The Slovenia Times

No realistic alternative but saving



Firstly, what is your comment on, to put it mildly "suspicious complications" around the signatures for the two referendums for a "bad bank" and a state holding. This is definitely not helping resolve the "political crunch", restore trust between social partners and improve the general image of Slovenian politicians.

It is important that the error in trade union signatures was recognised and it is the fact that the error was recognised that should raise, not reduce, the credibility of the authorities - if, of course, a mistake would not be immediately misused for political charges. How the error occurred and who was responsible for it was under investigation by the competent authorities. However, this is not the main reason for the persistence of the opposition and trade unions for the referendum. The opposition motives are purely political, but trade unions motives are a mixture of fear of privatisation and misunderstanding the laws. The government was always ready for interpretation and compromise but we cannot agree on the requirement that the laws are written from scratch and with a completely different concept.

Will the processes connected to the bad loan problems in the banks and improving the management of the state owned companies somehow continue despite the referendum blockade? How will you do that? Probably you will not just wait for the referendum results and hope that the public will come to their senses and be rational on the referendum day?

The Government  isseeking to avoid referendums at the Constitutional Court and if allowed, to convince people in the correctness of the approach. In the meantime we will of course do all we can for the stability of the banking system but our tools for this are very limited.

An important part of very often also excessively demagogic criticism, is directed to the alleged sale of state owned companies which, according to the opposition, will follow the adoption of the bad bank and state holding laws. What guarantee do we have that this will not happen?

The law on the 'bad bank' is not related to privatisation. The law on SDH would simplify procedures although privatisation is also possible under the current regime. Above all, the law on SDH defines the required consent by Parliament to sell the state's shares, which is of course the greatest possible guarantee against irresponsible decisions if they would just be left to the SDH.

Until now we just haven't seen a credible and clear strategy which will define what will potentially be sold, under what conditions, to whom and what the so called strategic sectors are? This kind of transparency would definitely raise the level of trust between people and credibility amongst foreign investors!

The decision of the government was to first arrange a formal framework (SDH) and then prepare the strategy that you mention. Now we may have to reverse the order and implement the strategy within the existing institutions.

A key part of the Slovenian public agrees that the austerity measures are necessary but still there is a significant opposition who are convinced  that the austerity measures are "too radical" despite the fact that although the adopted measures will be super effective, budget expenditure will still exceed revenue by more than EUR 1bn? How can we overcome the current logic that continuous spending exceeding revenue is normal or even good?

It is very simple. We are in a situation where a larger than expected deficit cannot be financed. If we keep the deficit and the speed of debt rising at the level of previous years, no one will lend us money any more. If, instead of expenditure saving we raise taxes, we would further hurt the already weak economy. Simply there is no realistic alternative but to save.

If we are frank, resolving the "credit crunch" is just the tip of the iceberg in Slovenia. As the new head of Nova Ljubljanska banka said recently the real problem is a "capital crunch" in the majority of the Slovenian companies. Even if banks were in normal shape, the companies (not just state owned) are just not "fit" to get new loans, they don't have prospective and profitable projects, they are critically undercapitalised, uncompetitive, poorly managed... This is the real problem of Slovenia, do you have a solution for that?

The problem is on both sides and it is not right that the banks keep trying to avoid responsibility for the credit crunch. Nor it is logical that on the one hand they ensure that they have enough money and on the other they don't credit good companies, make a business loss and claim that minimal taxation of financial services would push them into bankruptcy. In recent years the banks have made a lot from the financial restructuring of companies that are their biggest debtors but they just did not know how or did not want to do it. Of course, the Bank of Slovenia also failed to deliver since it was unable to force them into active resolution of non-performing loans. Our proposal of a bad bank that takes over the claims of the most problematic borrowers, allows us to address both problems simultaneously - improve bank balance sheets with the acquisition of non-performing assets and at the same time begin the process of companies deleveraging with active measures by the bad bank who is now a new dominant creditor.

What can generate new growth in Slovenia, which sectors, products, services? We are not just in a temporary crisis, this is the new reality to which we must adapt. What are the new ideas, instruments that will push the economy out of the red, sticking to old recipes will just not work? Do we (not just in Slovenia but the whole EU) understand the scope of the problem and do we have the right solutions?

Searching for new sectors, products, services is not a task of the Finance Minister or the government but of entrepreneurs and owners.


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