Austerity measures cause conflict

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On 18 April 2012, a one day general strike in the public sector was held in protest at the Slovenian government’s package of austerity measures. Around 100,000 workers from 23 public sector unions took part in the strike. On 10 May 2012, after a month of negotiations, the government and the unions signed an agreement on austerity measures in the public sector. However, a new austerity package and legislation are said to be in preparation, and this is likely to lead to more conflict.

Background

A new government, led by by Janez Janša, leader of the centre-right Slovenian Democratic Party (SDS) took office on 10 February 2012. Its first act was to announce the adoption of an austerity package, presented to the social partners at the Economic and Social Council of Slovenia (ESSS) session, the country’s central body for tripartite cooperation, on 22 March 2012.

The most significant measures concerned the lowering of labour costs in the public sector to achieve the greatest part of the €800 million savings the government anticipated. This included, among other measures, a wage cut for functionaires (government officials) and public sector workers of 15%, and the abolition of the so-called annual leave bonus. Other measures included the lowering of sick leave and maternity pay, and cuts to child benefit and to annual benefits for pensioners. The abolition of free nursery care for second children and changes to education standards were also proposed.

Back in late February 2009, the government and the representatives of 23 public sector trade unions had signed an austerity pay deal for 2009–2010. Under that agreement, wage growth in the public sector in 2009 was to be reduced from 9.9% to 7.1%.

On 22 July 2010, the government and some public sector trade unions concluded an amendment to the public sector's collective agreement, freezing wages. On 23 December 2011, the Slovenia National Assembly unanimously passed a fiscal austerity bill to keep social benefits, pensions and public sector pay frozen at 2010 levels in the first half of 2012.

Reaction of public sector trade unions

The new government and unions were quick to begin negotiations on the proposed austerity measures, especially on wage cuts, but found little common ground. The government then submitted the draft Rebalance of the State Budget for 2012 and the draft Law of Public Finance Balance (LPFB) to the Slovenian parliamentary procedure

The unions accused the government of destroying the welfare state. The government promised only to adopt the measures with the agreement of social partners. However, the social partners, especially the unions, said the government had not given them enough time to analyse the measures and their potential consequences.

They said that the measures would hit the most vulnerable areas of the population hardest, and that they were unfair to public employees.

At the beginning of April 2012, the unions threatened to go on strike, and later 23 of them announced industrial action. Negotiations continued, but were not successful.

General strike goes ahead

On 18 April 2012, a general strike of public sector workers against the austerity measures was held in Slovenia. It was the second public sector general strike – the first one was in autumn 2010.

Around 150,000 people are employed in the public sector (SI0611029Q) (SI0708039I) (SI0510304F) and there are 32 public sector trade unions.

According to an estimate by the national broadcaster RTV Slovenia, around 100,000 workers took part in the industrial action. They were members of 23 unions, including those representing vets, customs officers, firefighters, police officers and school teachers – but not doctors and dentists. In Slovenia’s bigger cities unions organised protest demonstrations.

Agreement on the resolution of strike demands signed

Negotiations continued and on 10 May 2012, after a month of talks, the government and the unions signed an agreement on austerity measures in the public sector. The deal was sealed when the Agreement on the Resolution of Strike Demands (ARSD) was concluded by the Coordination of Strike Boards of the Public Sector Trade Unions and the Government of the Republic of Slovenia (SI1205019I).

Under the Law of Public Finance Balance, adopted on 11 May 2012, the wages of public sector workers were reduced by 8% from the beginning of June.

Commentary

A clause in the ARSD says that the government will not make any changes to the pay of public employees until the end of 2013. However, RTV Slovenia and daily newspaper Delo have reported that a new austerity package and further legislation are being prepared. If this is true, it will cause huge conflict with both private and public sector trade unions.

Meanwhile, the three main international credit ratings agencies downgraded Slovenian sovereign debt in August 2012 despite the adopted package of austerity measures.

It appears that Slovenia is slipping into a grave banking crisis. In a report on the Slovenian economy on 18 August 2012, The Economist magazine said Slovenia was still paying the price for a boom that veered out of control. Between 2004 and 2006, the economy grew on average by nearly 5% a year – in 2007, it expanded by almost 7%. However, the growth was fuelled by debt, particularly among firms, and especially in construction.

The boom ended in severe recession in 2009 and a renewed downturn in 2011, leaving Slovenia’s banks particularly vulnerable. Non-performing loans are high and rising fast. As foreign creditors take fright, the banks are becoming heavily dependent on liquidity provided by the European Central Bank. The government recently had to inject €380 million (1% of GDP) into the mainly state-owned Nova Ljubljanska Banka (NLB), the country’s largest lender. Because of the anticipated recapitalisation of the banks from the budget, which may yet prove to be impossible, long term bond yields have increased beyond the critical 7% level.

Instead of recession, Slovenia will need substantial economic growth in order to raise enough revenue to cover its debts. That looks unlikely to happen because of growing unemployment and falling domestic demand, caused in part by austerity measures.

RTV Slovenia has publicised a report in the German newspaper Süddeutsche Zeitung. In it, economist Vladimir Gligorov at the Vienna Institute for International Economic Studies (wiiw), says he believes the government plan to reduce the budget deficit to 3% of GDP will prove too optimistic, and the deficit will be nearer 4.5% of GDP. He added that it would be sensible for Slovenia to ask for help the from the International Monetary Fund (IMF) or the eurozone.

Štefan Skledar, UMAR

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