Ljubljana, 14 October (STA) - Slovenian society will have to face up to the fact that painful cuts will be needed if Slovenia is to turn around its economy, a former finance minister and an ex-boss of Slovenia's largest bank have told a panel held as part of FDI Summit development conference on Friday.
Former Finance Minister Dusan Mramor, who now acts as the dean of the Ljubljana Economics Faculty, and former boss of the NLB bank Marko Voljc said that Slovenia had entered the economic crisis unprepared.
Slovenia was basking in the glory of its success in the past when the crisis struck, which is why the causes of its current problems must be sought at home, the pair agreed.
Despite the current difficulties, Mramor rejects comparisons between Slovenia and Greece. He says that macroeconomic data are by no means as weak, although he is worried by the current state of society, which does not want to accept change.
"We know what we must do, but we don't do it," he warned. This was echoed by Voljc, the CEO for Central and Eastern Europe and Russia at Belgian financial group KBC: "There is a lack of political and social will to implement changes."
While people are trying to fight off anything that would curb their privileges, in the short run it will be almost impossible to avoid a cut in living standards in the short run, Voljc added.
Mramor highlighted that one of the issues that Slovenia must attend to immediately is long-term fiscal sustainability.
Moreover, it must also attend to the ageing population and demonstrate to financial markets that Slovenia's finance are sound.
In reducing its deficit, Slovenia must focus on items that have the lowest multiplier effect in the economy: wages, social transfers and costs of material, said Mramor, who does not see much room for cutting taxes.
Meanwhile, the director of the Ljubljana Technology Park Iztok Lesjak called for public money to be spent on better purposes, such as investment in value added.
Slovenia must build on know-how and producing companies that can adapt to conditions on the global market, Lesjak said.
Touching on the troubles of Slovenia's banking system, Voljc pointed to the fact that most countries in eastern Europe had decided to sell their banks to strategic investors, which provided them with capital during the crisis.
Slovenia had decided to keep the two biggest banks in state ownership, which is why the state must now foot the bill of injecting them with fresh capital.
According to Mramor, the current conditions mean that the state will have to start thinking about selling of its investments which it has not managed well in the past.