HOW THE TROIKA ’BAILED OUT’ SLOVENIA WITHOUT SPENDING A EURO...
by Lora Verheecke
Kira Cerjak is a member of the international section of the Initiative for Democratic Socialism (IDS), a political alliance from Slovenia advocating for an end to neoliberal policies. The alliance demands policies based on people’s welfare, not policies solely and blindly centred on the interests of capital. She talks to Equal Times about the Slovenian economic crisis and how the various Slovenian governments and the European Union have dealt with it.
How would you describe the transition from socialism to capitalism in Slovenia?
When Slovenia gained independence in the 1990s, it did not sell all its companies, unlike in the Czech Republic or in Hungary. Shock therapy in the 1990s was not an option in Slovenia because of a strongly organised labour movement.
Thanks to pressure on the government, through strikes for instance, the privatisation wave was toned down. Instead, Slovenia pursued a gradual model of privatisation.
Slovenian people were appointed at the head of state companies, leading to the development of a Slovenian bourgeoisie.
And what do you think caused the current crisis in Slovenia?
In the so-called transition period, Slovenia’s companies’ shares were divided among citizens. Everyone became a shareholder, up to a certain point. But speculation on those shares ensued. The national bourgeoisie started taking bank loans, in a non-transparent manner, to buy up shares from Slovenian citizens. This led to the empowerment of Slovenian national bourgeoisie.
Under their administration, Slovenian companies suffered from bad management and heavy borrowing. The incentive to borrow came from Slovenian national banks, led by political appointees, which issued loans in a very opaque manner.
The loans were used mostly for financial speculations by leading company managers or for unsustainable projects, mostly in construction and infrastructure, which were never finalised.
Banks were literally giving away credits without making sure their clients were able to pay them back.
What happened in 2008?
The bubble in the banking sector burst in Slovenia. And since 2008, the Slovenian government has helped national banks with taxpayers money.
How did the Slovenian government deal with the crisis?
The Slovenian government, to help the banks and to pay back the interest rates on previous loans, started to borrow more money on financial markets. This caused a spiralling public debt.
In 2008, public debt amounted to around 22 per cent of GDP – in 2013, it reached almost 72 per cent.
Public debt became the most important and urgent issue on the agenda. It was framed as a threat and used as an argument for Slovenia to include the golden fiscal rule into its constitution. The rule forbids any public deficit, only authorising public surplus.
With the golden fiscal rule, Slovenia basically gave up the only macroeconomic policy tool at its disposal to independently control public debts.
Henceforth, the government started to increase state revenues through privatisation and to decrease state expenditures through budget cuts.
The golden rule is austerity.
What influence did the European Union have over those policies?
The very aggressive neoliberal policies basically started with the accession of Slovenia in the European Union.
The story of the EU was sold very successfully on the premises that Slovenia will prosper and people will enjoy higher living standards, at the level of those in Germany. It took a while for people to realise the consequences of accession.
Slovenian governing bodies are very obedient to the EU. The golden fiscal rule was added to the Slovenian constitution without it being a formal requirement.
But surely, there was some indirect pressure…
Of course. There were rumours that Slovenia was going to file for bail out. Various stress tests were released at strategic moments to show the weakness of the Slovenian banking sector. But the government decided to bail out the banks without the Troika.
The threat of the Troika was powerful: If Slovenia did not pursue, on its own, neoliberal and austerity measures, the Troika would come to rescue Slovenia and implement those same measures.
We find it absurd. We have to implement Troika measures to fight the crisis. If we do not, the Troika imposes them. The pressure was real and it is now being exerted in a more direct manner.
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