LJUBLJANA: Slovenia, once one of the fastest-growing new members of the EU, is still struggling to get its economy back into shape following the deep recession caused by the global crisis two years ago.
Growth may be set to pick up to 2.5 percent this year from 0.9 percent last year but that will solely be by virtue of its exports, primarily to Germany.
Prime Minister Borut Pahor's efforts to put the economy on a more balanced and sustainable footing via much-needed, if deeply unpopular, reforms have effectively been roadblocked by the opposition parties and the unions.
Mid-way through its four-year term, the centre-left government is facing its deepest crisis since coming to power in 2008, with its popularity at an all-time low and as many as six ministers throwing in the towel within a space of just two years.
Last week, Pahor refused to let go of one of his closest allies, finance minister Franc Krizanic, despite a demand by Slovenia's Court of Audit to sack him over alleged irregularities in the country's public accounting.
The whole affair "can seriously damage Slovenia's international reputation" said Janez Sustersic, an economics professor at the Faculty of Management in Koper and former head of the national statistics office.
The Court of Audit is one of the country's main institutions, even if it has no concrete powers.
Last year, Pahor sacked his environment minister, Karel Erjavec, at its behest.
The court then turned its sights on Krizanic earlier this month, accusing him of mishandling the privatisation of a shipping company and failing to provide a clear picture of the public finances and the level of public debt.
Given the recent crises elsewhere in the eurozone over false or misleading financial data, such accusations weigh heavily.
Slovenia's statistics office felt compelled this week to reassure the public that the data provided by Ljubljana to Brussels were indeed reliable and accurate.
But Pahor stood by Krizanic last Thursday, saying: "Franc Krizanic stays as finance minister."
Krizanic, for his part, insisted he had done nothing wrong, and the ministry reacted "in time and adequately" to implement all the corrective measures proposed by the Court of Audit.
Slovenia's public debt is rising -- the latest data put it at 37.9 percent of gross domestic product (GDP) at the end of 2010, up from 35.4 percent of GDP a year earlier.
But it is still below the 60-percent ceiling set by the EU, so analysts see no danger of Slovenia turning into a new Greece or Ireland for the single currency area, which the former Yugoslav republic joined in 2007.
"We avoided an Irish or Greek (bailout) scenario thanks to the fact that, at the start of the crisis, we had more room for manoeuvre due to a relatively low public debt," economist Sustersic told AFP.
At the same time, Ljubljana's public deficit, perhaps the more important gauge of a country's financial health, is in excess of the 3.0-percent limit required by Brussels.
The government is pencilling in a deficit equivalent to 4.7 percent of GDP this year, down from an estimated 5.4 percent in 2010.
But experts and economists insist that a raft of unpopular economic and social reforms are needed if the deficit is to be brought down further.
Last year, Pahor froze public sector wages, proposed a shake-up of the labour market and an overhaul the pension system.
But the plans have been held up by unions, who are demanding a referendum on the pension reform before it can become law.
With political parties already beginning to look to the next elections just two years away, analysts suggest Pahor's reform commitment might soon falter.
Last month, international rating agency Standard & Poor's downgraded its outlook for Slovenia amid such concerns.
"We've now entered the second half of the government's four-year term and the will for reforms might soon weaken," Sustersic said.
Maks Tajnikar, professor at Ljubljana's Faculty of Economy, said "we need an urgent implementation of the pension reform, there is no other way. A referendum would significantly postpone Slovenia's return to a balanced budget."
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