CELEX: 52015DC0273
Language: en
Date: 2015-05-13 00:00:00
Title: Recommendation for a COUNCIL RECOMMENDATION on the 2015 National Reform Programme of Slovenia and delivering a Council opinion on the 2015 Stability Programme of Slovenia

EUROPEAN
                       COMMISSION
                                               Brussels, 13.5.2015
                                               COM(2015) 273 final
                               Recommendation for a
                        COUNCIL RECOMMENDATION
               on the 2015 National Reform Programme of Slovenia
   and delivering a Council opinion on the 2015 Stability Programme of Slovenia
EN                                                                              EN
 ---pagebreak---                                          Recommendation for a
                                     COUNCIL RECOMMENDATION
                        on the 2015 National Reform Programme of Slovenia
         and delivering a Council opinion on the 2015 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 26 March 2010, the European Council agreed to the Commission’s proposal to
            launch a new strategy for growth and jobs, Europe 2020, based on enhanced
            coordination of economic policies, which will focus on the key areas where action is
            needed to boost Europe’s potential for sustainable growth and competitiveness.
   (2)      On 13 July 2010, the Council, on the basis of the Commission's proposals, adopted a
            recommendation on the broad guidelines for the economic policies of the Member
            States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on
            guidelines for the employment policies of the Member States, which together form
   1
           OJ L 209, 2.8.1997, p. 1.
   2
           OJ L 306, 23.11.2011, p. 25.
   3
           COM(2015) 273
   4
           P8_TA(2015)0067, P8_TA(2015)0068, P8_TA(2015)0069
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 ---pagebreak---         the ‘integrated guidelines’. Member States were invited to take the integrated
        guidelines into account in their national economic and employment policies.
   (3)  On 8 July 2014, the Council adopted a recommendation on Slovenia’s National
        Reform Programme for 2014 and delivered its opinion on Slovenia’s updated
        Stability Programme for 2014. On 28 November 2014, in line with Regulation (EU)
        No 473/20135, the Commission presented its opinion on Slovenia's draft budgetary
        plan for 20156.
   (4)  On 28 November 2014, the Commission adopted the Annual Growth Survey7,
        marking the start of the 2015 European Semester of economic policy coordination.
        On the same day, on the basis of Regulation (EU) No 1176/2011, the Commission
        adopted the Alert Mechanism Report8, in which it identified Slovenia as one of the
        Member States for which an in-depth review would be carried out.
   (5)  On 18 December 2014, the European Council endorsed the priorities for boosting
        investment, accelerating structural reforms and pursuing responsible growth-friendly
        fiscal consolidation.
   (6)  On 26 February 2015, the Commission published its 2015 country report for
        Slovenia 9. The country report assessed progress in addressing the country-specific
        recommendations adopted on 8 July 2014. For Slovenia, the country report also
        includes results of the in-depth review under Article 5 of Regulation (EU) No
        1176/2011. The Commission's analysis leads it to conclude that Slovenia is
        experiencing macroeconomic imbalances, which require decisive policy action and
        specific monitoring. In particular, the rebalancing is ongoing and decisive policy
        actions, improved export performance and growth conditions have reduced risks
        compared to last year, in particular those linked to external sustainability. However,
        weak corporate governance, a high level of state ownership, high corporate leverage,
        and an increasing public debt pose risks for financial stability and growth and
        warrant close attention. The imbalances are therefore no longer considered as
        excessive but continue to deserve close attention.
   (7)  On 30 April 2015, Slovenia submitted its 2015 National Reform Programme and its
        2015 Stability Programme. In order to take account of their interlinkages, the two
        programmes have been assessed at the same time.
   (8)  Slovenia is currently in the corrective arm of the Stability and Growth Pact. In its
        2015 Stability Programme, the government plans to correct the excessive deficit by
        2015, in line with the deadline set by the Council, and to reach the medium-term
        objective – a balanced budgetary position in structural terms – by 2020, i.e. one year
        after the programme period. The government plans to gradually reduce the headline
        deficit to 2.9 % of GDP in 2015 and to 0.9% of GDP in 2019. According to the
        Stability Programme, the government debt-to-GDP ratio is expected to peak in 2015
        at 81.6% before starting to decline. The macroeconomic scenario underpinning these
        budgetary projections is plausible. Based on the Commission's 2015 spring forecast,
        a timely and durable correction of the excessive deficit by 2015 is foreseen. At the
        same time, the fiscal effort is below what is recommended by the Council, based on
   5
       OJ L 140, 27.5.2013, p.11.
   6
       C(2014) 8813 final
   7
       COM (2014) 902
   8
       COM(2014) 904
   9
       SWD(2015) 43 final/2
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 ---pagebreak---         the structural balance and the discretionary measures taken. Assuming a timely
        correction of the excessive deficit as planned, Slovenia will be subject to the
        preventive arm of the Pact as of 2016. Measures to support the planned deficit targets
        from 2016 onwards have not been sufficiently specified. Therefore, in the light of the
        Commission's 2015 spring forecast, there appears to be a risk of a significant
        deviation from the required adjustment towards the medium-term objective in 2016
        and further measures will be needed. Based on its assessment of the Stability
        Programme and taking into account the Commission's 2015 spring forecast, the
        Council is of the opinion that there is a risk that Slovenia will not comply with the
        provisions of the Stability and Growth Pact. With respect to the fiscal rules, in 2013
        the parliament approved a constitutional basis for establishing a general government
        budget balance / surplus rule in structural terms. However, the necessary
        implementing legislation has yet to be adopted. Revisions to the Public Finance Act
        are expected to provide the necessary legislative basis for the procedural issues
        underpinning the Fiscal Rules Act.
   (9)  Slovenia has taken action to alleviate pressures on the medium-term sustainability of
        the pension system but key parameters still need to be adjusted to ensure its
        sustainability beyond 2020. The 2013 pension reform has had a positive impact and
        the legal act establishing a demographic fund is expected to be adopted in June 2015.
        However, ensuring the long term sustainability of pensions will require further
        reform. No progress has been made as regards the long-term care reform. At the end
        of 2013, the government adopted a blueprint for long-term care reform but the
        adoption of the legislation implementing the reform has been postponed to the end of
        2015 in order to allow prior decisions on health insurance reform including the
        question of sources to finance overall healthcare and long-term care. Age related
        expenditure on long-term care can be contained by targeting benefits to those most in
        need and by refocusing care provision from institutional to home care.
   (10) A Social Agreement was concluded in January 2015 providing that public sector
        wage growth will lag behind private sector wage growth. The composition and
        indexation of minimum wages are not covered by this agreement. While still
        relatively high compared to the average wage, recent growth of the minimum wage
        has been limited. An evaluation of the 2013 labour market reform shows that labour
        market restrictions have decreased, but structural problems persist as regards the
        long-term unemployment and the low employment rates of low-skilled and older
        workers. Slovenia has undertaken some action to address the skills mismatch and
        numerous other measures are planned until 2020.
   (11) The banking sector has been further stabilised through the recapitalisation of Abanka
        and Banka Celje in 2014. A comprehensive action plan for banks has been finalized
        and submitted to the Prime Minister office in January 2015. The Bank of Slovenia
        has ensured follow-up of the shortcomings identified by the 2013 Asset Quality
        Review and will resume on-site inspections in the first quarter of 2015 to verify
        whether the recommendations have been implemented by banks. The major banks
        have reorganised and reinforced their work-out and restructuring units. However,
        boosting the long-term profitability and reducing non-performing loans in the
        corporate sector are necessary for a healthier banking sector. Both the corporate
        restructuring master plan and a centralised corporate restructuring task force have
        been established. Further deleveraging of the corporate sector, including through the
        Bank Asset Management Company and by full application of the new insolvency
        legislation, would help restore the conditions for a rebound of private investment.
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 ---pagebreak---         Bank lending activity continues to decline, mainly affecting SMEs. The recent
        banking sector recapitalisation is expected to show full results only in 2016.
        Restrained bank lending and high interest rates are weighing on the financing
        capacity of SMEs. While the proportion of rejected loan applications has decreased
        over the past six years, the number of SMEs reporting a deterioration in the
        willingness of banks to provide loans has increased substantially and is one of the
        highest in the EU.
   (12) The privatisation programme is progressing, albeit with delays. The restructuring of
        the five major state-owned banks and the wind-down of two smaller domestic banks
        are on track. The Slovenian Sovereign Holding, responsible for the management and
        divestment of state assets, is now fully operational. A draft asset management
        strategy is still to be approved by the Slovenian parliament and this is expected to be
        followed by the release of the divestment schedule for a number of well- targeted
        state-owned assets. A new corporate governance code has been adopted by the
        Slovenian Sovereign Holding in December 2014 and in January 2015 a compliance
        officer was appointed.
   (13) The efficiency of the courts further improved in 2014, although at a slower pace.
        While some progress in reducing the length of judicial proceedings at first instance in
        litigious civil and commercial cases has been made, including in cases under the
        insolvency legislation, the length of proceedings and the number of unresolved cases
        backlogs remain significant.
   (14) An unsupportive business environment in Slovenia is a key factor for low investment
        levels in Slovenian business and the high number of laws and numerous changes in
        the legislation make it difficult to run a business and comply with local regulation.
        The number of regulated professions has decreased from 323 to 242 but remains
        high. Around 25% of measures included in the Single Document to cut
        administrative burden were implemented. Sufficient budgetary autonomy for the
        Competition Protection Agency and institutional independence are provided.
   (15) The new government reiterated its commitment to fight corruption and adopted a
        new two-year programme of 11 perennial measures in January 2015. Some progress
        has been made regarding transparency and accountability. A comprehensive public-
        sector reform is in preparation. No progress has been made regarding reports on
        performance evaluation and quality control procedures.
   (16) In the context of the European Semester, the Commission has carried out a
        comprehensive analysis of Slovenia’s economic policy and published it in the 2015
        country report. It has also assessed the Stability Programme and the 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 socio-economic policy in Slovenia but also their compliance with EU rules
        and guidance, given the need to reinforce the overall economic governance of the
        European Union by providing EU-level input into future national decisions. The
        recommendations under the European Semester are reflected in recommendations 1
        to 4 below.
   (17) In the light of the Commission's in-depth review and this assessment, the Council has
        examined the National Reform Programme and the Stability Programme. The
        recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in
        recommendations (1) to (4) below.
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 ---pagebreak---    (18)    In the context of the European Semester the Commission has also carried out an
           analysis of the economic policy of the euro area as a whole. On the basis of this
           analysis, the Council has issued specific recommendations for the Member States
           whose currency is the euro. Slovenia should also ensure the full and timely
           implementation of these recommendations.
   HEREBY RECOMMENDS that Slovenia take action within the period 2015-2016 to:
   1.      Ensure a durable correction of the excessive deficit in 2015, and achieve a fiscal
           adjustment of 0.6% of GDP towards the medium-term objective in 2016. Adopt the
           Fiscal Rule Act and revise the Public Finance Act. Advance long-term reform of the
           pension system. By end of 2015 adopt a healthcare and long-term care reform.
   2.      Review, in consultation with the social partners and in accordance with national
           practices, the mechanism for setting the minimum wage, and in particular the role of
           allowances, in light of the impact on in-work poverty, job creation and
           competitiveness. Increase the employability of low skilled and older workers. Take
           measures to address long-term unemployment and provide adequate incentives to
           extend working lives.
   3.      Bring down the level of non-performing loans in banks by introducing specific
           targets. Improve credit risk monitoring capacity in banks. Continue corporate
           restructuring and maintain strong corporate governance in the Bank Asset
           Management Company. Take measures to improve access to finance for SMEs and
           micro companies. Adopt a strategy for the Slovenian Sovereign Holding with a clear
           classification of assets, implement an annual asset management plan and apply
           performance criteria.
   4.      Ensure that the reforms adopted to improve the efficiency of civil justice help reduce
           the length of proceedings.
   Done at Brussels,
                                              For the Council
                                              The President
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