The risk of a second wave of the coronavirus hitting the European Union makes the speedy approval of the bloc’s 750 billion-euro ($844 billion) relief fund crucial to an economic rebound, Slovenia’s finance minister said.
The impact of Covid-19 and the subsequent lockdowns that have sent the EU spiralling into its worst recession in decades will persist into 2021, a situation its 27 members — including Slovenia — are coming to terms with and one that will continue to affect economic and fiscal policies, Andrej Sircelj said in an interview.
Signs of a second wave in the EU and the Balkan region where Slovenia lies are prompting the reintroduction of travel and social-distancing restrictions. That makes a breakthrough in negotiations on the EU’s recovery plan, which is pitting wealthier EU members against their worst-hit partners, vital as the talks go down to the wire.
“It’s crucial for us that the EU recovery plan gets approved in July, so all the programs become operational as soon as possible,” said Sircelj, who took his position in March as part of Prime Minister Janez Jansa’s new government, just as the brunt of the virus hit the euro area.
He said solidarity is a key part of the agreement, and that it’s important to ensure “part of the aid is coming in grants, not just loans.” Slovenia, which adopted the euro in 2007, would get about 5.1 billion euros ($5.8 billion) under the current proposal.
Virus-fouled supply chains “will certainly dampen the economic recovery in the mid-term,” Sircelj said.
“I still see a V-shaped recovery,” he said. But the path “on the way up won’t be as steep as we first thought, which means the economy will be slower in recovering to where it was before the crisis.”
Slovenia has already borrowed more than 6 billion euros since January, and there’s no pressing need for another bond issue, Sircelj said.
“Should the need arise, we have enough space in the budget to borrow an additional 2 billion euros on international markets,” he said.
The Alpine nation of 2.1 million is now targeting a 2020 budget deficit of about 8.1% of gross domestic product after lawmakers backed three virus-relief packages, with a vote on the fourth scheduled for later this week. While public debt may well reach a record of more than 82% of output, the full-year deficit will still fall short of the 14.6% of GDP reached in 2013 in the wake of a banking crisis.
Sircelj’s ministry will prepare a revised 2020 budget and frameworks for next year and 2022 by September, with a focus on energy, infrastructure and other projects that have stalled.
As it stands now, the economy hit a nadir in the second quarter. Slovenia didn’t impose the type of full economic lockdowns seen across the EU and it should return to quarter-on-quarter growth in the second half of the year, he said.
“We’re well prepared for potential second, third or fourth waves” of the virus, he said. “I believe we won’t have to go into a nationwide lockdown or halt production in any industry.”