The economic and political situation in Slovenia

Slovenians have often seen themselves as frontrunners among Eastern European nations. On a political plan, Slovenia was often also seen as a pioneer nation. It was the first ex-Yugoslav republic to become a member of the European Union in 2004. Even as late as 2007, annual economic growth was at a relatively high rate of 6%. Slovenia was regularly lauded as being the “star pupil” who meticulously carried out required EU reforms and was praised as a “success story” and other countries were encouraged to follow its example.

The influence of Slovenian politicians on the population

What is more worrying is that some politicians in Slovenia have been able to harness this distrust and use it for their own political machinations and ambitions. By employing demagogic strategies they have been able to penetrate deep into the collective Slovenian psyche. Given that, historically speaking, Slovenia was always dominated by various foreign powers and was never seen as completely independent until 1991, it comes as no surprise that a large proportion of the population shudders at the thought of yet another form of submission to more powerful forces. One of the most “popular” derogatory phrases Slovenian politicians use to belittle the population and instil a sense of helplessness is “hlapci”, roughly translated as “serfs” or “servants”. When politicians attempt to explain why they are not carrying out obligations which they have agreed to carry out with the EU, one of the most common explanations, or to use a better term, excuses, is that Slovenia does not need to take orders from what is increasingly seen as an alien institution. However, what might seem as an altruistic and patriotic gesture which serves “national interests” often seems to leave people worse off instead of improving their standards of living. Therefore, one may start to question the real motives of politicians who attempt to prevent privatisations whatever the cost.

Nova Ljubljanska Banka

One of the most blatant examples of politicians constantly stalling reforms can be found in the banking sector. Nova Ljubljanska Banka, which is the largest bank in Slovenia and is state-owned, should have already been sold on numerous previous occasions. However, there are increasing concerns that selling a large proportion of the bank will be postponed again, something which would further damage our international credibility. Currently, Brexit is being presented as one of the main obstacles in the process of selling the bank, with the Slovenian Prime Minister stating that conditions on the market are not favourable for carrying out sales. Also, it is true that Slovenians tend to be weary when it comes to selling state-owned companies, mainly because of sales that have gone wrong in the past and because of a perpetual fear that they will be swindled (a fear which is often played upon by politicians). However, the alternative to selling could be considered as being worse for the population. In 2013, in order to avoid the feared Troika composed of the European Central Bank, the IMF and the European Commission, Slovenia paid over three billion euros in the form of bailout to save its banking system. The bailout came at a high cost. When attempting to deal with the crisis in banking in 2013, Slovenia offered a 6% interest rate on the 10-year bonds in its debt sales, at a time when certain Eurozone countries were enjoying far lower borrowing cost. For instance, Germany’s equivalent bond was trading below 1.2%. How would the country deal with bailing out its bank system again if a crisis emerged? Already, Slovenia is significantly lacking funds in practically all sectors, ranging from healthcare to the defense and security system, which is a different subject altogether. It seems as though this would be a good time to sell the bank. The Slovenian newspaper Finance estimated that NLB will have over €100 millions of profit this year and forecasts for as soon as next year are already worse. The Bank of Slovenia came to the same conclusion. Given that there is positive correlation between profitability and the cost of a bank, selling NLB would be certainly be beneficial at this stage.

“national interests” ?

It is ironic that politicians talk about “national interests” when attempting to avert sales of state-owned companies given that it is precisely these companies which caused most problems for the economy. Unfortunately, Slovenia’s reputation is regularly threatened by “rampant cronyism”, as described by Nicole Lindstrom from the University of York. In the past, elaborate Ponzi schemes in which firms and individuals received massive loans despite having insufficient collateral were prevalent in Slovenia. In 2013, two of Slovenia’s biggest construction companies, Vegrad and SCT went into bankruptcy proceedings. Istrabenz Holding, a food, tourism and energy conglomerate started undergoing a court-mandated debt restructuring. Who is to say that this will not happen again? Moreover, it is difficult to overlook political overtones in these controversial cases. As the New York Times wrote in 2013, the politically connected banks lent to politically connected companies, leaving state banks sitting on loans books where more than a fifth of the debts were no longer being repaid. It is doubtful whether anything has changed in over three years given that no serious reforms were carried out.

A new era in Slovenian politics ?

The outcome of the meeting which took place on the 23rd of January between Slovenia’s Finance Minister and the European Commissioner reaffirmed that the sale of NLB will go on as planned, and that the sale should take place by the end of 2017. Perhaps this signifies a new era in Slovenian politics in which we have finally abandoned the quite useless and often harmful policy of pursuing “national interests” regardless of costs and without being completely certain what that entails most of the time. On the other hand, which is probably more realistic, is the fact that Brussels will no longer tolerate endless postponements of sales based solely on flimsy political agenda and not on serious economic concerns. Whatever the reason, what is most important is that Slovenian people will not experience the same financial burden they did in 2013, when they needed to bail out Slovenia’s banking system.