Recommendation for a COUNCIL RECOMMENDATION on the 2018 National Reform Programme of Slovenia and delivering a Council opinion on the 2018 Stability Programme of Slovenia
Date: 2018-05-23
Institutions: European Commission, Secretariat-General
Subjects: Slovenia, administrative formalities, economic policy, economic reform, employment policy, organisation of health care, pension scheme, privatisation, public contract, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 23.5.2018 COM(2018) 423 final  Recommendation for a COUNCIL RECOMMENDATION on the 2018 National Reform Programme of Slovenia  and delivering a Council opinion on the 2018 Stability Programme of Slovenia  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2018 National Reform Programme of Slovenia 

and delivering a Council opinion on the 2018 Stability Programme of Slovenia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 
Having regard to the recommendation of the European Commission3, 
Having regard to the resolutions of the European Parliament4, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

On 22 November 2017, the Commission adopted the Annual Growth Survey, marking 
the start of the 2018 European Semester of economic policy coordination. It took due 
account  of  the  European  Pillar  of  Social  Rights,  proclaimed  by  the  European 
Parliament, the Council and the Commission on 17 November 2017. The priorities of 
the  Annual  Growth  Survey  were  endorsed  by  the  European  Council  on  22  March 
2018.  On  22  November  2017,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Slovenia 
as one of the Member States for which an in-depth review would be carried out. On 
the  same  day,  the  Commission  also  adopted  a  recommendation  for  a  Council 

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OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
COM(2018) 423 final. 
P8_TA(2018)0077 and P8_TA(2018)0078. 

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recommendation on the economic policy of the euro area, which was endorsed by the 
European  Council  on  22  March  2018.  On  14  May  2018,  the  Council  adopted  the 
recommendation  on  the  economic  policy  of  the  euro  area  (‘recommendation  for  the 
euro area’). 

As a Member State whose currency is the euro and in view of the close interlinkages 
between the economies in the economic and monetary union, Slovenia should ensure 
the full and timely implementation of the recommendation on the economic policy for 
the euro area, as reflected in the recommendations below, in particular (1).  
The  2018  country  report  for  Slovenia5  was  published  on  7  March  2018.  It  assessed 
Slovenia’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 11 July 2017, the follow-up given to the recommendations adopted in 
previous years and Slovenia's progress towards its national Europe 2020 targets. It also 
included  an  in-depth  review  under  Article  5  of  Regulation  (EU)  No  1176/2011,  the 
results  of  which  were  also  published  on  7  March  20186.  The  Commission’s  analysis 
leads it to conclude that Slovenia is not experiencing macroeconomic imbalances. 

On  13  April  2018,  Slovenia  submitted  its  2018  National  Reform  Programme  and  its 
2018 Stability Programme. To take account of their interlinkages, the two programmes 
have been assessed at the same time. 

Relevant country-specific recommendations have been addressed in the programming 
of  the  European  Structural  and  Investment  Funds  for  the  2014-2020  period.  As 
foreseen in Article 23 of Regulation (EU) No 1303/2013 of the European Parliament 
and  of  the  Council7,  where  it  is  necessary  to  support  the  implementation  of  relevant 
Council  recommendations,  the  Commission  may  request  a  Member  State  to  review 
and propose amendments to its Partnership Agreement and relevant programmes. The 
Commission has provided further details on how it would make use of that provision 
in  guidelines  on  the  application  of  the  measures  linking  the  effectiveness  of  the 
European Structural and Investment Funds to sound economic governance8.  

Slovenia  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact  and 
subject to the transitional debt rule. The 2018 Stability Programme was submitted by a 
caretaker  government  and  is  based  on  a  no-policy-change  assumption.  Accordingly, 
the  government  expects  that  the  headline  surplus  will  improve  to  0.4  %  of  GDP  in 
2018 and then reach 0.9 % of GDP in 2021. The medium-term budgetary objective – a 
surplus of 0.25 % of GDP – is not planned to be achieved by 2021. According to the 
2018  Stability  Programme,  the  general  government  debt-to-GDP  ratio  is  expected  to 
fall  to  69.3  %  of  GDP  in  2018  and  continue to  fall  to  58.3  %  of  GDP  in  2021.  The 
macroeconomic scenario underpinning those budgetary projections is plausible.  

SWD(2018) 222 final. 
COM(2018) 120 final. 
Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 
laying  down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social 
Fund, the  Cohesion Fund, the European Agricultural Fund for Rural Development and the European 
Maritime  and  Fisheries  Fund  and  laying  down  general  provisions  on  the  European  Regional 
Development  Fund,  the  European  Social  Fund,  the  Cohesion  Fund  and  the  European  Maritime  and 
Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347, 20.12.2013, p. 320). 
Guidelines on the application of the measures linking the effectiveness of the European Structural and 
Investment Funds to sound economic governance, COM(2014) 494 final. 

(2) 

(3) 

(4) 

(5) 

(6) 

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(7) 

(8) 

(9) 

9 

On  11  July  2017,  the  Council  recommended  Slovenia  to  ensure  that  the  nominal 
growth rate of net primary government expenditure9 does not exceed 0.6 % in 2018, 
corresponding to an annual structural adjustment of 1.0 % of GDP. At the same time, 
it  was  stated  that  the  assessment  of  the  2018  Draft  Budgetary  Plan  and  subsequent 
assessment  of  2018  budget  outcomes  will  need  to  take  due  account  of  the  goal  of 
achieving  a  fiscal  stance  that  contributes  to  both  strengthening  the  ongoing  recovery 
and  ensuring  the  sustainability  of  public  finances.  Following  the  Commission's 
assessment of the strength of the recovery in Slovenia while giving due consideration 
to its sustainability challenges, carried out in the context of its opinion on Slovenia's 
Draft Budgetary Plan, a fiscal structural effort of at least 0.6 % of GDP is required for 
2018, without any additional margin of deviation over one year. This corresponds to a 
nominal rate of growth of net primary government expenditure not exceeding 1.5 %. 
Taking  that  into  account  in  the  overall  assessment,  based  on  the  Commission  2018 
spring  forecast,  there  is  a  risk  of  a  significant  deviation  from  the  recommended 
adjustment path towards the medium-term budgetary objective in 2018. 

In 2019, in view of Slovenia's general government debt ratio above 60 % of GDP and 
projected positive output gap of 4.1 % of GDP, the nominal growth rate of net primary 
government  expenditure  should  not  exceed  2.2  %,  in  line  with  the  structural 
adjustment  of  1.0  %  of  GDP  stemming  from  the  matrix  of  requirements  under  the 
Stability  and  Growth  Pact.  At  the  same  time,  there  are  strong  signs  that  the  idle 
capacity  in  the  economy  is  underestimated,  with  inflation  expected  to  reach  2  %  in 
2019,  underemployment  above  the  pre-crisis  level  and  investment  picking  up 
following  a  strong  contraction  over  the  crisis  years.  In  addition,  the  plausibility  tool 
also  indicates  that  there  is  a  high  degree  of  uncertainty  surrounding  the  output  gap 
estimates  based  on  the  common  methodology.  On  that  basis,  an  annual  structural 
adjustment  of  0.65 %  of  GDP,  corresponding  to  a  maximum  growth  rate  of  net 
primary  government  expenditure  of  3.1  %,  appears  appropriate.  Under  unchanged 
policies, there is a risk of a significant deviation from that requirement in 2019 and for 
2018 and 2019 taken together. Slovenia is forecast to comply with the transitional debt 
rule in 2018 and the debt rule in 2019. Overall, the Council is of the opinion that the 
necessary measures should be taken as of 2018 to comply with the provisions of the 
Stability and Growth Pact.   

The Slovenian Government has presented proposals to reform the healthcare system. 
The  draft  Healthcare  and  Health  Insurance  Act,  which  is  the  central  piece  of  the 
reform and will ensure the financing of the health system in the long term, was put to 
the Economic-Social Council for consultation in December 2017 but was not adopted 
before the elections, making its prospects for adoption uncertain. A draft Long-Term 
Care  Act  is  currently  being  drawn  up  to  make  long-term  care  a  new  pillar  of  social 
security  complementary  to  other  social  security  systems  (health  care,  social  care, 
pension security). It remains uncertain how Slovenia will increase cost-effectiveness, 
accessibility and quality of care in the future. In 2017, proposals to amend the Medical 
Practitioners  Act,  the  Health  Services  Act,  the  Patient  Rights  Act  and  the  Act 
Determining  Intervention  Measures  to  Ensure  the  Financial  Stability  of  Public 

Net  primary  government  expenditure  comprises  total  government  expenditure  excluding  interest 
expenditure,  expenditure  on  Union  programmes  fully  matched  by  Union  funds  revenue  and  non-
discretionary  changes  in  unemployment  benefit  expenditure.  Nationally  financed  gross  fixed  capital 
formation  is  smoothed  over  a  4-year  period.  Discretionary  revenue  measures  or  revenue  increases 
mandated by law are factored in. One-off measures on both the revenue and expenditure sides are netted 
out. 

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(10) 

Healthcare  Institutions  were  adopted  and  now  have  to  be  implemented  to  ensure 
accessibility  and  quality  care.  Initial  steps  have  been  taken  to  implement  the  2016-
2025  of  the  National  Health  Care  Plan.  Family  medicine  outpatient  clinics  are 
gradually  being  introduced,  a  health  technology  assessment  system  is  planned  to  be 
established  by  2020  and  eHealth  solutions  will  improve  monitoring  nationwide.  In 
addition,  the  benefits  from  better  coordinated  public  procurement  in  healthcare  are 
expected to help procurement to become more cost-efficient.  

In  July  2017,  the  Economic  and  Social  Council  unanimously  adopted  a  document 
called  ‘Starting  points  for  the  modernisation  of  the  Pension and  Disability  Insurance 
System  in  the  Republic  of  Slovenia.  It  outlines  various  measures  how  adequate 
pensions  and  a  sustainable  and  transparent  pension  system  could  be  achieved.  
However, a concrete action plan to adopt it is still missing and despite an agreement 
between social partners and the government to adopt the reform by 2020, the phase-in 
period  for  the  reform  has  not  yet  been  outlined.  Challenges  remain  in:  ensuring  the 
long-term sustainability and adequacy of the pension system by adjusting the statutory 
the 
pension  age  and  promoting 
supplementary  pension  schemes;  appropriately  addressing  changing  career  paths  and 
reducing old-age poverty risks. 

later  retirement;  boosting 

the  coverage  of 

(11)  Economic  growth  continued  and  labour  market  and  social  trends  improved  further. 
The rate of people at risk of poverty or social exclusion decreased but remains above 
the  EU  average  for  the  elderly.  Employment  continued  to  rise  and  unemployment 
further  decreased.  However,  there  are  signs  of  labour  shortages  in  a  number  of 
vocational occupations. Long-term unemployment remains above pre-crisis levels and 
still  represents  almost  half  of  all  unemployment.  Challenges  persist  in  particular  for 
older workers as their activity and employment rates remain among the lowest in the 
EU. Slovenia's society is ageing rapidly which means the working-age population and 
labour supply are shrinking. In response to this trend, the government has prepared an 
‘Active Ageing Strategy’, but concrete action plans are still lacking.  

(12)  The ageing population emphasises the need to increase participation in adult learning 
which has been falling since 2010 and is especially low among low-skilled and older 
workers.  Improving  skills  through  lifelong  learning  would  increase  the  chances  of 
employment,  especially  for  low-skilled  and  older  workers.  The  employment  rate  of 
low-skilled  workers  improved,  but  remains  below  pre-crisis  levels  and  the  EU 
average. Evaluation of active labour market policies shows that most programmes are 
performing  well,  however  expenditure  in  this  field  and  the  participation  rate  of 
unemployed  people  in  the  programmes  both  remain  limited.  While  the  2013  labour 
market reform clearly helped certain vulnerable groups enter employment, temporary 
employment remains an issue. 

(13)  Measures  have  been  adopted  measures  to  improve  funding  options  for  firms  in 
Slovenia and to provide them with alternatives to bank credits. However, reliance on 
bank  credit  presents  a  continued  funding  challenge,  notably  for  small  and  medium-
sized  enterprises,  for  which  access  to  finance  remains  a  growth  barrier.  Current 
measures have not yet resulted in improved finance, particularly for innovative firms. 
There are only a small number of high-growth enterprises in Slovenia and these lack 
sufficient  support  to  scale  up.  Venture  capital,  as  one  form  of  equity  financing,  is 
growing  but  from  a  very  low  level.  Innovative  companies  would  also  benefit  from 
more efficient public research which is currently hindered by difficulties in attracting 
domestic  and  foreign  talent  and  a  lack  of  performance-based  funding.  The  level  of 
private  investment  in  Slovenia  remains  relatively  low  compared  to  peer  countries 

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meriting focussed efforts to further improve the framework conditions for investment, 
particularly in areas yielding strong potential to increase productivity.  

(14)  Businesses are  held back by the still high  regulatory  and administrative burden. Red 
tape is considered to be one of the most problematic factors in terms of doing business 
in Slovenia. This mainly relates to uncertainty and complexity of tax procedures but is 
not limited to this area as it still takes about a year for commercial cases to be heard 
before a court. Slovenia has created a tool to help reduce administrative burden and is 
progressing with implementing this. A significant part of this implementation has not 
yet been carried out.  

(15)  Equally,  Slovenia  has  only  started  to  tackle  its  high  level  of  restrictive  regulation  in 
certain  service  sectors.  Reforms  have  been  carried  out  to  liberalise  the  professional 
requirements  for  architects  and  civil  engineers,  but  other  issues  identified  by 
Commission's  services  remain  unaddressed10.  Reforms  would  also  benefit  Slovenian 
manufacturing firms which depend on competitive services inputs. 

(16)  Efficient  public  procurement  is  key  to  cost  control  and  quality  improvements  in 
Slovenia’s health sector. Expanding centralised procurement as well a other forms of 
procurement  aggregation  such  as  joint  procurement  between  hospitals,  is  crucial  to 
ensuring good quality supplies of innovative products at competitive prices.  

(17)  Slovenia  struggles  with  inefficiency  and  lack  of  transparency  in  public procurement. 
Competition between bidders is comparatively low, as indicated by the low number of 
bids received per tender and by the high ratio of negotiated procedures without prior 
call.  Professionalisation  of  those  involved  in  procurement  is  low  and  there  are  few 
safeguards  against  corruption  and  collusion  among  bidders.  In  particular  the 
independence  of  the  National  Review  Commission  is  limited,  as  a  result  of  the 
procedure  for  appointing  its  members.  While  economic  crime  and  corruption  are 
estimated by the authorities to have caused significant damage in the past years, some 
anti-corruption reforms are still pending. 

(18)  Slovenia  still  has  high  state  involvement  in  the  economy,  notably  in  the  financial 
sector.  The  previously  published  plans  for  privatisation  have  been  implemented 
slowly. Proceeding with privatisations would increase the viability of the companies in 
the long run and would lower the risks for public finances. 

(19) 

In  the  context  of  the  2018  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Slovenia’s  economic  policy  and  published  it  in  the  2018 
country  report.  It  has  also  assessed  the  2018  Stability  Programme  and  the  2018 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Slovenia  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Slovenia  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(20) 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined the 2018 Stability Programme and its opinion11 is reflected in particular in 
recommendation 1 below. 

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SWD(2016)820 final. 
Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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HEREBY RECOMMENDS that Slovenia take action in 2018 and 2019 to: 

1. 

2. 

Ensure that the nominal growth rate of net primary government expenditure does not 
exceed 3.1 % in 2019, corresponding to an annual structural adjustment of 0.65 % of 
GDP. Adopt and implement the healthcare and health insurance act and the planned 
reform  of  long-term  care.  Ensure  the  long-term  sustainability  and  adequacy  of  the 
pension  system,  including  by  increasing  the  statutory  retirement  age  and  by 
restricting  early  retirement.  Increase  the  employability  of  low-skilled  and  older 
workers through lifelong learning and activation measures.  

Develop  alternative  sources  of  financing  for  fast-growing  companies.  Lower  the 
barriers  for  market  entry  through  the  revision  of  product  market  regulation  and 
limiting  administrative  burden.  Enhance  competition,  professionalisation  and 
independent oversight in public procurement. Carry out the privatisations according 
to the existing plans. 

Done at Brussels, 

For the Council 
The President 

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