Council Opinion of 5 July 2004 on the Convergence Programme of Slovenia, 2004-2007
Date: 2004-07-05
Institutions: Council of the European Union
Subjects: Slovenia, budget policy, economic convergence, economic policy, stability programme

24.12.2004

EN

Official Journal of the European Union

C 320/17

COUNCIL OPINION

of 5 July 2004

on the Convergence Programme of Slovenia, 2004-2007

(2004/C 320/09)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveil-
lance of budgetary positions and the surveillance and coordination of economic policies (1), and in particu-
lar Article 9(2) thereof,

Having regard to the recommendation of the Commission,

After consulting the Economic and Financial Committee,

HAS DELIVERED THIS OPINION:

On 5 July 2004, the Council examined the convergence programme of Slovenia, which covers the period
2004 to 2007. The programme largely complies with the data requirements of the revised ‘code of
conduct on the content and format of stability and convergence programmes’.

The budgetary strategy underlying the programme aims at achieving sound public finances as defined by a
budgetary position of close-to-balance. To this end, the programme envisages a gradual reduction of the
general government deficit over the period covered, consistent with a cut in both the revenue and the
primary expenditure ratio, the latter through restraint on mandatory expenditure. According to the adjust-
ment path, the deficit halves over the next four years, reaching just below 1 % in 2007. While gearing the
policy towards a gradual decrease of the structural deficit, the authorities will allow automatic fiscal stabili-
sers to operate — although to a limited extent — under unfavourable economic conditions.

The macro-economic scenario underlying the programme beyond 2005 seems to reflect plausible growth
assumptions, forecasting real GDP to grow slightly above potential output. Nevertheless, for 2004 growth
is assumed rather favourably. The projection for inflation appears on the low side of the current forecasting
range in 2004 but is realistic thereafter provided that economic policies continue to be co-ordinated in the
aim to lower inflation durably.

Increasing marginally to 1,9 % of GDP in 2004 and then declining gradually to 0,9 % of GDP by 2007,
general government deficits are foreseen to stay below the 3 % of GDP reference value in each year. The
budgetary targets presented in the programme are not sufficient to ensure the Stability and Growth Pact's
medium-term objective of a budgetary position of close to balance; the pace of fiscal consolidation is
rather slow and the medium-term objective would only be approached by the end of the programme
period. Furthermore, the budgetary outcome could be worse than projected, in particular, given the down-
side macroeconomic risks related to an upbeat growth forecast in 2004 highlighted above. Moreover, the
fiscal consolidation is back-loaded. Therefore, the budgetary stance in the programme may not provide a
sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic
fluctuations especially in the initial years of the programme period.

(1) OJ L 209, 2.8.1997, p. 1. The documents referred to in this text can be found at the following website

http://europa.eu.int/comm/economy_finance/about/activities/sgp/main_en.htm

C 320/18

EN

Official Journal of the European Union

24.12.2004

Gross public debt is relatively low and will remain so in the future. After increasing to 29,5 % of GDP by
2005, the debt ratio is expected to fall back to 28,4 % of GDP in 2007. Regarding long term sustainability,
Slovenia faces risks of budgetary imbalances in meeting the costs of an ageing population. Implementing
thoroughly the pension reform and putting in place a stable health-care system together with securing an
adequate primary surplus are essential for placing public finances on a sustainable footing.

Key projections from the convergence programme of Slovenia

Real GDP growth (%)

Employment growth (%)

HICP inflation (%)

General government balance (% of GDP)

Government gross debt (% of GDP)

2003

2004

2005

2006

2007

2,3

– 0,2

5,7

– 1,8

28,6

3,6

0,4

3,3

– 1,9

29,1

3,7

0,6

3,0

– 1,8

29,5

3,8

0,6

2,7

– 1,5

29,4

3,9

0,7

2,6

– 0,9

28,4