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Slovenia postpones parliament vote on budget cap until late May

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(Globalpost/GlobalPost)

By Marja Novak

LJUBLJANA (Reuters) - Slovenia postponed on Tuesday a parliamentary vote on setting a cap on the budget deficit until later in May, after parties failed to agree the terms of the so-called golden fiscal rule.

The euro zone state, which is battling to shore up its finances to avert a bailout, had pledged to set the cap by the end of May but the government and opposition are at odds over when it should be introduced.

The fiscal reform entails changing the constitution, which requires a two-thirds majority in parliament. The center-left government coalition controls 49 out of 90 parliamentary seats.

The postponement could sow further doubt over the ability of Prime Minister Alenka Bratusek's government to push through unpopular reforms to stabilize the country's finances and stop it becoming the latest member of the 17-nation currency bloc to need a bailout.

The government is due to unveil a reform package on Thursday, but investors are doubtful of its readiness to cut spending and reduce the level of state ownership in the economy.

It bought some breathing space last week when it managed to issue two bonds to a joint value of $3.5 billion on Thursday, while government sources told Reuters on Monday the country plans to sell its second largest bank Nova KBM <NKBM.LJ><KBM.WA> and telecoms operator Telekom Slovenia <TLSG.LJ> this year to raise budget income.

"The session on the fiscal rule is expected to take place after the next regular session, that is between May 20 and 24," parliament's spokeswoman Gordana Vrabec told Reuters.

By then parliamentary parties will try to reach an agreement on whether the fiscal rule should apply from 2017, as the government suggests, or 2015 as demanded by the conservative opposition.

The European Commission expects the deficit to rise to 5.3 percent of national output this year, up from 4 percent in 2012 on lower tax revenues and high government spending to prop up the country's ailing state-owned banks.

The government expects the state-owned banks, which are nursing most of Slovenia's 7 billion euros of bad loans, will need 900 million euros in fresh capital by the end of July.

(Reporting By Marja Novak; Editing by John Stonestreet, Ron Askew)

http://www.globalpost.com/dispatch/news/thomson-reuters/130510/slovenia-postpones-parliament-vote-budget-cap-until-late-may