The Fiscal Council estimates that the coalition agreement of the new government does not provide a sufficient basis for the planning of economic entities due to its great vagueness, both in terms of scope and the timing of measures. In relation to this, the Fiscal Council proposes trying to follow the good practices of some foreign countries, where coalition agreements allow for more accurate evaluation. This also gives the general public an insight into their public finances and the macroeconomic consequences. The Fiscal Council also notes that the coalition agreement contains a set of largely generally defined measures that go beyond a four-year term.
The coalition agreement, entitled “The 15th Government of the Republic of Slovenia: The Work Programme of the 2022-2026 Coalition,” contains a set of mostly generally defined measures, which largely exceed the coalition’s four-year term. From the point of view of public finances, one of the key orientations of the coalition agreement is the gradual achievement of the average share of revenues and expenditures in the EU-27. According to the Fiscal Council, such an orientation is not only methodologically questionable, but also substantively risky for such a small and open economy, which is generally more exposed to financial markets. The measures that can determine the direction of the impact on general government aggregates are mainly aimed at increasing expenditure. The Fiscal Council reiterates its warning that the growth of current consumption must not exceed the growth of long-term economic potential. At the same time, the coalition agreement also reflects, to some extent, some guidelines regarding the financing of additional expenditures, which is different compared to the previously assessed coalition agreements.
Funding is also expected to be provided by the increased use of EU funds and partly by alternative sources of funding, which are not yet defined in the coalition agreement, as a result of which some measures should not necessarily worsen the public finance situation. The predominant implementation of the economic policy set out in the coalition agreement would otherwise be a departure from the fiscal developments presented in the scenario of unchanged policies in the 2022 Stability Programme, which indicated the gradual consolidation of public finances. A stalemate in consolidation would increase the risk of achieving a medium-term balance of public finances in the coming years. The coalition agreement also mentions commitments in some places to ensure (long-term) fiscal sustainability in connection with the measures it cites. “At the same time, the coalition agreement indicates some elements of solving the long-term challenges that Slovenian public finances are facing, but it does not specify the measures in detail here either,” they warned.
The coalition agreement does not provide a sufficient basis for the planning of economic entities
The Fiscal Council estimates that the coalition agreement of the new government does not provide a sufficient basis for the planning of economic entities due to its great vagueness, both in terms of scope and the timing of measures. In relation to this, the Fiscal Council proposes trying to follow the good practices of some foreign countries, where coalition agreements allow for more accurate evaluation. This also gives the general public an insight into their public finance and the macroeconomic consequences. “The Fiscal Council expects the government to present the measures in future official budget documents in a transparent manner, and with specifications for their fiscal implications,” they said, emphasising that, in the face of current and projected macroeconomic developments and global and domestic risks, economic policy must prepare an appropriate set of measures to address the current challenges to ensure a macroeconomic environment for sustainable economic growth without deepening imbalances and enable the creation of room for manoeuvre for future economic policy interventions. Measures should not jeopardise the achievement of a medium-term balance of public finances. This is all the more important due to the expected gradual tightening of monetary policy and thus higher debt financing costs. With the announced change in the fiscal rule, the Fiscal Council warns that this should be well thought out and, in terms of time and content, harmonised as much as possible with the expected changes in the rules of economic governance in the EU. “At the same time, we want to emphasise that Slovenian and European legislation, after the end of the period of exceptional circumstances, determine the manner and time frame for the so-called corrective mechanism to restore the medium-term balance of the general government balance,” the Fiscal Council also wrote in a press release.
Sara Bertoncelj
