Slovenia gripped by strike, government on the ropes

LJUBLJANA Wed Jan 23, 2013 7:00am EST

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LJUBLJANA (Reuters) - Around 100,000 public sector employees held a strike over pay cuts in Slovenia on Wednesday, with the government on the ropes over a corruption scandal that could strip the ruling coalition of its majority in parliament.

A junior partner in the conservative coalition, the Civic List, is promising to quit the alliance unless Prime Minister Janez Jansa resigns.

Jansa has been named in a report by an anti-corruption commission, which said he was unable to explain the source of some of his income. Jansa has denied wrongdoing and refuses to quit.

Hit by falling demand for its exports, the Alpine country is battling to stabilize its public finances and reassure markets to avoid becoming the latest member of the euro zone to seek an international bailout.

State employees are angry over a plan to lay off workers and cut wages by some 5 percent this year, adding to a cut of around 3 percent in 2012 as the government tries to narrow its budget shortfall to around 3 percent of national output from 4.2 percent last year.

The public sector strike closed almost all schools, kindergartens and universities in the country of 2 million people. Hospitals were offering limited care with reduced staff.

Protests over the cuts and corruption allegations have caused regular disruption and sometimes turned violent.

"We demand that the government retain the number of employees in the public sector and the quality of services the sector provides," said Tone Seliskar, a representative of the education trade union SVIZ.

"We also believe that wages in the sector have been cut enough so far," he said.

Around 14,000 employees in the metals and electronics industries were also on a strike, demanding wage increases of up to 7.5 percent. Many get by on barely more than the monthly minimum wage of 784 euros.

If, as expected, the Civic List leaves the coalition, it would take its two ministers with it, including Finance Minister Janez Sustersic.

The government may not fall immediately, with Jansa able to continue at the helm of a minority government until parliament nominates a new prime minister or calls an early election.

Analysts said a snap election, the second in just over a year, looked the most likely outcome, slowing vital reforms and denting investor confidence.

"I think the credit ratings will be downgraded whether or not there are early elections as, given the risks and the likely deterioration in the debt/GDP ratios around the bank restructuring program, Slovenia is simply not deserving of a single-A rating anymore," said Standard Bank analyst Timothy Ash.

($1 = 0.7526 euros)

(Editing by Matt Robinson and Tom Pfeiffer)

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