Slovenian parliament approves new government

By bne IntelliNews September 19, 2014

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The Slovenian parliament  approved Prime Minister Miro Cerar’s cabinet on September 18, ushering in an a government that has pledged to bring down the country’s budget deficit. Cerar's choice of Dusan Mramor, a staunch supporter of privatisation, as finance minister also indicates that the new government is likely to pursue the sale of major state assets despite public opposition. 

Addressing the parliament before the vote, Cerar outlined the priorities of his new centre-left government, saying that it will focus on cutting the budget deficit and get within the European Union’s official ceiling of 3% of GDP in 2015. 

"Our fiscal policy will be restrictive, we have to reduce public spending and increase the efficiency of tax collection," Cerar told MPs, according to Reuters. This year, the deficit is expected to be around 4.2% of GDP, after ballooning to 15% in 2013 as the previous government spent some €3.2bn on a bailout package for state banks.

The parliament was expected to vote Cerar’s cabinet in, since his three-party coalition holds 52 seats of the chamber’s  92 seats. In addition to the 36 seats the Party of Miro Cerar (SMC) took in the July 15 elections, the Democratic Party of Pensioners of Slovenia (DeSUS) and Social Democrats (SD) hold 10 and six seats each respectively, giving the coalition a reasonable majority. 

In the two months since the election, Cerar has made overtures to most mainstream political parties, in addition to the SMC’s natural allies from the centre left. The only party not invited to talks was the conservative Slovenian Democratic Party (SDS), whose leader former Prime Minister Janez Janša was jailed for corruption in April. 

However, parties from both the right and the far left quit the negotiations, leaving Cerar with a broadly centre-left coalition not dissimilar to the previous government under Alenka Bratusek. Although her party, the Alliance of Alenka Bratusek, is not part of the new government, there is some continuity. Four members of the previous cabinet including Foreign Minister Karl Erjavec and Agriculture Minister Dejan Zidan have been reappointed. 

Cerar told the parliament on September 18 that he will “aim to keep a strong coalition”. However, an analyst note from Teneo Intelligence warns that “government instability continues to be the main potential source of political risk in Slovenia”. 

“Besides the potential loss of one or both coalition partners, SMC itself lacks internal cohesion,” wrote Teneo vice president Otilia Dhand. “The party was registered only five weeks before the 13 July general elections. Previous experiences with similar political projects in Slovenia suggest that the only uniting factor of the party – the persona of Cerar himself – may not be enough to hold the party together through the entire parliamentary term.”

Aside from political risk, the main concern for investors is the future of the country’s privatisation process. In 2013, Bratusek’s government drew up a list of 15 companies to be sold off by 2016, as it scrambled to avoid an international bailout. However, by the end of her term in office just two companies - speciality paints firm Helios and laser manufacturer Fotana - have been sold. 

Privatisation was the hottest issue in the run-up to the election, with both Bratusek and her rivals saying they would reassess plans to sell off state companies. Cerar also voiced his opposition to the sales of Telekom Slovenije and Aerodrom Ljubljana, though said he supports the sales of smaller state companies.

When it became clear that Cerar, a former law professor, was on track to become Slovenia’s next prime minister, observers were left grasping for clues as to how he would handle the issue. Following the election, the indications are that his approach will not differ substantially from the previous government’s, even though the SMC’s coalition partners take a firmer stance against the sale of major state-owned companies. 

Perhaps the most significant appointment in the Cerar cabinet is Finance Minister Dusan Mramor. An economist and independent MP, Mramor is “a supporter of privatisation and tight fiscal policy”, according to Teneo’s Dhand. On September 15, Mramor told a parliamentary committee that the government would continue with the sales of companies already picked for privatisation. 

The biggest and most controversial of these is Telekom Slovenije. The sale of the state telecoms operator has been delayed, and is no longer expected to be wrapped up by the end of this year, although there there has already been progress towards the sale of other companies. 

On September 5, Slovenian Sovereign Holding (SDH), which is managing the privatisation process, said it had agreed to sell Aerodrom Ljubljana to Fraport, the operator of Frankfurt airport. The German company will pay €177.1m for a 75.5% stake in Aerodrom Ljubljana, despite a last minute attempt by France’s Vinci to acquire the company. SDH also announced on September 16 that it has started looking for buyers for a 51.55% stake in food producer Zito

There are hopes that the sales of these companies will help to revive Slovenia’s stagnating economy, which has been slow to recover since the crisis. The ongoing political uncertainty has held back growth and investment this year. According to a European Commission report Reindustrialising Europe: Member States' Competitiveness Report 2014, real GDP in Slovenia remains 10% below its 2008 peak. The country has one of the lowest levels of industrial competitiveness across the EU, because of its fragile banking sector, low foreign direct investment and a difficult operating environment for businesses.

There has, however, been modest progress this year. In its latest projections for the region released on September 19, the European Bank for Reconstruction and Development (EBRD), which had previously forecast zero GDP growth for Slovenia in 2014, raised its forecast to 0.7%. 

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