UPDATE 1-New PM Cerar hints Slovenia might scale back privatisation drive

Mon Aug 25, 2014 12:49pm EDT

* Parliament confirms Cerar as PM by 57 votes to 11

* Cerar pledges "strategically considered privatisation"

* Has to present his cabinet within 15 days (Updates with vote result, details)

By Marja Novak

LJUBLJANA, Aug 25 (Reuters) - Slovenia's new prime minister hinted on Monday he might scale back the country's privatisation program once he forms a coalition with two parties opposed to large-scale sell-offs 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 confirmed Cerar, 51, as the new prime minister by 57 votes to 11. Cerar now has 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 a 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 in the coming days a coalition deal 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 the 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.

The country expects growth of 0.5 percent this year after two consecutive years of recession.

"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 Tom Heneghan and Toby Chopra)