Government formation could prove lengthy
Overview:
Parliamentary elections to be held at the beginning of December are likely to be won by the opposition SDS. However, coalition building could prove difficult and unpredictable as the SDS is likely to fall well short of a majority and a number of parties are struggling to cross the threshold for parliamentary participation. Several months of negotiations would hardly be ideal when the euro area crisis has seen the yields on Slovenian debt rise significantly. Moreover, the new administration will not only have to tighten fiscal policy but undertake serious structural reforms to make the economy more flexible and competitive. Slovenia may have a much stronger economic base than most transition countries but its record on productivity growth is poor, its banking sector is vulnerable and its pension system is unsustainable.