Prime Minister Janez Janša: We will do everything we can to maintain the European recovery and resilience agreement
The Slovenian Parliament today discussed the draft amending the budget of the Republic of Slovenia for 2021 and the amended draft of the budget for 2022. The RS Government submitted the drafts to the Slovenian Parliament for discussion. The introductory clarification of both drafts was presented at the Slovenian Parliament session by Prime Minister Janez Janša.
Below is the unauthorised transcription.
JANEZ JANŠA: Dear members of the Slovenian Parliament. Briefly on the Draft amending the budget of the Republic of Slovenia for the next year and on the amended budget for 2022, since we already talked about these acts in the last couple of weeks to a certain extent, it needs to be pointed out again that the circumstances regarding the public finance position of Slovenia and other EU member states remain unstable; today, however, income and expenditures may be planned in a more realistic way compared to the beginning of the first wave of the epidemic. Domestic and international institutions forecasting the growth or drop in the gross domestic product of gross domestic products in Europe, change these forecasts on a monthly, or at least quarterly basis, but they remain relatively the same as they were when we initially presented the budgetary documents.
In terms of the framework that was forecast for the entire European Union, Slovenia is slightly better positioned than the forecasts for the Eurozone, which we are all part of, and much better in indebtedness forecasts. Therefore, the average forecast indebtedness in the next three years for state debts in the European Union is much higher compared to our average or our forecasts, and the forecast state debt is predicted to be much higher in other EU member states compared to the forecasts for Slovenia by more than 100% of the gross domestic product, 90 or 95% for the European Union in the next three years, and Slovenia remains somewhere around 80% in these three years, or even somewhat below that in the last year. This relatively favourable public finance position of the state has an impact on our position on the financial markets as well, due to the measures which were adopted in the form of the anti-corona measures in due time, our ratings either stabilised or moved upwards in practically all the rating agencies, and these ratings are of course key when assessing the price of indebtedness, the price of achieving liquidity in the modern or financial world, which places Slovenia among those EU countries that have the most stable public finance position.
I may therefore cite various data or comparisons. The most illustrative information which shows we have also corrected our public finance position in terms of the international financial markets, is the fact that this year, in the year of the crisis, we will pay less for debts with interest than we paid last year. This means that the finance minister or the treasury successfully refinanced some debts from the past, that we paid them off with those that were taken with lower interest rates, and that this year’s debt servicing costs, when the whole of Europe and ourselves included are recording a drop in the gross domestic product, which is practically incomparable with normal times at any time in the history of the European Union, the price for indebtedness is lower than it was last year when the pandemic, and these drastic drops were nowhere to be seen.
We will continue with this robust approach to managing the public finance consequences of the epidemic, or we could say, the socio-economic consequences of the epidemic, in the next two years. Indicators on gross investments show that these will be significant in the next two years in Slovenia, approx. 6% in 2021 and over 4% in 2022. We will increase public investments. If, comparatively speaking, they will be around 4.5% this year, then they will increase to 5.8% next year, and 6% the year after.
We may also go beyond that, depending on how capable we will be in improving the environment which allows the investment of European funds, both from the recovery and resilience fund, as well as from the next seven year financial framework of the European Union. The package that was negotiated at the July session is still in its approval phase. The agreement on the European Union states that the decision of the European Council needs to be harmonised with the Parliament, and a uniform, consolidated budget proposal needs to be adopted in the end.
Based on the experience to date (and we have negotiated and were part of this process twice), this was usually some sort of a formality where certain programmes, which the European Parliament pushed forward, ensured a couple of billions from the reserves, and we then came to a common proposal which was unanimously approved both in the European Parliament as well as in the Council. Unfortunately, there were a couple of complications this year due to the fact that as of July, the European Council unanimously defined the financial frameworks for both key instruments, including the option of the European Union’s own funds and common borrowings, via the European Commission. This agreement was partially and positively amended during the negotiations with the leadersof the European Parliament; namely, more funds were allocated to some common programmes, from the protection of external borders, to more funds for Erasmus and certain other projects which were not on the priority list of the European Council when they spoke about trillions. However, these are smaller sums which can be ensured from the remainder of budgetary drawdowns on an annual level, and from certain reserves which always remain at such sums. Complications arose in conditioning.
The media told you that some countries do not accept the rule of law condition, and that the agreement is threatened by this. The situation needs to be explained, because I doubt you will get the right insights from the media. Full consensus, full consent was given at the European Council in July to the agreement that the rule of law is a cornerstone of the existence of the European Union. It is basically a fact that a country which does not accept the rule of law and whose operations are not in line with the rule of law, cannot, under contract, become a member of the European Union. This is why the Lisbon Treaty includes a provision which states that it is clear that a member state operates in line with the rule of law, and that nobody may take advantage of this by pressurising any member state with political motives to do anything that goes against the Treaty on European Union. It also states what happens when a country violates this Treaty, and within these rules is also the famous Article 7, on the basis of which the country may lose its voting rights should all the other countries agree with this. The violating country cannot veto this decision. However, the procedure is set in such a way that the court decides on whether somebody has violated the rule of law. The Lisbon Treaty, the Treaty on European Union, defines the procedure, where the final decision is made by the court, and the independent body established for the very purpose of issuing decisions in the event of such violations. After four days and four nights of discussions at the European Council in July, consent was achieved in the end, that is the legal framework. Those of us who are members of the European Union must respect it, and there were no reservations regarding the matter.
During later negotiations between the leadership of the European Parliament, the latter did not yet adopt this proposal, it is a sort of a technical agreement between the leadership of the European Parliament and the presiding country or presidency of the European Union council, that a certain condition was adopted in the end, which states that the court does not decide on whether somebody violates the rule of law and the Treaty, but rather the majority. The political majority in the framework of the European Union, the various institutions, a very complicated mechanism is proposed, and this mechanism may not be triggered by any competent institution of the European Union, not only, but also various non-government organisations, like in the case of Slovenia, the famous peace institute, which we all know how it operates. And in the end, the qualified majority may therefore vote to suspend financing a certain country with European funds. See, this instrument is, based on all the clarifications we were given in July, disputable in light of the Lisbon Treaty. The rule of law means that the final decision is made by an independent body, a non-political body. So, if we here in the Slovenian parliament or somewhere in the European Parliament adopt something by a majority, then this is a political decision, this is the decision of the legislative body or the legislative-consultative body in the European case, such is the status of the European Parliament. However, this is not the decision of an independent court. This way, anyone in the future may place any other country in a position where the financing of important European projects will simply be suspended.
I ask you what the atmosphere and relationship will be in that country with the European Union, especially towards a member state who will demand this, or towards the European institution. Imagine that, I don’t know, we receive some information that the bypass around Amsterdam is receiving strange financing and we propose to suspend the financing. Imagine the reaction in the Netherlands. Regardless of what happens in the end of the procedure, I assure you that within one year, the Netherlands will launch a process regarding the financing of a project in Slovenia, just because the public will demand this. This is the end of the European Union as we know it and as we imagined it, for which we voted at the referendum and with which we also agreed, with their legal framework by signing the Lisbon Treaty. I signed it myself, therefore I know what is written in it and Slovenia made great efforts during its presidency to have it ratified.
What is now on the table will not be going through, the media is full of it today how two countries blocked it. Before this, the media was full of information that this rule was adopted, or that it will be adopted by a simple, qualified majority in order to discipline Poland and Hungary, when we all know that parts of this package must be ratified by all the parliaments. Who in their right mind believes that the Polish or Hungarian parliaments would ratify a package for which it is said includes instruments on the basis of which the financing of the European projects in these two countries will be suspended?
Not on the basis of a court decision, which can be done even today, but after the majority in the European Parliament adopts such a decision. Luckily, the situation is not as the media are demonstrating, there have been no blockages yet, because neither the European Parliament nor the European Council or any one of the national parliaments adopted any decisions regarding the matter, which could, eventually, block this, only intentions were demonstrated which, of course, places the entire procedure under time pressure.
Imagine a broad, robust administrative undertaking presented by this financial package, almost two trillion euros with all the ratification procedure via national parliaments, the European Parliament, the European Council, and so on. Usually, we needed about a year for this, now we only have a month until the end of the year. There will be much activity here. In this sense, I believe that it is right that you are informed of what is really going on.
My position is that the agreement that was reached at the European Council in July when everything was on the table, when the further existence of the European Union was questioned, and when a framework was adopted unanimously, that this needs to be respected. If we do not respect this, then we may agree on something else, then someone will think that this is not okay and we will move forward, we are in the middle of the second wave of the epidemic.
Europe is badly affected, not just Slovenia, everyone. This will have an impact on many things. If these packages are not ratified in due time, and this may only be realised if the final agreement will be based on the July agreement, which was achieved with compromises from all sides, with, I will say, much drama, then this will have an impact on the economic and financial optimism in the European Union and beyond, on the stability of the euro, also on credit ratings, on the price of indebtedness, on forecasts which are still optimistic, or at least moderately optimistic. And Europe may wake up at the start of next year in a situation that will be poor, completely unnecessary, which it brought upon it itself.
We will therefore do everything in our power (we are also in a trio, the future and current presidencies) to keep the July agreement, to act rationally and to prevent the dissolution of the European Union, to prevent the depreciation of the euro, and to react sensibly in times when we actually have no idea what the price of the second wave will be, and we do not know whether we will be able to avoid the third covid wave due to the optimistic vaccination announcements. So much about that.
The finance minister will present some additional numbers. I would just like to say that during the draft of the seventh anti-corona package, which we need to adopt by the end of next month, we have been searching for reserves in order to help those most affected during the second wave, especially the hundreds of thousands of retirees with low pensions and who, in these times perhaps more than in spring, are feeling the costs and the situation in general that we have due to all the corona restrictions. In this view, we are looking for internal reserves to ensure additional funds in order to mitigate the social consequences of the epidemic, at least for those who have been affected the most.