The young people knew about this. I should have added that the Venezuelan ambassador attended many of the sessions. Not only that, he was familiar with many of the participants -- including Michael Lebowitz, who knew him in Venezuala.
Michael Perelman Economics Department California State University michael dot perelman at gmail.com Chico, CA 95929 530-898-5321 fax 530-898-5901 www.michaelperelman.wordpress.com -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Louis Proyect Sent: Sunday, May 05, 2013 3:24 PM To: Activists and scholars in Marxist tradition; Progressive Economics Subject: Re: [Pen-l] [Marxism] Mayday in Slovenia On 5/4/13 5:13 PM, michael perelman wrote: > Finally, the level of political and intellectual sophistication I saw > was absolutely amazing. The young people were intensely interested in > ideas, especially those relevant to building a new society. > No wonder. NY Times May 5, 2013 In Europe, Growing Concern Slovenia Is Next to Need Bailout By DAN BILEFSKY LJUBLJANA, SLOVENIA — Only a few years ago, Bine Kordez was feted as Slovenia’s star entrepreneur. After transforming a home-improvement chain, Merkur, into a regional giant, he drew on easy credit from state-run banks to help orchestrate a €400 million management buyout of the company, the largest in the country’s history. The rewards of success included an imposing mountainside retreat and frequent mention of his name as a possible future finance minister of this small, idyllic Alpine country. Now, though, Mr. Kordez stands convicted of forgery and abuse of office for financial dealings as Merkur struggled under a mountain of debt. “My mistake and the mistake of the banks was to vastly underestimate the risk,” Mr. Kordez, 56, said in a recent interview at his home near the picturesque town of Bled, with a view of Slovenia’s highest peak. He awaits a decision later this month on an appeal of his conviction, which could send him to prison for five years. As fears grow that Slovenia could follow Cyprus and become the sixth euro zone country to seek a bailout, his rise and fall have come to symbolize the way easy and cheap credit, combined with Balkan-style crony capitalism and corporate mismanagement, fueled a banking crisis that has unhinged a country previously praised as a regional model of peaceful prosperity. The recent bailout of Cyprus at a cost of €10 billion, or $13 billion, which included stringent conditions forcing losses on bank depositors, has focused minds in Ljubljana, the Slovenian capital. Slovenia’s struggling banking sector is saddled with about €6.8 billion worth of nonperforming loans, about one-fifth of the national economy. Slovenia is now in recession, and the gloom across the euro zone shows little sign of abating. A European Commission forecast released Friday said that France, Spain, Italy and the Netherlands — four of the five largest euro zone economies — will be in recession through 2013. Last Thursday, Slovenia bought time by borrowing $3.5 billion on international markets. That was two days after Moody’s Investors Service cut the country’s credit rating to junk status, citing the banking turmoil and a deteriorating national balance sheet. Analysts said the bond sale would probably enable the government of the new prime minister, Alenka Bratusek, to stay afloat at least through the end of the year. The Cypriot debacle has shown how bailing out even a small country can damage the credibility of the euro currency union. But Slovenia, with two million people, insists that it is not Cyprus and will not seek emergency aid. “For the time being, I have a sound sleep,” Ms. Bratusek, the 42-year-old prime minister, said in a recent interview. This week, on Thursday, Ms. Bratusek, only a little more than a month in office, is expected to present a financial turnaround plan to the European Commission, the executive arm of the European Union. She said that privatizing Slovenia’s largely state-owned banking sector was a priority, along with creating a “bad bank” to take over nonperforming loans. Her government, she said, will also unveil plans by July to sell the country’s second-largest bank, Nova Kreditna Banka Maribor, along with two large state companies that she declined to specify. The sales could raise up to €2 billion, she said. Ms. Bratusek, who once headed the state budget office at the Finance Ministry, said Slovenia’s government debt, which analysts say rose from about 54 percent of gross domestic product to around 64 percent with last week’s bond sale, still ranked at the lower end of that scale in the euro area. But the 6 percent interest rate Slovenia offered on the 10-year bonds in last week’s debt sale, at a time when some euro zone countries are enjoying historically low borrowing costs — Germany’s equivalent bond is trading below 1.2 percent — might only add to the country’s financial problems. Mujtaba Rahman, director of Europe at Eurasia Group, a political risk consulting firm, said the new financing could backfire if it lulled the government into laxity about making vital structural changes. “The new financing was not a vote of confidence in the Slovenian government or in the economy, but rather reflects investors attracted by high bond yields,” Mr. Rahman said. “A bailout could still prove inevitable.” What went wrong in Slovenia? The country, wedged between Italy, Austria, Hungary and Croatia, was considered the most promising among the 10 new European Union entrants when it joined in 2004. That was 13 years after it declared independence from Yugoslavia, avoiding a bloody Balkan war that had swept up other countries in the region. When Slovenia was admitted to the euro club in 2007, the single currency helped fuel easy credit and a construction boom. It was the same sort of heady access to cheap money that led to economic disasters in Ireland and Spain. But economists say the Slovenian variety of euro-euphoria hangover can be traced to a failed transition from communism to a fully functional market economy. After gaining independence in 1991, Slovenia — conditioned by centuries of foreign subjugation — was determined to retain local control of its prized assets. It embarked on a spree of management buyouts of partially state-owned companies, overseen by executives who in many cases were uncomfortably close to people running the government and the state banks. “After the transition in Slovenia, the state retained a stranglehold over the economy,” Mr. Rahman said, “and the country today is suffering the consequences.” Bine Kordez at Merkur was not the only head of big Slovenian company whose involvement in a bank-aided management buyout ended badly, or whose access to easy credit backfired. Two of Slovenia’s biggest construction companies, Vegrad and SCT, are now in bankruptcy proceedings. Istrabenz Holding, a sprawling food, tourism and energy conglomerate that once owned a vast swath of Slovenia’s economy, is undergoing a court-mandated debt restructuring. Igor Bavcar, Istrabenz’s former chief executive, was charged with money laundering, and Bosko Srot, former chief of the big brewing company Pivovarna Lasko, with abuse of authority, in connection with a 2007 deal. Prosecutors say Mr. Bavcar attempted to buy a stake in Istrabenz from Lasko through a series of shady intermediaries. Both deny any wrongdoing. A big provider of buyout loans was Slovenia’s largest state-owned financial institution, Nova Ljubljanska Banka, or N.L.B. The government installed new management late last year, as the bank’s lending portfolio turned increasingly sour. Janko Medja, N.L.B.’s new chief executive, said that the rush to privatize Slovenian state-controlled companies, combined with the money coursing through Europe before the 2008 financial collapse, had prompted banks like N.L.B. to practically give money away “for free.” In the case of Merkur, which Mr. Kordez joined as finance director in 1988, the advent of the euro sent the home-improvement company’s profit soaring, as newly prosperous Slovenians rushed to renovate their apartments and houses. By 2008, the once modest group of neighborhood hardware stores had €1.3 billion in annual revenue, and the number of employees had more than doubled to 5,000. Mr. Kordez decided to consolidate his grip. He recounted recently how he convinced a group of 10 banks, including 4 foreign ones and N.L.B., to lend him more than €350 million. “I had no real collateral for a deal of that size,” he said. “Just my house , a few hundred thousand euros, a smart business plan and my reputation.” So he offered as collateral the assets of Merkur, a company he did not yet own. The trouble intensified in 2009 when, with the global economic downdraft in full force, Slovenia’s construction bubble burst. As home improvement projects fell idle, Merkur sales dropped by about 20 percent. Mr. Kordez described taking out fresh loans to repay the outstanding ones, even as Merkur paid dividends to Mr. Kordez’s investment vehicle, Merfin, which he then used to help pay off spiraling debts. “In some countries this could be called a Ponzi scheme,” said Primoz Cirman, a leading economic writer for Dnevnik, a Slovenian newspaper. “But here it was called financial engineering.” By 2010, the banks had lost patience and Mr. Kordez was pushed out. An audit later revealed that the buyout had destroyed €200 million of Merkur’s value. The company is now majority owned by the banks and undergoing a court-mandated debt restructuring. In 2011, prosecutors accused Mr. Kordez of embezzling €9 million from Merkur in 2008 through a byzantine deal in which his investment firm, Merfin, bought a shopping center with an improper €10 million loan from Merkur. A few days later, Merfin sold the property to a construction company for €21 million, an artificially high price. Merfin, prosecutors said, then used the profits to help pay back its soaring loan costs. Last September Mr. Kordez was found guilty of forgery and abuse of office. He said he was trying to save the company and had not broken any laws. Prosecutors counter that he abused his position to save himself from financial ruin. As he awaits a ruling on his appeal, Mr. Kordez has been riding his mountain bike throughout the country, and he says he refuses even to contemplate a possible prison term that he compares to a diagnosis of cancer. He would leave behind his wife, and an adult daughter and son. The country’s financial disease, he said, is hardly his fault. “Someone needed to be blamed for this mess,” he said, “And I have become the sacrificial lamb.” _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
