Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Slovenia and delivering a Council opinion on the 2019 Stability Programme of Slovenia
Date: 2019-06-05
Institutions: European Commission, Secretariat-General
Subjects: Slovenia, competition policy, economic policy, economic reform, employment policy, investment, organisation of health care, pension scheme, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.6.2019  COM(2019) 524 final  Recommendation for a COUNCIL RECOMMENDATION on the 2019 National Reform Programme of Slovenia and delivering a Council opinion on the 2019 Stability Programme of Slovenia    
 
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2019 National Reform Programme of Slovenia and delivering a Council opinion 
on the 2019 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 the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

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 21 November 2018, the Commission adopted the Annual Growth Survey, marking 
the start of the 2019 European Semester for 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  21  March 
2019.  On  21  November  2018,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  in  which  it  did  not  identify 
Slovenia as one of the Member States for which an in-depth review would be carried 
out. On the same date, the Commission also adopted a recommendation for a Council 
recommendation on the economic policy of the euro area, which was endorsed by the 
European  Council  on  21  March  2019.  On  9  April  2019,  the  Council  adopted  the 
recommendation  on  the  economic  policy  of  the  euro  area  (‘Recommendation  for  the 
euro area’).  

(2) 

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 

1 

OJ L 209, 2.8.1997, p. 1. 

EN 

1 

  EN 

 
 
 
 
 
                                                 
(3) 

(4) 

(5) 

(6) 

the  full  and  timely  implementation  of  the  Recommendation  for  the  euro  area,  as 
reflected  in  recommendations  (1)  to  (3)  below.  In  particular,  reducing  regulatory 
restrictions  will  help  address  the  first  euro  area  recommendation  as  regards  resilient 
product and services markets, and focusing economic policy related to investment in 
the specified areas will help address the second euro area recommendation as regards 
supporting investment. 
The 2019 country report for Slovenia2 was published on 27 February 2019. It assessed 
Slovenia’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 13 July 2018, the follow-up given to the recommendations adopted in 
previous years and Slovenia's progress towards its national Europe 2020 targets.  

On 15 April 2019, Slovenia submitted its 2019 National Reform Programme and, on 
26  April  2019,  its  2019  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  ('ESI  Funds')  for  the  2014-2020 
period.  As  provided  for  in  Article  23  of  Regulation  (EU)  No  1303/2013  of  the 
European  Parliament  and  of  the  Council3,  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 ESI Funds to sound economic governance4.  

Slovenia  is  currently  in  the  preventive  arm  of  the  Stability  and  Growth  Pact  and 
subject to the debt rule. In its 2019 Stability Programme, the government expects that 
the  headline  surplus  will  increase  to  0.9%  of  GDP  in  2019  and  then  reach  1.2%  of 
GDP  in  2022.  Based  on  the  recalculated  structural  balance,  the  medium-term 
budgetary objective – which has been changed from a structural surplus of 0.25% of 
GDP  in  2019  to  a  structural  deficit  of  0.25%  of  GDP  from  2020  –  is  planned  to  be 
achieved  by  20215.  According  to  the  2019  Stability  Programme,  the  general 
government  debt-to-GDP  ratio  is  projected  to  continue  to  fall  to  65.4%  of  GDP  in 
2019 and to 54.7% of GDP in 2022. The macroeconomic scenario underpinning those 
budgetary projections is favourable. 

(7) 

On  13  July  2018,  the  Council  recommended  Slovenia  to  ensure  that  the  nominal 
growth  rate  of  net  primary  government  expenditure6  does  not  exceed  3.1%  in  2019, 

2 

3 

4 
5 

6 

SWD(2019) 1023 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). 
COM(2014) 494 final. 
Cyclically-adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
using the commonly agreed methodology. 
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. 

EN 

2 

  EN 

 
                                                 
(8) 

(9) 

corresponding  to  an  annual  structural  adjustment  of  0.65%  of  GDP.  Based  on  the 
Commission  2019  spring  forecast,  there  is  a  risk  of  a  significant  deviation  from  the 
recommended adjustment path towards the medium-term budgetary objective in 2019.  

In 2020, Slovenia should achieve its medium-term budgetary objective. Based on the 
Commission 2019 spring forecast, this is consistent with a maximum nominal growth 
rate  of  net  primary  government  expenditure  of  4.0%,  corresponding  to  a  structural 
adjustment  of  0.5%  of  GDP.  Based  on  the  Commission  2019  spring  forecast  under 
unchanged  policies,  Slovenia  is  forecast  to  be  close  to  its  medium-term  budgetary 
objective in 2020. Thus, the current assessment indicates a risk of some deviation in 
2020. While the projected nominal growth rate of net primary government expenditure 
would  currently  point  to  a  risk  of  some  deviation  from  the  requirement  in  2020,  it 
would point to a risk of significant deviation from the requirement over 2019 and 2020 
taken  together.  If  the  structural  balance  is  no  longer  projected  to  be  close  to  the 
medium-term budgetary objective, in future assessments an overall assessment would 
need  to  take  into  account  a  possible  deviation  from  the  requirement.  Slovenia  is 
forecast to comply with the debt rule in 2019 and 2020. Overall, the Council is of the 
opinion that the necessary measures should be taken in 2019 and that Slovenia needs 
to stand ready to take further measures as of 2020 to comply with the provisions of the 
Stability and Growth Pact. 

Population  ageing  will  increasingly  strain  Slovenia’s  healthcare  and  long-term  care 
systems.  The  financing for the healthcare system is  not  adapted to  face the expected 
cost  increases  from  population  ageing.  To  date  Slovenia  has  not  proposed 
comprehensive  measures  to  ensure  quality,  accessibility  and  long-term  fiscal 
sustainability of healthcare in Slovenia. A draft long-term care act is being drawn up 
as part of Slovenia’s active ageing strategy. However, it remains still unclear how the 
envisaged measures will improve cost-effectiveness, accessibility and quality of care 
except that public procurement in healthcare is expected to become more cost-efficient 
through  improved  coordination.  Investments  in  health  and  long-term  care  structures 
and equipment could help easing future pressure on the care systems.  

(10)  Challenges regarding the long-term sustainability and adequacy of the pension system 
are becoming  increasingly pressing as  the Slovenian population is  ageing faster than 
the population of most other Member States. In the document “Starting points for the 
modernisation  of  the  Pension  and  Disability  Insurance  System”,  adopted  in  2017  by 
the  Economic  and  Social  Council,  it  was  foreseen  by  the  social  partners  and  the 
previous  government  to  adopt  a  reform  by  2020  and  the  national  reform  programme 
2019-2020  mentions  the  possibility  of  an  overhaul  of  the  pension  system  to  support 
the  medium  to  long-term  sustainability  of  the  system  and  appropriate  levels  of 
pensions.  It  also  sets  the  objective  of  extending  working  lives  and  providing  better 
opportunities  for  exploiting  the  human  resources  of  older  workers,  but  it  does  not 
specify how and when to achieve this objective. Adjusting the statutory pension age in 
line  with  increased  life  expectancy  and  promoting  later  retirement  would  make  the 
system  more  sustainable.  Ensuring  adequate  pensions  remains  a  challenge,  as  some 
pension  recipients  are  still  at  or  below  the  poverty  line.  Almost  70%  of  all  self-
employed  people  in  Slovenia  choose  to  pay  social  security  contributions  at  the 
minimum level entitling them to the minimum old-age pension only. The adequacy of 
pensions  could  be  further  improved  by  boosting  the  coverage  of  the  supplementary 
pension schemes, appropriately addressing changing career paths and by reducing old-
age poverty risks. 

EN 

3 

  EN 

 
(11)  Employment continued to rise and unemployment fell further. At the same time, long-
term unemployment remains above pre-crisis levels and still represents almost half of 
all  unemployment.  Challenges  persist  in  particular  for  low-skilled  and older  workers 
as  their  activity  and  employment  rates  remain  among  the  lowest  in  the  EU.  Their 
participation in adult learning is very low. Evaluation of policies to encourage people 
into  work  or  training  shows  that  most  existing  programmes  are  performing  well. 
However,  spending  in  this  field,  and  the  participation  rate  of  low-skilled  and  older 
unemployed  people  in  the  programmes  remain  limited.  Therefore,  investments  in 
efficient  measures  to  increase  the  employability  of  low-skilled  and  older  workers, 
including in digital skills, is of particular importance. Increasing the employment rate 
of older workers will also help ease pressures on the pension system. While the 2013 
labour  market  reform  clearly  helped  certain  vulnerable  groups  enter  employment, 
temporary employment remains an issue. The rate of people at risk of poverty or social 
exclusion decreased but remains above the EU average for the elderly. 

(12)  Signs of labour shortages are emerging in more and more sectors of the economy. A 
mismatch between the skills young people acquire during their education and the skills 
sought  by  employers  appears  to  contribute  to  such  shortages.  Together  with 
deficiencies in the functioning of the ecosystems for innovation, these shortages hinder 
industrial  transformation  in  the  priority  areas  of  the  smart  specialisation  strategy  as 
defined  in  consultation  with  stakeholders.  Developing  digital  skills  in  the  future 
workforce is crucial to meet the needs of the economy.  

(13)  Some measures have been or will be adopted to improve funding options for firms in 
Slovenia  and  to  provide  them  with  alternatives  to  bank  loans.  However,  Slovenia’s 
businesses still heavily rely on bank loans and cash flow to meet their funding needs. 
Access  to  equity  from  private  markets  remains  low.  Venture  capital  provision  is 
growing, but from a very low level. The market capitalisation of the stock exchange in 
Ljubljana  is  low  and  continues  to  shrink.  The  limited  and  underdeveloped  capital 
market, combined with unfavourable framework conditions including the low financial 
literacy  of  smaller  firms,  hampers  the  inflow  of  equity  and  venture  capital  into  the 
country.  The  difficult  access  to  equity  presents  a  growth  barrier  for  innovative 
companies  but  also  for  established  businesses  which  could  benefit  from  a  change  in 
funding.  

(14)  Slovenian  businesses  are  held  back  by  the  country’s  still  high  regulatory  and 
administrative burden. This burden is considered a key problem for doing business in 
Slovenia.  It  relates  to  issues  such  as  permits,  reporting  requirements,  tax  procedures 
and often lengthy commercial court proceedings. Difficulties in prosecuting economic 
and financial crime also impact the business environment. Slovenia has created tools 
to  reduce  administrative  burden,  including  the  SPOT  portal  (‘Slovenska  poslovna 
točka’)  and  the  ‘Single  Document’,  which  address  several  of  the  identified  burdens. 
However, many of the burden-reduction measures are still pending and the impact of 
some  that  have  been  implemented  has  been  below  expectations.  Slovenia  has  also 
carried  out  some  reforms 
liberalise  restrictive  professional  requirements. 
Nevertheless, some parts of the country-specific recommendations from 2017 remain 
unaddressed, in particular as regards lawyers and real estate agents. 

to 

(15)  There are weaknesses regarding competition and transparency in  public procurement 
in  Slovenia,  as  indicated  notably  by  the  high  ratio  of  contracts  arranged  through 
negotiated procedures (without a call). The safeguards against corruption and collusion 
among  bidders,  notably  in  procurement  by  local  administrations  and  by  state-owned 
enterprises, remain weak. Independent oversight of public procurement lacks sufficient 

EN 

4 

  EN 

 
legal  safeguards  against  external  pressure  or  interference,  particularly  regarding  the 
disciplinary  procedures  and  the  proposal  for  appointing  members  of  the  National 
Review  Commission.  An  action  plan  to  increase  the  professionalisation  of  those 
involved  in  procurement  has  been  put  in  place,  but  professionalisation  is  still  low. 
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. 

(16)  Despite the partial privatisation of 65% of the shares of Slovenia’s largest bank, Nova 
Ljubljanska  Banka,  state  involvement  in  the  economy  is  still  high,  including  in  the 
financial  sector.  The  previously  published  plans  for  privatisation  have  been 
implemented  slowly.  Proceeding  with  privatisations  would  increase  the  viability  of 
companies in the long run and lower the risks for public finances as well as the risk of 
distorting  competition  and  resource  allocation.  Further  sales  of  shares  in  listed 
companies would also help develop Slovenia’s capital market. 

(17)  The  research,  development  and  innovation  ecosystem  requires  improvements  to 
become fully functioning and support measures often lack coherence. Limited support 
for business education and technology transfer, and, more generally, weak cooperation 
between  science  and  business,  hinders  the  creation  and  scaling  up  of  innovative 
companies.  Most  small  and  medium-sized  enterprises  in  Slovenia  have  a  low 
innovation  capacity  and  the  share  of  innovative  companies  in  Slovenia  is  indeed 
decreasing  and  below  the  EU  average.  Slovenia’s  slow  digital  transformation  limits 
productivity  growth.  There  are  discrepancies  in  the  innovation  performance  between 
Slovenia's  eastern  and  western  regions,  which  hinder  cooperation  and  networking. 
Slovenia  is  reversing  its  progress  towards  the  2020  research  and  development 
spending  target  at  the  same  time  as  an  increase  in  investment  into  research, 
development  and  innovation  would  strengthen  the  country’s  growth  potential. 
Slovenia  attracts  a  low  share  of  international  students  at  all  levels  of  post-secondary 
education,  especially  at  the  doctoral  level  while  international  mobility of  researchers 
and mobility between academia and industry remain limited. 

(18)  For  the  period  until  2030,  Slovenia  has  set  out  objectives  in  terms  of  energy 
infrastructure,  energy  efficiency  and  renewables  in  its  draft  national  energy  and 
climate  plan,  which  all  require  appropriate  investments.  In  particular,  Slovenia’s 
economy is more carbon intensive than the EU average, and the share of renewables in 
total  energy  production  is  stagnating.  The  development  of  renewable  energy  sources 
other  than  wood  and  hydropower  is  particularly  slow.  Slovenia’s  industry,  services 
and residential  sector  all account  for higher shares of total  final  energy consumption 
than  the  EU  average.  Moreover,  existing  energy  storage  capacity  is  underdeveloped 
and  so  fails  to  address  the  needs  deriving  from  non-integrated  local  production  of 
renewable energy sources.  

(19)  Transport  has  become  the  biggest  source  of  CO2  emissions:  its  share  of  total 
emissions  is  above  the  average  share  of  this  sector  in  the  EU.  Slovenia’s  heavy 
reliance  on  road  transport  creates  problems  of  high  energy  and  carbon  intensity,  as 
well as air pollution and road accidents. There is significant scope for improvement in 
rail infrastructure as well as in low carbon energy and sustainable transport in general, 
which  could  help  reducing  these  negative  effects.  Important  investment  gaps  also 
remain  in  the  area  of  natural  resources  to  ensure  a  more  sustainable  development 
model.  Slovenia’s  economy  depends  on 
is 
deteriorating. High dependence on imported raw materials, coupled with low recycling 
rates,  hinder  the  transition  to  a  circular  economy.  The  state  of  the  urban  wastewater 
sector  system,  including  collection  and  treatment  infrastructure,  does  not  fully  meet 

its  natural  environment,  which 

EN 

5 

  EN 

 
EU  requirements.  Substantial  parts  of  Slovenia’s  economy  are  vulnerable  to  natural 
disasters, in particular floods.  

(20)  The programming of EU funds for the period 2021-2027 could help address some of 
the  gaps  identified  in  the  recommendations,  in  particular  in  the  areas  covered  by 
Annex  D  to  the  country  report7.  This  would  allow  Slovenia  to  make  the  best  use  of 
those funds in respect of the identified sectors, taking into account regional disparities. 
Strengthening the country’s administrative capacity for the management of these funds 
is an important factor for the success of this investment. 

(21) 

In  the  context  of  the  2019  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Slovenia’s  economic  policy  and  published  it  in  the  2019 
country  report.  It  has  also  assessed  the  2019  Stability  Programme  and  the  2019 
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.  This  reflects  the  need  to  strengthen  the 
Union’s  overall  economic  governance  by  providing  Union-level  input  into  future 
national decisions.  

(22) 

In  the  light  of  this  assessment,  the  Council  has  examined  the  2019  Stability 
Programme and its opinion8 is reflected in particular in recommendation (1) below. 

HEREBY RECOMMENDS that Slovenia take action in 2019 and 2020 to: 

1. 

2. 

3. 

Achieve  the  medium-term  budgetary  objective  in  2020.  Adopt  and  implement 
reforms in healthcare and long-term care that ensure quality, accessibility and long-
term  fiscal  sustainability.  Ensure  the  long-term  sustainability  and  adequacy  of  the 
pension  system,  including  by  adjusting  the  statutory  retirement  age  and  restricting 
early  retirement.  Increase  the  employability  of  low-skilled  and  older  workers  by 
improving  labour  market  relevance  of  education  and  training,  lifelong  learning  and 
activation measures, including through better digital literacy. 

Support  the  development  of  equity  markets.  Improve  the  business  environment  by 
reducing  regulatory  restrictions  and  administrative  burden.  Improve  competition, 
professionalisation  and  independent  oversight  in  public  procurement.  Carry  out 
privatisations in line with the existing plans. 

Focus  investment-related  economic  policy  on  research  and  innovation,  low  carbon 
and  energy  transition,  sustainable  transport,  in  particular  rail,  and  environmental 
infrastructure, taking into account regional disparities. 

Done at Brussels, 

For the Council 
The President 

7 
8 

SWD(2019) 1023 final. 
Under Article 5(2) of Council Regulation (EC) No 1466/97. 

EN 

6 

  EN