Cerar hints Slovenia might scale back its privatisation drive

LJUBLJANA Mon Aug 25, 2014 7:35am EDT

LJUBLJANA Aug 25 (Reuters) - Slovenia's likely new prime minister hinted on Monday he might scale back its privatisation program once he forms a coalition with two parties opposed to any large-scale sell-off of state assets.

Law professor and political novice Miro Cerar also told parliament he would work to strengthen the banking system, whose fragility brought the euro zone country to the verge of an international bailout last year.

Parliament was due to confirm Cerar, 51, as the new prime minister later on Monday. He will then have 15 days to nominate his cabinet, which also has to be confirmed by parliament.

He told deputies before the vote his government would pursue "strategically considered privatisation", without elaborating.

Analysts think Cerar's government might delay privatisation and public sector reform, both seen as crucial for Slovenia to steady its public finances after narrowly avoiding an international bailout for its banks in December.

"Given the electorate's opposition to privatization and cuts in public sector spending, the next government will dilute and delay these reforms," said Tsveta Petrova, an analyst at political risk research firm Eurasia Group.

Policy differences within Cerar's coalition would "generate continued government instability over the next year," she added.

Cerar's centre-left SMC party is expected to sign a coalition deal soon with the pensioners' party Desus and the Social Democrats, which both oppose large-scale privatisation.

The three parties together will hold 52 of the 90 seats in the new parliament following a snap election in July that gave the SMC a mandate to restore stability and steer the country out of its economic crisis.

The government's main task will be to reduce budget deficit to 3 percent of GDP, as agreed with the European Commission, from some 4.2 percent seen this year.

Cerar said the government would tightly control public spending and not allow an increase of social transfers, like unemployment and welfare benefits, until economic growth reaches 2.5 percent of GDP.

"We will work towards establishing a stable banking and financial system that will support the development and restructuring of the economy, which will improve competitiveness and enable the creation of new jobs," he said.

Cerar's SMC was formed less than three months ago after the resignation of outgoing Prime Minister Alenka Bratusek triggered early election. Bratusek resigned in May because she lost the battle for the leadership of the Positive Slovenia party. (Reporting By Marja Novak; Editing by Zoran Radosavljevic; Editing by Tom Heneghan)

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