Tax debate delays Slovenia confidence vote

Reuters News
Posted: Nov 14, 2013 4:43 PM
Tax debate delays Slovenia confidence vote

By Marja Novak

LJUBLJANA (Reuters) - A vote of confidence in Slovenia's government that was expected to take place on Thursday is likely to be postponed due to a prolonged debate on an unpopular new real estate tax, a parliamentary spokeswoman said.

An expected "Yes" vote, which would shore up political backing for Prime Minister Alenka Bratusek's disparate alliance, which is struggling to avert a bailout, is now seen happening on Friday or Saturday.

"It is likely that the confidence vote will not take place today because parliamentarians continue to debate the real estate law, which has to be voted on before the confidence vote takes place," spokeswoman Gordana Vrabec said.

The confidence vote is to be linked to one on amendments to the 2014 budget which include the new real estate tax.

"This prolonged debate shows that parliamentarians are more concerned about the real estate tax, which will hit all voters, than about the confidence vote where coalition parties have already promised to give the needed support to the government," said Borut Hocevar, political analyst with the daily Finance.

But Bratusek's government may yet have to turn to the European Union and International Monetary Fund for help if external stress tests reveal it has not budgeted enough to resolve the bad loan crisis afflicting Slovenia's mainly state-run banks. The test results are due in a month.

Slovenia's 35-billion-euro economy accounts for only a small fraction of the 17-nation euro zone. But another bailout following that of Cyprus in March would further dent confidence in the bloc's ability to resolve its government debt crisis.

The government wants to raise taxes, cut spending and sell off more than a dozen state-controlled companies.

But Slovenia's success in averting an EU/IMF bailout - and the painful conditions and oversight that come with it - hinges on the cost of cleaning up around 7.9 billion euros ($10.6 billion) of bad loans, equivalent to more than a fifth of economic output.


Non-performing loans shot up with the onset of the global financial crisis, when Slovenian exports hit a wall and a recession exposed the flaws of an economy once held up as a trailblazer for the rest of formerly communist eastern Europe.

The government plans to inject fresh capital into the banks later this year or in early 2014, after the results of the stress tests are published, probably on December 13.

It has earmarked 1.2 billion euros for the recapitalization but the real cost may prove far higher. Credit rating agency Fitch last week raised its estimate from 2.8 billion euros to 4.6 billion euros, which would be hard for the government to raise without help from the "troika" of official lenders who have been bailing out euro zone debtors.

The audit has delayed for six months a plan to ring-fence bad loans at Slovenia's biggest state banks, while continuing economic contraction will have only made the problem worse. The government expects the recession to last until late 2014.

Under the amended budget, Slovenia's central budget deficit, without the bank recapitalization, would fall to 2.9 percent of GDP in 2014 from 4 percent seen this year. The European Commission, however, says that with the capital injection the shortfall could reach 7.1 percent next year.

But at the start of the budget session on Monday, Bratusek again assured parliament that a bailout can be averted.

"There will be no troika (in Slovenia) because we know how to reach our goal by ourselves," she said.

(Editing by Mark Heinrich)