SLOVENIA - The Constitutional Court has ruled that a referendum on pension changes approved by Parliament can take place, a move that will delay public spending cuts and may prompt a rating downgrade.
Lawmakers approved an increase in the retirement age to 65 in December, spurring the country's largest trade union, Zveza Svodobnih Sindikatov Slovenije, to seek a public vote on the measure.
Prime Minister Borut Pahor's government asked the court to decide whether a referendum is legal as it would "endanger" the system of social benefits and pensions.
"The demand that the court rule on the illegality of the initiative for a referendum on the pension reform is rejected," the Ljubljana-based constitutional court said.
European nations are struggling with ageing population and are implementing public overhaul to budget spending to alleviate the strain on public finances. Failure to overhaul the pension system may speed up a ratings downgrade of the country with the highest credit score in Eastern Europe, Marko Mrsnik, an analyst at Standard & Poor's, said in an interview on February 3.
Slovenia is rated AA at S&P, the third-highest investment level. It was put on review for a possible downgrade on December 22 when the ratings service lowered its outlook on signs the government may become less determined to narrow its budget deficit.
"Slovenia has one of the most worrying demographic trends in Europe," Pahor told reporters in Ljubljana after the court's decision was announced. "If the pension reform is rejected, we will be left standing at the station watching development trains speed by."
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