LJUBLJANA, Slovenia (AP) -- Slovenia's government and trade unions on Tuesday reached a tentative agreement to cut public sector wages by up to 4.8 percent as part of budget austerity measures the country needs to avoid an international bailout.
The deal is expected to save 108.6 million euros ($141 million) this year and 182.6 million euros in 2014 for debt-laden Slovenia, which is struggling to avoid becoming the sixth of the 17 EU countries that use the euro to need financial aid.
The cuts will be achieved through a mix of cuts in base pay, mostly affecting higher income brackets, officials said. They will affect the prime minister and government ministers, along with others public administration employees in education, health and other public services.
The deal still needs formal approval by the government, in Parliament and by the key unions ahead of its planned implementation on June 1.
The wage cut is "the maximum that we could agree in a manner that still preserves social peace," said Interior and Public Administration Minister Gregor Virant. "The government is happy because it is in line with the fiscal goals for 2014."
Branimir Strukelj, a union leader, said the agreement was "reasonable" and allows for those with higher wages to face higher cuts, too. Unions in the past have organized protests against cost-cutting measures, including wage cuts.
Slovenia is racing to convince international investors it has a credible strategy to reduce debt and stay solvent. In addition to a hike in the retail sales tax, from 20 percent to 22 percent, the government has said it will partly privatize 15 state-run companies.
At the center of Slovenia's crisis are five state-controlled banks that have an estimated 7 billion euros of bad loans on their books. Slovenia needs to support these banks to avoid a collapse of its banking system. But that will hurt its public finances, so the government is introducing the austerity measures.
Prime Minister Alenka Bratusek said Tuesday the budget cuts showed that "we know what we're doing and that it will be hard."
"Nobody can guarantee to us that we will not feel the impact of a further deepening of the crisis and of a drop in economic activity in the EU and the eurozone," Bratusek said.
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