Prime Minister Robert Golob recently told the National Assembly that the debt-to-GDP ratio is falling under his government. This is true, but the key reason for this is the growth of the Gross Domestic Product (GDP). And in spite of that, the absolute debt is increasing all the time. From the end of 2021 to last year, public debt increased from EUR 39 billion to EUR 43.8 billion, which means that the financial burden on the state is actually increasing.
At the same time, despite higher taxes and excise duties, the authorities are opening the door to even more public spending, leading to an even deeper budget hole. Former Ambassador Tone Kajzer warned: “‘Innovative’ public finance management, as it is being done now, usually ends miserably. Those responsible for the situation tend to disappear. What remains are debts and disappointed people.”
Recently, economist Janez Šušteršič pointed to the structural increase in public expenditure. Since the beginning of the millennium, expenditure on the consolidated balance of public finances has increased by more than 20 billion euros, while revenue has remained around 40 percent of GDP in recent years. Šušteršič stressed that public spending will have to be prioritised, because without it, public finances are not sustainable.
Regarding the government’s proposal on the fiscal rule, which transposes changes to European Union public finance rules into Slovenian law, Šušteršič expressed doubts about its constitutional compatibility. He criticised the added dictum that government budget revenues and expenditures are balanced in the medium term without borrowing “if the general government debt remains at a prudent level below 60 percent of GDP and the general government deficit is below three percent of GDP and both remain below this limit in the medium term.” In his opinion, such a proposal allows for a much looser fiscal policy, which could lead to further debt increases.
He also pointed out that the current level of public debt to GDP, which remains at 70 percent, is dangerous due to the continuous increase in absolute debt and rising consumption. The government is, therefore, facing serious fiscal challenges, and a loose policy may lead to even bigger problems for Slovenian taxpayers in the future.
Sara Kovač
