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IMAD Boss Says Not Too Late for Reforms

Ljubljana, 27 September (STA) - Boštjan Vasle, the head of the Institute for Macroeconomic Analysis and Development (IMAD), told the latest edition of the weekly Demokracija it was not too late for reforms in Slovenia. If the needed structural reforms are implemented, the country will still be able to find funding on international markets on its own, he said.

If Slovenia wants to return to economic growth in 2014, it needs reforms of the pension system and labour market as well as those linked to public finances and productivity, stressed the head of the government's think tank, which downgraded its economic growth forecast for 2013 last week to a 2% contraction of GDP.

From the macroeconomic perspective, Vasle said it was also crucial to address as soon as possible the problems of the country's three biggest banks, which constitute the bulk of Slovenia's banking system, and to clean them up in a way that will allow new crediting.

He said he hoped the government's measures - a bad bank is planned to be set up to take over the banks' bad loans - will be implemented soon and will allow resuming investment activities and consequently lead to economic growth.

On the other hand, Vasle pointed out that Slovenia had been facing excessive public spending since it became independent - an unsustainable "gap between...its potential for generating revenues from taxes and what we think needs to be funded".

In its latest forecast, IMAD did not include potential changes in tax regulation, but it did include the expected retirements of 5,000-6,000 people in the public sector and the expiry of fixed-term contracts of a further 2,000.

By not replacing these jobs, the government could come close to what it expects to save in this area, Vasle noted, adding that results in this respect would show whether layoffs in the public sector would also be needed to reach budget goals.

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