“Public debt reduction and management are very important in my eyes … because they go hand in hand with growth”

Stable and prudent

Andrej Bertoncelj, deputy prime minister and minister of finance of Slovenia


Text by Andrew Howitt / Photos by Kageaki Smith

With a background in both business and academia, Andrej Bertoncelj brings decades of practical experience and theoretical understanding to his role as Slovenia’s finance minister. For the first 20 years of his career, he worked at a pharmaceutical firm and then in investment banking, living both in Europe and the US. Then, during a 10-year stint at the University of Primorska, he became a full professor of economics and published 10 books and more than 40 articles. Bertoncelj, who is also deputy prime minister of Slovenia, was appointed to his current post last September to help consolidate public finances.

What’s the reason for your visit to Japan?

My main reason for coming to Japan was to attend the International Monetary Fund’s Public and Debt Management Forum. I was invited as a speaker to present our practices for reducing public debt. Slovenia is one of the 19 members of the eurozone, and we are leading in this area.

I also met my Japanese counterpart Minister of Finance Mr Taro Aso for the first time. We had the chance to exchange ideas on running monetary fiscal policy. Japan has done a good job in this respect, especially regarding how to spur economic growth. I also enjoyed hearing his views on current global developments. Despite being a small economy with a population of two million, Slovenia is, of course, affected by these developments, especially as we are very export oriented — exports account for 85.2% of our GDP.

We have excellent economic cooperation with Japan. We are so far apart and so different, nevertheless, we have very much in common. I told Mr Aso that we are open to foreign investments and that we regard Japanese investments very highly. It was very good to express our willingness to enhance cooperation.

How would you describe Slovenia’s economy today?

We are in good shape. Our economic outlook is positive — something said by ratings agencies, not just me. Prospects for real economic growth are good. Last year, we grew 4.5%. This year’s expected growth is 3.4% — because everybody’s slowing down. And then we hope to stay at around 3%, which is very good. The eurozone is growing at an average of 1.5%, so we’re growing twice as fast as the larger economies around us. I would like to keep it that way.

Public debt reduction and management are very important in my eyes — strategic goal number one in fiscal terms — because they go hand in hand with growth. We finished last year with a public debt of around 70% of GDP. This year we expect to get to 65% and then, by the end of next year, 61%, essentially meeting the EU’s Maastricht criteria of capping debt at 60% of GDP. Very few countries in the eurozone, unfortunately, are below 60%. The eurozone average is 85%, so we are well below already. And by 2022, we are forecasting that we will get to 55% of GDP.

Another of our strategic goals is to achieve a 1% general budget surplus. Last year, we ended with a 0.7% surplus. If everything goes well, we forecast that we will reach 1.2% by 2022. We will then be fully compliant with the Stability and Growth Pact, the EU’s fiscal rules.

Domestically, macroeconomic stability and fiscal prudence are okay, but external threats are looming, so I hope that there will be more cooperation, like the Economic Partnership Agreement and the Strategic Partnership Agreement signed by the European Union and Japan. Cooperation is always better than trade wars.



How are you working to reduce public debt?

Some of the proceeds are coming from the privatisation of our banking system. We made a commitment to the EU to sell our three banks, and we’ve sold two already. I was very strict on having 90% of the proceeds go towards lowering public debt. The remaining 10% is invested in a demographic fund. We will decrease our public debt over the next three years from €32 billion to €31 billion, which doesn’t sound like a lot, but €1 billion for an economy is a huge effort.

I meet finance minister colleagues from the Eurogroup and the European Union once or twice a month, and nobody’s thinking about actively decreasing debt. For most of them, the goal is not to increase debt, but we are actually reducing ours.

It’s also very important that the interest on our debt decreases. At the worst times, it was almost €1.2 billion. Now it’s less than €800 million. Our general government budget is slightly above €10 billion, so that extra €400 million means a lot. I can spend it on healthcare, education or investments.

On top of that comes a very unpleasant word: reform. We are currently implementing reforms in Slovenia, starting with tax optimisation. Right now, labour is over-taxed, and I have to increase net income, boosting disposable income, to spur domestic demand.

What are some other structural reforms you are implementing?

It is crucial for us, in order to be sustainable, to do more on pension system reform, healthcare reform, education reform and labour market reform, and to deal with the costs related to our ageing society, which in Slovenia is a huge problem, probably one of the worst among OECD countries. The birthrate is too low, at 1.3% — practically the same as Japan’s. So, we plan to increase the retirement age from 65 to 67, which is the trend in Europe.

What are some examples of cooperation with Japan?

Practically all cooperation between Japan and Slovenia is in high-tech. We recently had a very interesting and highly regarded investment: Yaskawa Robotics opened a factory in Slovenia this year. For us, it’s very important because the firm deploys highly educated people, it’s in a high-tech industry — robotics is the industry of the future — and it can serve as a hub for research, production or distribution activities. Japanese companies that invest in Slovenia can easily reach other European countries because we are part of the common market.

I think more can be done in this respect, especially when you consider our stable macroeconomic situation, attractive and predictable business environment, highly educated workforce, relatively low tax burden — our nominal corporate tax is 19% — and desire to move more towards high-tech industries. Japan is an ideal partner for us.  

“Practically all cooperation between Japan and Slovenia is in high-tech”