Economic Situation In Slovenia Post Financial Crisis Research Paper

Economic Situation In Slovenia Post Financial Crisis - Research Paper Example Slovenia is a developed state in the central Europe which experienced a period of boom between the years 2004 to 2006, when the economy grew at a rate of 5 % per annum. The economic growth surge was mainly due to the rising expenditure (mainly in construction) supported by public debt (OECD, 2015). However, after the global recession of 2007, Slovenia entered in a period of financial austerity to reduce its burden of debt which was earlier created by bailing out its banks. Slovenia’s austerity programmes were aimed at reducing its budget deficit caused by the amounted debt. The austerity policies of the government hence included the rise in the tax rates or introduction of new taxes, reduction of public expenditure and privatisation of state owned companies (Nova Kreditna Banka Maribor; communications operator Telekom Slovenija; airline Adria Airways; Ljubljana airport and Elan ski manufacturer). Such kind of financial strictness often results in rising unemployment; fall in c onsumption level and higher debt to GDP ratio (despite being fall in the budget deficits). With advent of rising debt obligations of Slovenia, financial austerity is a well justified approach by the government. The easier accessibility to credit and the meagre risk assessment prior to the crisis had resulted in such unsustainable debt. The economic reforms in the form of financial consolidation, privatisation and recapitalization of banks were hence required to drive the credibility of the country in financial market.