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London, 30-31 March 2006 Policy learning and experimentation in EU economic governance: Laboratory federalism in practice? SOCIAL PARTNERSHIP IN SLOVENIA – HOW USEFUL FOR EMU? Tatjana Pajnkihar, advisor Chamber of Commerce and Industry Slovenia SOCIAL DIALOGUE IN SLOVENIA a system of social partnership introduced in 1994 to promote consensus between employers’ and employees’ organisations Consensus also promoted by Slovenian constitution TRIPATITE Social and Economic council Social agreement : 1996, 1997, 2003-2005, 2006-in progres) Wage policy agreement (private & public sector) other tripartite bodies BIPARTITE Collective agreements on national level on activities’ level at companies’ level The social partnerships does not comprise only basic industrial relations. Social and Economic Council is also acquainted with specific macro-economic issues, such as: Monetary policy – i.e. adopting of the Euro Fiscal policy – i.e. tax reform Income policy, i.e. wage adjustements, minimum wage Public expenditures Etc. ADOPTING THE EURO IN SLOVENIA • June 2004: ERM2 regime; central parity 239.64 SIT per EUR • January 2005: Joint Slovenian scenario of adopting the euro • June 2004 – till this moment: exchange rate SIT/EUR stable, close to central parity • Since October 2005: meeting the convergence criteria • January 2007: final introducing of the Euro - “Big bang” scenario SLOVENIA AND MAASTRICHT CRITERIA December 2005 Inflation (12-month average) Long term interest rate Public finance deficit (% GDP) Public debt (% GDP) Source: Bank of Slovenia, January 2006 CRITERIA SLOVENIA 2,5% 2,5% 5,37% 3,81% < 3% 2,1% < 60% 29,8% WHY REFORMS ? • Stable economic growth • The states with implemented reforms had higher economic progress • Very slow restructuring – high % of state in the economy • Dramatic fall of competitiveness: 35 52/60 (IMD 2005) • Ageing population – the possible collapse of the pension system • High youth unemployment • Problems in the health system • Etc. SLOVENIA- ECONOMIC GROWTH REAL GDP GROWTH 7 6 1995 – 2006, in % 1995 - 2000:constant proces 1995 2001 - 2006: constant prices 2000 79% of EU-25 5 4 3 2 4,1 5,6 4,8 3,6 3,6 4,1 2,7 1 3,5 4,2 3,9 4,0 2,7 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: SORS, Estimates and forecasts SKEP, october 2005 SKEP GZS COMPETITIVENESS In % 20 COMPARED TO THE EU NEW MEMBER STATES 10 0 -10 PERCEPTIONS IN GENERAL -20 -30 -40 COMPARED TO THE EU 15 -50 -60 1992 1993 1994 1995 1996 1997 1998 2000 1999 2001 2002 2003 2005 SKEP GZS Source: GZS - Survey SKEP "PERCEPTIONS ON COMPETITIVENESS" ADVANTAGES – POSITIVE MOST NEGATIVE • • • • • • • • Access to the buying markets Access to capital Price of capital Political stability 2004 Taxation Administration and regulations Additional labour costs Industrial policy SET OF ECONOMIC AND SOCIAL REFORMS • Slovenian Government put forward the proposition of the framework of INTEGRAL ECONOMIC AND SOCIAL REFORMS in October 2005 • Slovenian Government adopted the reforms on 3.11.2005 • A public debate followed unions (employees representatives) on the other hand expressed HIGH DISAPPROVAL Economic sector AGREES with the neccessity of the reforms – taking into consideration certain shortages KEY AREAS OF THE REFORMS TAX REFORM LABOUR MARKET REFORM WAGE POLICY REFORM PENSION & HEALTH SYSTEM REFORM SOCIAL TRANSFERS SYSTEM REFORM THE NEW SOCIAL AGREEMENT 2006 - 2009 •dynamic economic growth, •enhanced competitiveness •new investments, • new and better employment •knowledge, •entrepreneurshi p and • innovation •low inflation, •balanced and comparable interest rates, •lowering public finance deficit “ECONOMIC GROWTH AND EMPLOYMENT” •social security, •enhanced quality of life; • Better business environment • remove obstacles in tax and labour regulation 1. TAX REFORM i. flat tax rate (around 20%?.....17%) i. personal income tax unions NO! ii. VAT unions NO! employers SPECIAL CONSIDERATION OF CERTAIN ACTIVITIES! ii. Abolishment of payroll tax unions & employers agree! iii. simplifying the tax procedure unions & employers agree! iv. change of corporate tax (lower rate without any tax deductions) v. real estate tax (real estate register, was to be adopted by 2005 already, then prolonged to 2007) 2. MORE FLEXIBLE LABOUR MARKET i. more flexible employment contracts - part time, fixed term employment ii. Promote employment agencies iii. scolarship programmes iv. Abolishment of the bonus on the years of employment v. active employment policy – more regional emphasis, job rotation programme 3. WAGE POLICY Government: Employers and unions: •Tripartite dialogue for both public and private sector •bipartite dialogue for private sector •Wage agreement, enforced by law •Collective agreements-where wage policy should be set Common goals: • real gross wage growth 1pp behind productivity growth • “wage moderation”, “employment friendly wages” • minimum wage - an integral part of the wage system its escalation clause in line with low inflation in Slovenia 4. SOCIAL TRANFERS SYSTEM more transparent and fair social transfers system i. one point of control mechanism and unified way of adjustment ii. Unemployment bonuses – more restrictive? iii. upper limit of sick leave bonus – upper limit of contributions paid? iv. … THE QUESTION OF FLEXICURITY? 5. HEALTH & PENSION SYSTEM GOVERNMENT i. diminishing sick leave only after first 30 days ii. Enlarging the basis for employers social contributions iii. Increasing the retirement age iv. Combinig employment and retirement v. 2nd & 3rd pillar separated completely EMPLOYERS i. The basis for social contributions must not be enlarged ii. Lowering of the sick leave bonus from the 1st day on iii. Exuse the pay of contributions for employers who employ elderly and invalid persons iv. Lower the dependence of people on financial help of the state by creating new workplaces UNIONS i. Against any diminishing of sick leave bonus ii. Against Increasing the retirement age 6. other… i. cheaper and more effective state ii. further privatisation iii. rationalistation of public administration iv. energetics v. promoting technological development and investments vi. …. Thank you for your attention! SOCIAL AND ECONOMIC COUNCIL Established in 1994 Consists of three groups of representatives: • Employers (among them CCI) • Trade unions (6 confederations on national level) • Government Regular sittings, rotating presidency The opinion of council is respected in parliament when adopting a certain act!