Slovenia loosens debt brake as EU fiscal rules evolve

Slovenia's parliament has endorsed legislation that loosens the constitutionally-imposed debt brake following last year's overhaul of fiscal rules at EU level.

Under the recently revised EU fiscal rules, fiscal policy should focus on the medium-term path and core expenditure, rather than multi-year goals that can easily be affected by data revisions, forecast changes, and one-off expenditure, CE Report quotes The Slovenia Times.

The amended Fiscal Rule Act thus changes the way the medium-term fiscal balance is defined.

It determines that general government revenue and expenditure will be considered balanced in the medium term if debt remains below 60% of gross domestic product (GDP), deficit is below 3% of GDP, and both are below this limit over the medium term.

This will give government more leeway to increase spending in the event of downturns.

In periods when the balance is not achieved, the trajectory of expenditure must follow a four-year fiscal and structural plan.

Fiscal rules were introduced in the EU in 2011 as an attempt to limit borrowing by member states to prevent a deepening of the debt crisis in the eurozone at the time.

The broadly defined rule was enshrined in the Slovenian constitution in 2013 after months of political fighting, and the National Assembly passed the implementing law, which determines the rule's details, in 2015.

Any changes to the law require a two-thirds majority. The 28 March parliamentary vote was 86 for and only one against in the 90-member legislature.