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Slovene parliament confirms Jansa-led government

Fri, 10 Feb 2012 15:36 GMT

Source: reuters // Reuters

* Government pledges budget cuts

* Plans to cut taxes on labour, profit

* Hopes to improve Slovenia's credit rating (Updates with quotes, details, background)

By Marja Novak

LJUBLJANA, Feb 10 (Reuters) - Slovenia's parliament confirmed the cabinet of centre-right Prime Minister Janez Jansa on Friday, charged with enforcing budget cuts, stimulating the economy and rescuing the small euro zone member's credit ratings.

"We know it will not be easy, but we know why we took this challenge and we know what we will work for, that is for Slovenia to exit this crisis," Jansa, who was prime minister from 2004 to 2008, told reporters after the vote.

All major credit rating agencies have cut Slovenia's rating twice since September and put it on negative watch, citing political strife, rising public debt and the deepening of the euro zone debt crisis. Slovenia is rated A by Fitch, A+ by Standard & Poor's and A1 by Moody's.

President Danilo Turk said in January that Jansa lacked legitimacy for the post of prime minister because he has been on trial since September on bribery charges.

He and four co-defendants are charged with bribery over a 2006 deal for Finnish armoured vehicles worth 278 million euros ($370 million). He has denied the charges.

Jansa said the government would reduce budget spending by 10 percent this year and promised to cut red tape, reduce taxes on labour and profits and speed up privatisation.

Jansa's Slovenian Democratic Party (SDS) has formed a coalition with four other centre-right parties which together have a comfortable majority in parliament.

With 12 ministers, the government is the slimmest since Slovenia declared independence from Yugoslavia in 1991 and analysts believe it will last its full four-year term despite Jansa's trial.

"I believe there is a good chance the government will last for the full term although it will face tough negotiations with unions and the opposition about savings and structural reforms," Borut Hocevar, an editor of daily Zurnal24, told Reuters.

Jansa replaces Social Democrat Borut Pahor, whose government was ousted by parliament in September amid internal coalition squabbles and an inability to implement reforms that would help the ailing economy.

Turk's candidate for prime minister, the centre-left Zoran Jankovic, whose Positive Slovenia party won a snap election in December, was rejected by parliament last month after failing to form a majority coalition.

Slovenia was the fastest growing euro zone member in 2007 but was badly hit by the global crisis because of its dependency on exports, and its economy shrank by 8 percent in 2009.

After a year of a mild recovery, another recession is possible as the economy contracted by 0.5 percent in the third quarter of 2011, while exports and industrial output are slowing down amid lower demand from abroad and low domestic spending.

Slovenia's budget plunged to a deficit of 5.5 percent of GDP in 2011 from a balanced budget in 2007 because of high government spending and lower tax income. Public debt rose to about 50 percent of GDP in 2011 from 21.9 percent in 2008. ($1 = 0.7517 euros) (Reporting by Marja Novak, Editing by Zoran Radosavljevic)