The Slovenia Times

Looking for Growth! Growth of What?



It became very clear that the presumably imbalanced approach between austerity and growth will be the the main political issue and battlefield between the government and the opposition, which applies for all of Europe. In fact, its not even clear if this is battle is between the left and right because the boundaries are somewhat blurred. The so-called left in Slovenia is accusing the government of being "neoliberal" because it wants to lower public spending to a level that can be supported by current tax revenue and the avaliable level of foreign loans. The final result of "neoliberal" austerity measures is still a budget with a more than 3% deficit. We can definitely agree that austerity is not all that is needed, but recklessly thinking that we can just continue with deficits of 5% or 6% a year is just not a credible policy. This definitely cannot be labelled as a policy of the left, more appropriate may be the"far from reality" policy.
In Slovenia, everyone is looking for the mysterious growth recipe. Aside from desperate public promotion of the general need for growth, we still haven't heard something real or operational from either the government or the opposition. The government is definitely stuck in the short term with the obvious and painful stagnation in our main foreign markets; an empty public treasury without the potential to stimulate through large public investment; and useless, frightened and undercapitalised state owned banks which are trapped in dealing with the transitional sins from the past and not having the capital or ideas to finance the economy. The oppositon is more or less without any realistic financial recommendations, proposing aggressive investment in public projects such as the second track for the railway line toward the Port of Koper or new highway projects on the so called third development axis.
So what is realistic in the short term? Probably the first, next most important task for the Finance Minister is to ensure the banks go back to their basic function: lending money. This will not happen without the substantial inflow of fresh capital, domestic or foreign, which will cover the huge hole of bad loans from the past. And this decision must be made in the next month. Even if the state is forced to once again finance the recapitalisation of our biggest bank, this is probably cheaper than a continuation of the credit crunch. Secondly, the government must immediatly make a list of credible projects where we can attract foreign capital and this will certainly not happen if every project or company in this country is labelled as being "strategic" and/or "in the national interest" and consequently closed to foreign investment. Thirdly, the short term step is to enter new markets with existing products and services. For example, the fact that Slovenian imports from China is cca. EUR 500m per year and exports do not reach EUR 50m, cleary shows how innovative and pervasive our economy is and what kind of opportunites are missed every day.
In the long run we definitely need a completely new development strategy. We must move toward sustainable growth, new techologies, energy efficiency and away from our traditional thinking that the only true investment is an investment in concrete or asphalt. On top of that it would be very useful to slowly improve "GDP growth" in its current substance and form as the only and Holly indicator of development. This could solve a lot of our self inflicted problems. But for now we can only hope that the ministers of the Slovenian government, especially the Minister for Economic Development and Technology and the Minister for Infrastructure and Spatial Planning, will do their homework at least as successfully as the Finance Minister did with the austerity measures.


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