does anybody have an independent perspective on Slovenia? (independent of the hegemonic view, that is.)
New York TIMES / September 14, 2012 Slovenia Encounters Debt Trouble and May Need Bailout By STEPHEN CASTLE LJUBLJANA, Slovenia — Small, affluent and westward-leaning, Slovenia was welcomed with open arms into the European Union in 2004 and slipped, almost unnoticed, into the euro union three years later. Yet five years later, this alpine nation with two million people risks the dubious distinction of becoming the first former socialist country in the European Union to need a bailout. Janez Jansa, the Slovenian prime minister, warned last month that debt troubles could eventually force him to seek European aid. And his government has already promised to put up guarantees of as much as 4 billion euros, ($5.2 billion) — more than 11 percent of gross domestic product — to help the country’s banking sector unwind bad real estate and commercial loans. Mired in recession, weighed down by crippled banks and battered by the bond markets, Slovenia’s fall from grace has cast doubt on an economic transition that was once the envy of Central and Eastern Europe. When Yugoslavia fell apart in 1991, newly independent Slovenia kept most of its best assets in domestic hands rather than selling them to foreigners in a flurry of privatizations the way some other countries did. That caution, and resistance to the sorts of change that outsiders would have brought — known here as “Slovenian gradualism” — is now being second-guessed. Some even wonder whether the country suffered from having such a promising start. “It is a beautiful place, and people have a feeling that they have a good life,” said Janez Sustersic, the country’s finance minister. “We were the good pupil of euro entry, also of entry into the E.U., so there was a lot of self-satisfaction that probably made us unaware of the underlying problems.” They certainly know about them now. By financing a construction boom and a spate of ill-advised takeovers, banks accumulated billions of euros in bad debts, according to the Institute of Macroeconomic Analysis and Development, an independent agency that prepares data for the Slovenian government. Now, with the contraction, once-sound businesses are struggling. Bad loans now account for 6 billion euros, or 12 percent, of Slovenian banks’ lending portfolios. Construction has stalled. Gross domestic product is expected to shrink by 0.9 percent this year, to 35.6 billion euros. And because the government’s borrowing costs are high — yields on its 10-year bonds have been above 6 percent lately — the government’s interest payments are higher, too. Even if Slovenia is nowhere close to actually requesting a bailout, its situation cannot help but be on the radar of the European Central Bank, whose next governing directors’ meeting will be held here in Ljubljana on Oct. 4. Although the government’s borrowing needs are still relatively small — projected at 1.6 billion euros in 2013 — a spike in bond yields could lock Slovenia out of debt markets. So what went wrong? Despite its cold war period as a socialist state, Slovenia, as part of moderately open Yugoslavia, was familiar with market economies. Agriculture was never collectivized, for example. There was extensive trade with Western Europe. But Yugoslavia’s breakup, and Slovenia’s drive to independence, left an inflated sense of national pride and, perhaps, of Slovenes’ own abilities. Having negotiated their transition and accession to the European Union smoothly, and with its banks having little exposure to toxic subprime American assets, Slovenes underestimated both the dangers of the looming euro zone debt crisis, and the extent to which the increasingly global economy was changing around them, according to Professor Marjan Svetlicic, head of the center of international relations at the University of Ljubljana. The country’s subsequent economic disaster echoes those of other countries, with the euro bringing easy credit and fueling a construction bubble that inevitably burst. But here, special factors were at play when the country’s economic elite embarked on a host of management buyouts of companies that were partly privatized when the resources of the old socialist state were divided. That meant Slovenia began looking inward just as globalization was transforming world trading patterns. Worse, many buyouts lacked the robust business plans foreign investors would have required, officials and academics say. “The old boy network is very strong in small countries,” Mr. Svetlicic said. “These kind of connections made bankers blind. They trusted personalities. They said, ‘These managers have performed well in the past, so let them have the money,’ and they did not go through a very precise analysis.” Buyouts and mergers peaked during the first term of Mr. Jansa, who was prime minister from 2004 to 2008. He returned to power this year after his predecessor, Borut Pahor, lost elections after squabbles within his coalition and a failure to push through reforms. Mr. Jansa’s first government was a power broker because state-run funds still held stakes in many companies. One cause célèbre was the so-called brewery wars in which Pivovarna Lasko acquired its rival, Union, in 2005 to avert a takeover by InBev of Belgium. Keeping ownership in Slovene hands was a crucial goal. On its Web site, Pivovarna Lasko still cites a quotation about it from 1940, which begins: “This is not a factory like those built with foreign capital, which came to engulf our land in slavery and misery.” But Pivovarna Lasko then went on a scattershot buying spree, acquiring strategically questionable stakes in both Mercator, the country’s largest retailer, and Delo, a newspaper. The hodgepodge conglomerate became unwieldy, and many of its parts have since been sold. Opponents still accuse Mr. Jansa of meddling back then to consolidate his power. The opposition leader and mayor of Ljubljana, Zoran Jankovic, says he was ousted from the leadership of Mercator at the behest of Mr. Jansa. “I wasn’t on the same side as him — it was just important to be in the right political party,” Mr. Jankovic said. Mr. Jansa’s office, in a statement responding to questions, said he had “never interfered” in appointments at Mercator. “The appointment and the dismissal of the chairman of the management board of Slovenia’s largest food retailer, Mercator, falls within the competence of the owners of the company and not within the competence of the government or the prime minister,” the statement said. In any event Bostjan Vasle, the director of the Institute of Macroeconomic Analysis and Development, said many mistakes were made in Slovenia in the period of 2005 to 2007. “Just before the outbreak of the crisis,” Mr. Vasle said, “a lot of people in Slovenia had this idea that it was possible to buy out their companies solely on the basis of cheap loans from a banking sector which had gained from entering the euro area.” Around this same time proposals for structural reforms were largely shelved in the face of opposition from various politicians and interest groups. Foreign direct investment grew more slowly in Slovenia than in other Central and East European countries over the last two decades, limiting the adoption of new technology, thus inhibiting productivity, according to the Organization for Economic Cooperation and Development. Now, with a rising number of bankruptcies and bad debts, Slovenia wants foreigners to recapitalize its big, sickly Nova Ljubljanska Banka. Mr. Sustersic, the finance minister, said investors might be found “in a period of several months, maybe a year.” An austerity budget for 2012 aims to cut about 600 million euros from the previous year’s government spending, and there are plans to adopt labor market reforms by the end of the year. With such efforts under way, Mr. Sustersic said an international bailout would be a last resort. “If we go on with the measures planned, then I think we will be looked at favorably by financial markets and then the likelihood of us needing any financial help will be small,” he said. “Today,” Mr. Sustersic added, “people don’t have the feeling anymore that we are in any kind of sense exceptional or better than the others — which is good because there is maybe also a better understanding of the necessary measures that we have to take.” Slovenia’s gradualism still has some defenders, like Joze Mencinger, professor of economics at the University of Ljubljana and a former finance minister. “Nobody has anything against foreign investments, for example when they are greenfield investments,” he said, “but I don’t understand why you should sell all your companies.” But that view is no longer the consensus. “This idea of gradualism just went a little too far,” Mr. Vasle said. “At the beginning it was appropriate, but at some point in time it became an excuse for postponing all structural reforms.” -- Jim Devine / If you're going to support the lesser of two evils, at the very least you should know the nature of that evil. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
