Tatjana Pajnkihar, advisorTatjana Pajnkihar, advisorChamber of Commerce and Industry SloveniaChamber of Commerce and Industry Slovenia

Policy learning and experimentation in EU economic governance: Policy learning and experimentation in EU economic governance: Laboratory federalism in practice?Laboratory federalism in practice?

SOCIAL PARTNERSHIP IN SLOVENIA – SOCIAL PARTNERSHIP IN SLOVENIA – HOW USEFUL FOR EMU?HOW USEFUL FOR EMU?

London, 30-31 March 2006London, 30-31 March 2006

SOCIAL DIALOGUE IN SLOVENIA

BIPARTITE

Collective agreements on national level on activities’ level at companies’ level

TRIPATITE

Social and Economic council Social agreement : 1996, 1997, 2003-2005, 2006-in progres) Wage policy agreement (private & public sector) other tripartite bodies

a system of social partnership introduced in 1994 to promote consensus between employers’ and employees’ organisations

Consensus also promoted by Slovenian constitution

Monetary policy – i.e. adopting of the Euro Fiscal policy – i.e. tax reform Income policy, i.e. wage adjustements, minimum wage Public expenditures Etc.

The social partnerships does not comprise only basic

industrial relations.

Social and Economic Council is also acquainted with specific macro-economic issues, such as:

ADOPTING THE EURO IN SLOVENIA

• June 2004: ERM2 regime; central parity 239.64 SIT per EUR

• January 2005: Joint Slovenian scenario of adopting the euro

• June 2004 – till this moment: exchange rate SIT/EUR stable, close to central parity

• Since October 2005: meeting the convergence criteria

• January 2007: final introducing of the Euro - “Big bang” scenario

SLOVENIA AND MAASTRICHT CRITERIA

December 2005

CRITERIA SLOVENIA

Inflation (12-month average) 2,5% 2,5%

Long term interest rate 5,37% 3,81%

Public finance deficit (% GDP) < 3% 2,1%

Public debt (% GDP) < 60% 29,8%

Source: Bank of Slovenia, January 2006

WHY REFORMS ?

• Stable economic growth

• The states with implemented reforms had higher economic progress

• Very slow restructuring – high % of state in the economy

• Dramatic fall of competitiveness: 35 52/60 (IMD 2005)

• Ageing population – the possible collapse of the pension system

• High youth unemployment

• Problems in the health system

• Etc.

SLOVENIA- ECONOMIC GROWTH

REAL GDP GROWTH 1995 – 2006, in %

4,04,1 3,64,8

3,6

5,6

4,1

2,73,5

2,7

4,2 3,9

0

1

2

3

4

5

6

7

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: SORS, Estimates and forecasts SKEP, october 2005 SKEP GZS

1995 - 2000:constant proces 19952001 - 2006: constant prices 2000

79% of EU-25

COMPETITIVENESS

ADVANTAGES – POSITIVE

• Access to the buying markets

• Access to capital

• Price of capital

• Political stability

MOST NEGATIVE

• Taxation

• Administration and regulations

• Additional labour costs

• Industrial policy

-60

-50

-40

-30

-20

-10

0

10

20

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

COMPARED TO THE EU 15

In %

Source: GZS - Survey SKEP "PERCEPTIONS ON COMPETITIVENESS" SKEP GZS

PERCEPTIONS IN GENERAL

COMPARED TO THE EU NEW MEMBER STATES

SET OF ECONOMIC AND SOCIAL REFORMS

• Slovenian Government put forward the proposition of the framework of INTEGRAL ECONOMIC AND SOCIAL REFORMS in October 2005

• Slovenian Government adopted the reforms on 3.11.2005

• A public debate followed

Economic sector AGREES

with the neccessity of the reforms – taking into consideration certain shortages

unions (employees representatives)

on the other hand expressed HIGH DISAPPROVAL

KEY AREAS OF THE

REFORMS

TAX REFORMLABOUR MARKET REFORM

WAGE POLICY

REFORM

PENSION & HEALTH SYSTEM REFORM

SOCIAL TRANSFERS

SYSTEM REFORM

THE NEW SOCIAL AGREEMENT 2006 - 2009

•social securitysocial security,

•enhanced quality quality

of lifeof life;

• Better

business business

environmentenvironment

• remove obstacles in tax tax

and labour and labour

regulationregulation

•knowledge,

•entrepreneurship and

• innovation

•dynamic dynamic economic growtheconomic growth,

•enhanced competitiveness competitiveness

•new investmentsinvestments,

• new and better new and better employmentemployment

•low inflation, •balanced and

comparable interest rates, •lowering public finance deficit

““ECONOMIC GROWTH AND ECONOMIC GROWTH AND EMPLOYMENT”EMPLOYMENT”

1. TAX REFORM

i. flat tax rate (around 20%?.....17%)i. personal income tax unions NO!

ii. VAT unions NO!

employers SPECIAL CONSIDERATION OF CERTAIN ACTIVITIES!

ii. Abolishment of payroll tax unions & employers agree!

iii. simplifying the tax procedure unions & employers agree!

iv. change of corporate tax (lower rate without any tax deductions)

v. real estate tax (real estate register, was to be adopted by 2005 already, then prolonged to 2007)

2. MORE FLEXIBLE LABOUR MARKET

i. more flexible employment contracts - part time, fixed term employment

ii. Promote employment agencies

iii. scolarship programmes

iv. Abolishment of the bonus on the years of employment

v. active employment policy – more regional emphasis, job rotation programme

3. WAGE POLICY

Common goals:

• real gross wage growth 1pp behind productivity growth

• “wage moderation”, “employment friendly wages”

• minimum wage - an integral part of the wage system its escalation clause in line with low inflation in Slovenia

Government:

•Tripartite dialogue for both public and private sector

•Wage agreement, enforced by law

Employers and unions:

•bipartite dialogue for private sector

•Collective agreements-where wage policy should be set

4. SOCIAL TRANFERS SYSTEM

more transparent and fair social transfers system

i. one point of control mechanism and unified way of adjustment

ii. Unemployment bonuses – more restrictive?

iii. upper limit of sick leave bonus – upper limit of contributions paid?

iv. …

THE QUESTION OF FLEXICURITY?

5. HEALTH & PENSION SYSTEM

GOVERNMENT

i. diminishing sick leave only after first 30 days

ii. Enlarging the basis for employers social contributions

iii. Increasing the retirement age

iv. Combinig employment and retirement

v. 2nd & 3rd pillar separated completely

EMPLOYERS

i. The basis for social contributions must not be enlarged

ii. Lowering of the sick leave bonus from the 1st day on

iii. Exuse the pay of contributions for employers who employ elderly and invalid persons

iv. Lower the dependence of people on financial help of the state by creating new workplaces

UNIONS

i. Against any diminishing of sick leave bonus

ii. Against Increasing the retirement age

6. other…

i. cheaper and more effective state

ii. further privatisation

iii. rationalistation of public administration

iv. energetics

v. promoting technological development and investments

vi. ….

Thank you for your attention!

SOCIAL AND ECONOMIC COUNCIL

Established in 1994

Consists of three groups of representatives:• Employers (among them CCI)• Trade unions (6 confederations on national level)• Government

Regular sittings, rotating presidency

The opinion of council is respected in parliament when adopting a certain act!