At the round table, the following authors participated: dr Rado Bohinc, dr Mejra Festič, dr Borut Bratina, dr Dušan Jovanovič, otherwise the authors or co-authors of the contributions for the monograph ECONOMIC GOVERNANCE FROM A CENTRAL EUROPEAN PERSPECTIVE, State sovereignty and responsibility for a competitive economic integration within the European Union. The event is available at:
The whole inf.:
This summary presents the main points and conclusions presented at the round table, which derive from their articles for the monograph.
DR. RADO BOHINC
PUBLIC FINANCE IN SLOVENIA
Author explores the similarities and differences of Slovenia’s public finance system in terms of its positions as Member State (MS) of the European Union (EU) and European Monetary Union (EMU). Consequently, the reasons for the potentially interfering viewpoints are identified. Sovereignty is the focus of the research. The research focuses on the advantages and challenges of the functioning of EU as supranational community in the field of economic policy, with special regard to aligning the objectives of the EU and those of its MS.
Conclusions
The EU provisions on ES (European Semester), obliging the MS to prepare a Stability and Reform program, and the coordination of the budget preparation procedure, are definitely crucial for Slovenia as a member state. The EU has developed a complex system of economic governance that involves a mix of supranational, intergovernmental, and national-level decision-making. This has raised concerns among some EU MS about the erosion of their sovereignty and their ability to control their own economic policies. Scholars’ positions on economic sovereignty vary depending on their backgrounds, ideologies, and research interests.
EU rules (mainly Regulations) are strict and enforceable and not just recommendations that a Member State should follow or not. EU fiscal rules thoroughly and directly interfere with the sovereignty and autonomy of the EU member in the field of public finances. An important legal system feature of the ES is that EU Regulations (rather than Directives) have created the vast majority of rules, since l. 1997 and up to the present day. As known, Regulations are by binding legal acts that have a direct effect on the MS’ law.
Slovenia in 2013, provoked by the post-crisis EU debate on the fiscal discipline of the MS and in the light of the adopted measures at the EU level, amended the Constitutional rules on public spending and enforced the mandatory fiscal rule. The FRA, following CS, determines the method and time frame for implementing the principle of medium-term balance of revenues and expenditures of the state budget without borrowing, the criteria for determining exceptional circumstances in which medium-term balance may be deviated from, and the manner of dealing with their occurrence or termination
In Slovenia, in addition to CS, several national laws and government regulations govern fiscal deficit and state debt. These laws outline the fiscal principles, procedures, and borrowing limits for in line with EU fiscal rules.
Central budgetary planning encompasses several methods to maintain a balanced budget; for ex. medium-term strategy for public debt management a government document, which targets balance of the state sector and the upper limit of state sector expenditures and indebtedness. Or for ex. Financing programme for the execution of the budget as an annual operational document for financing the execution of the state budget and government debt management transactions. Procedure of the adoption of the budget and implementation starts with different forecast of macroeconomic aggregates and preparation scenario and continues with national program of development policies. Adoption procedure, preparation, implementation and monitoring of the budget proposal is set out in details by national fiscal legislation strictly in conformity with EU rules. And so is the process of reporting and control audit, the supervisory role of the Fiscal Council, the repair mechanisms and the fiscal discipline, inspection and internal control of public finances.
Budgetary management of local governments, regulation of municipalities’ finances the process of reparation of the municipal budget proposal, sources of the municipal budget are regulated partly by general financial legislation and partly by specific municipal or local self government legislation. Brakes to avoid excessive indebtedness and measures to balance the budget, including temporary suspension of execution is also regulated for municipal level.
Future orientations in fiscal policy in Slovenia are more or less created in the process of the European semester. Green transition and digitalization, energy, technological development and of course inevitable social reforms (pension, long term care, health) and the reform of fiscal system are current challenges to sustainability of fiscal policy in Slovenia. Maintaining the general withdrawal clause or not and by when, that is the question?
Dr. Mejra Festić
MONETARY POLICY IN SLOVENIA AND ITS EXPERIENCE IN THE EURO AREA
The Bank of Slovenia decided for the strategy of monetary targeting due to stable money demand function, stable velocities and stable monetary multipliers, and balanced the approach with limited flexibility of exchange rate. Inflation was proven to be conditioned by trade margins in the share of 39% the variance of inflation in the 18 months after the introduction of the euro in Slovenia.
The banking crisis of 2008 required a new approach in terms of the recapitalisation of Slovenian banks. Privatisation laws have been in full swing throughout years of overheating the Slovenian economy between 2004 and 2008. Slovenia decided to transfer the bad banking claims to the bad bank (DUTB), which was a project that was executed too late in the deepest point of the economic cycle. The difference between Slovenian specifics and the EU’s terms was that the banks in Slovenia were primarily owned by the state, and thus the state stepped into the recapitalisation process as an owner and not as a state.
All regulations and directives of the euro area were implemented into national laws. The Bank of Slovenia, just as the entirety of the euro system, started to implement the Pandemic Emergency Purchase Programme and other non-standard monetary policy instruments.
Conclusions
The establishment of Monetary Union required a long adjustment period during which economic policies were gradually unified and the macroeconomic environment became comparable. By increasing the integration of economies through uniform economic policies, in particular monetary policy, supply and demand shocks have become symmetrical. The comparability of inflation, interest rates, government debt and the general government deficit established the conditions for lowering the exchange rate fluctuation interval.
The adoption of the common currency eliminated exchange rate risks, while inflation became higher after the introduction of the euro in the countries that had lagged slightly behind the leading euro area countries. Slovenia introduced euro area regulations and directives into national laws and thus established a comparable macroeconomic and banking environment.
The bank recovery took place in 2013 under state aid rules and the European Commission’s requirements. As part of the euro system, the Bank of Slovenia lost the sovereignty of monetary policy, while at the same time established a commitment to the euro area’s policy, thus becoming an equal member of the single currency area.
Slovenia’s experience in EU and euro area is positive, as the international production chain of value and exports requires greater integration of the economy in the monetary field, which is especially evident through a common monetary policy. This makes it easier to control inflation and comparable lending rates and is a sign of the comparable level of development and the structure of GDP. Integration processes resulted in a comparable GDP structure, a single monetary and coordinated fiscal policy, insignificant speculative capital flows, which further strengthens the stability of interest rates, export competitiveness and national economic accumulation (savings) as a potential for financing Slovenia’s own development.
Dr. Borut Bratina
THE SUBSIDY POLICY EMBEDDED IN THE LEGAL ENVIRONMENT OF THE EU – THE CASE OF SLOVENIA
The author explores the intricate relationship between state aid regulation and the sovereignty of European Union (EU) Member States. The foundation of the study lies in Articles 3(3) and (4) of the Treaty on European Union (TEU), emphasizing the EU’s commitment to establishing an internal market and economic union. While the internal market aims for a highly competitive social market economy, economic and social disparities among Member States necessitate coordinated economic policies.
State aid delves into EU competition law, defining it as a system governing the protection of competition in the EU’s internal market. State aid, considered a potential restraint on competition, is scrutinized alongside other actions like cartel agreements and abuse of dominance. The study argues that state aid, while generally undesirable in a market economy, may be a tool to prevent unwanted outcomes and achieve non-economic objectives.
Examining EU competences, the research focuses on the exclusive competence of the EU in determining competition rules for the internal market, as outlined in Article 3 of the Treaty on the Functioning of the European Union (TFEU). The unique supranational state aid control system significantly constrains Member States in economic, financial, environmental, and regional policy decisions.
Author also explores the dynamics of state aid regulations during challenging economic periods (Covid-19 and Ukrainian war), shedding light on how Member States navigate the delicate balance between national interests and EU regulations.
Conclusions:
Author fully supports the assertion in this hypothesis that the definition and regulation of state aid is an exclusive competence of the EU by adding that Member States have as much autonomy in this respect as the EU leaves to them. Recently, it has become more evident that the EU Commission has been setting general exemptions from prohibited state aid, leaving it up to the Member States to define more precisely the criteria for the granting of state aid, taking the framework established by the EU Commission into account.
The COVID-19 crisis has shown how important it has been for countries to be able to intervene sovereignly with public funds to mitigate the adverse effects of the COVID-19 pandemic. At the same time, the EU has even temporarily waived its strict fiscal rule through its own rules, which countries will certainly have to comply with in the years to come.
Noting that this ‘shared competence’ varies in practice and depends on both the EU Commission and, in particular, the case law of the CJEU, which is the sole interpreter of EU law that overrides national law.
We may conclude by saying that the area of state aid is a very complex legal and economic domain that continues to evolve and change depending on the objectives set by the EU and actual world circumstances. Here I am thinking of two particular crises: the energy crisis and the security crisis, which were both triggered by the war in Ukraine.
Dr. Dušan Jovanovič
TAX LEGISLATION WITH SPECIAL REGARD TO ITS POSITION ON TAX COMPETITION AND SOVEREIGNTY
Author explores the intricate relationship between tax policy, national sovereignty, and competition in Slovenia, with a specific focus on relevant case law and court decisions. As an EU Member State, Slovenia grapples with the dual challenges of harmonizing its tax policies with EU directives while preserving its national sovereignty and fostering economic competitiveness, a struggle that has seen its fair share of legal battles.
Slovenia, like other EU members, is deeply influenced by supranational tax regulations that aim to create a unified market and prevent harmful tax practices. These regulations have led to significant legal developments within the country. Court decisions, such as those relating to the interpretation and implementation of EU tax directives, have shaped the country’s tax policy landscape. For instance, the European Court of Justice (ECJ) has rendered judgments that impact Slovenia’s approach to tax policy, making it necessary for the country to navigate EU legal interpretations while preserving national sovereignty.
Furthermore, domestic courts in Slovenia have also played a crucial role in shaping tax policy through their interpretations of national tax laws and their alignment with EU principles. Case law on issues such as transfer pricing, cross-border taxation, and tax evasion have significantly influenced the way Slovenia frames its tax regulations.
In this complex landscape, Slovenia has strived to strike a balance between complying with EU tax regulations and safeguarding its sovereignty. Court decisions often play a pivotal role in defining the extent to which national sovereignty can be preserved while adhering to EU directives. Simultaneously, the Slovenian government acknowledges the importance of tax competitiveness in attracting foreign investment and promoting domestic entrepreneurship. Case law and court decisions are essential in assessing the implications of these policies on competition.
Author delves into the multifaceted nature of tax policy in Slovenia, considering the role of case law and court decisions in shaping the landscape. I explore the ongoing tension between sovereignty, competition, and EU tax harmonization and how court rulings influence this equilibrium. By examining relevant case law, this research aims to provide a comprehensive analysis of the legal dynamics that underpin Slovenia’s tax policy, offering insights into the country’s economic future and its ability to navigate the challenges posed by EU membership.
Conclusions
In conclusion, the Republic of Slovenia demonstrates its tax sovereignty within the boundaries set by the Constitution of the Republic of Slovenia, while also taking into account the transferred sovereignty at the EU level. Consequently, it is of utmost importance to preserve Slovenia’s tax sovereignty by interpreting EU rules on tax legislation harmonization in a way that does not excessively encroach upon the tax sovereignty of EU Member States.
Slovenia, in pursuit of tax sovereignty, seeks to regulate the taxation of assets and reduce the tax burden on labour income. It follows the rules of the EU and international organizations (BEFIT and ATAD 3) and, within the permissible tax sovereignty, shapes tax regulations.
Moreover, Slovenia has prepared a proposal for a minimum tax law, taking into consideration the requirements for combating and preventing tax avoidance. This aligns with its commitment to maintaining a balance between EU directives and its own fiscal autonomy.
