Slovenia ups 2013 central government deficit target to 2.9 pct

By Marja Novak

LJUBLJANA, Oct 4 (Reuters) - Slovenia has had to raise its earlier budget deficit target and plans to cut its public sector wage bill and raise taxes, its finance minister said on Thursday as the country tries to avoid a bailout.

The euro zone country is struggling to support state-owned banks burdened with bad loans after years of weak demand for its exports.

The central budget deficit is likely to reach some 2.9 percent of gross domestic product next year, up from 2.5 percent targeted earlier, Finance Minister Janez Sustersic said on Thursday.

"We are facing worse economic conditions and forecasts for the next year are also worsening," Sustersic told a news conference.

He said the government plans to cut the total amount of public sector wages by 5 percent next year and raise taxes, including for students, media, communal services and banks, to keep the deficit under control.

He did not give an estimate of the 2013 general government deficit. This includes those of the national pension and health systems and local communities and will this year be about 0.6 percent of GDP higher than the central government deficit, seen at 3.6 percent of GDP for 2012.

The government had hoped to bring its general deficit below 3 percent of GDP next year but that target would be missed if it has to pour more cash into its banks.

Sustersic said last month state-owned banks might need up to 1 billion euros ($1.3 billion) of fresh capital after their bad loans are transferred to a new state company at a discount.

Slovenia, which joined the euro zone in 2007, was badly hit by the global crisis and is now struggling with a new recession after a mild recovery in 2010 and 2011.

However, Bank of Slovenia governor Marko Kranjec said earlier on Thursday the country could still avoid a bailout if it carried out reforms already planned by the government.

"If the country adopts decisive stabilisation measures in fiscal consolidation, the labour market, pension reform and of course in the banking sector the country would not need to apply for a (bailout) programme," said Kranjec after the ECB held its main monthly policy meeting in Slovenia. ($1 = 0.7689 euros)

(Reporting by Marja Novak; Editing by Ruth Pitchford)

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