing the country's troubled banks. Three of those firms have been sold so far.
(Editing by Zoran Radosavljevic and Susan Fenton)