Slovenian austerity drive threatened by referendum call

LJUBLJANA (Reuters) - Austerity measures Slovenia adopted last week could be delayed or even scrapped after two police unions said late on Thursday they wanted a referendum on the law.

The referendum will be held if the unions collect 40,000 signatures within a month, a target they are likely to reach. If the majority of those who take part in the vote reject the austerity legislation, the government will be unable to pass a similar law for one year.

Rejection would derail the conservative government’s plan to bring the budget deficit down to around 3.5 percent of GDP. It soared to 6.4 percent in 2011 from zero in 2007, when Slovenia joined the euro zone.

Prime Minister Janez Jansa said he hoped the unions would retract their demand, warning the referendum could be “a fatal blow to Slovenia”, according to daily Delo. The government will hold negotiations with the two unions later on Friday.

“We believe that the (austerity) law should not cut the lowest wages. The lowest police wage now is 705 euros net and that should not be cut,” the head of the Police Trade Union, Radivoj Urosevic, told Reuters.

The average net wage in Slovenia was 995 euros in March but if the austerity package is enforced all public sector wages will be cut by about 8 percent from June. Most other trade unions in Slovenia agreed the package last week.

Austerity measures also include cuts in public sector benefits and most welfare payments.

Last year four laws, among them a crucial one to raise the retirement age, were rejected in referendums demanded by unions, leading to the ousting of the previous centre-left government in September.

Slovenia, which exports about 70 percent of its production, was badly hit by the global crisis and is struggling with a new recession after a mild recovery in 2010.

The government expects the economy to shrink by 0.9 percent this year after a contraction of 0.2 percent in 2011 amid lower export demand and a fall in domestic spending.

In April, the government had to postpone the issue of a 1.5 billion-euro bond after the yield demanded was above 5 percent, compared to a yield of 4.375 percent on a 10-year sovereign bond that Slovenia issued in January 2011.

Editing by Zoran Radosavljevic and Andrew Roche