Slovenia's new PM in a race against time

By bne IntelliNews February 28, 2013

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Just after 10:00pm after more than ten hours of debate, Slovenia's parliament voted in Alenka Bratusek as the first female prime minister of the country, backed by three parties decamping from the collapsing centre-right government. It's unclear whether Bratusek will have the power or be given the time to steer Slovenia away from becoming the next Eurozone country to need a bailout.

The 42-year-old temporary leader of the largest opposition party, Positive Slovenia, won over 55 votes of parliament's 90 deputies, supported by the opposition Social Democrats, and former government coalition partners Civic List, Pensioners' Party (DeSUS) and People's Party.

A five-way conservative coalition under centre-right Democrat Janez Jansa was in power for just 13 months. Parliamentarians began to lose faith after months of protests and strikes that began in autumn last year. The problems began to snowball when at the start of the year an anti-corruption commission announced it was unsure of the origin of some of Jansa's wealth and that of opposition leader Zoran Jankovic, Bratusek's predecessor as leader of Positive Slovenia. Polls said confidence in the government fell to just 12%.

Jansa challenged the anti-corruption commission's findings, saying they were politically motivated and that the body was itself corrupt. But his protestations were in vain. He lost his parliamentary majority when the Civic List, under Gregor Virant, stepped out of coalition in January. The Pensioners' Party then left, followed soon after by the conservative People's Party.

Jansa's only hope was controlling around a third of the parliamentary vote through his own party and the Christian Democrats. But a no-confidence vote was lodged on February 22 and held February 27.

Jankovic, the mayor of Ljubljana, also accused of dodgy dealing, took a different tack. After learning of the anti-corruption body's allegations against him, he made Bratusek his stand-in. Then, ultimately, he pledged to step back from politics altogether, clearing Bratusek's path.

Brighter days

Bratusek said following the vote that a period of division, contempt, abuse and fear was over, alluding to Jansa's final weeks of struggle. In his closing days, Jansa had spoken of protesters as "leftist fascists". The main failure in politics, she said, was the stubborn belief of always being right,

She said she hoped women would in future be measured by the potential of their decision-making rather than the length of their skirt, and that she would answer sexist attacks. She gave no immediate answer to media allegations of personal enrichment and that she plagiarised her the thesis for her master's degree.

Jansa and his ministers will remain in office until Bratusek forms a government. Even once she has established a team, it is unclear if her new coalition will remain in power until the end of the allotted term. It may seek or be forced into an early election. Bratusek says she wants to be in office for at least a year.

Much will depend on her ability to turn around the economy. The country's main weakness is the banks, which are mostly state-owned and crippled by growing bad loans. The Bank of Slovenia reported that the sector posted losses in 2012 of €664m, about 1.8% of annual GDP, up from EUR539m in 2011. Bad loans are now equivalent to over 20% of GDP.

The Eurozone country is back in recession, which together with the bank bailout needed is making reaching targets for fiscal consolidation that much more difficult. The European Commission recently revised up its projection for the general government balance for Slovenia for 2013 from a deficit of 3.6% of GDP to 5.1% of GDP, and remaining close to this level in 2014 (4.7% of GDP). As a consequence of this and the costs of bank recapitalisation (€4bn-5bn), the Commission now projects the ratio of general government gross debt/GDP rising to 59.5% at the end of 2013, and to 63.4% of GDP by the end of 2014.

Unsurprisingly, the rating agencies are busy downgrading the country, further harming its ability to borrow in order to fund its debt obligations coming due this year.

Yet the political crisis has put reforms necessary to combat the crisis on hold. Tim Ash of Standard Bank notes that the Jansa administration appeared to have made progress late last year when parliamentary agreement was reached over a plan for cleaning up the banking sector through the creation of a bad bank and a company to manage state assets, the Slovene State Holding Company. And attempts to overturn these reforms through referenda called by opposition parties and trade unions were overturned in what had appeared to be a landmark legal ruling at the time from the constitutional court.

However, implementation is key to the success of any reforms. "Essentially formation of the Bad Bank and Slovene Holding Company are being held up, and the troubled Slovenian banking sector desperately in need of recapitalisation now by the state is in a state of limbo, arguably with the problems deepening," says Ash.

While preferring stimulus over austerity, Bratusek's new government leaves an open question whether it can deliver a more palatable remedy.

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