Slovenia plans tax increases, postpones parliament vote on budget cap

Slovenia plans to increase taxes to make up for the swelling budget shortfall as the country works to recapitalize its banks. The government will increase the sales tax and introduce a “crisis” tax on wages, Prime Minister Alenka Bratusek told reporters Monday. The country’s largest banks need €900 million ($1.2 billion) by the end of July, according to the government. That capital boost will widen the budget deficit to 7.8% this year from 4% at the end of 2012, Bratusek said. “Fixing the banks is our main priority since they are essential for an economic recovery,” Bratusek said, quoted by Bloomberg, adding the package of measures is still in a draft stage. The Southeast European country bought some breathing space last week when it managed to issue two bonds to a joint value of $3.5 billion on Thursday, while government sources told Reuters on Monday the country plans to sell its second largest bank Nova KBM and telecoms operator Telekom Slovenia this year to raise budget income. Slovenia had also pledged to set the cap on the budget deficit but after parties failed to agree the terms of the so-called golden fiscal rule on Tuesday, MPs postponed a parliamentary vote until later in May. By then parliamentary parties will try to reach an agreement on whether the fiscal rule should apply from 2017, as the government suggests, or 2015 as demanded by the conservative opposition. The fiscal reform entails changing the constitution, which requires a two-thirds majority in parliament. The center-left government coalition controls 49 out of 90 parliamentary seats.