|  This is a tale of a country with two faces. The first face is that of a plucky little land of two million people that heroically broke away from a larger, disintegrating nation after a 10-day skirmish. Since independence it has built a reputation for stability and prosperity, with a per capita GDP some 80% of the EU average and a diversified economy that is the envy of the region. It was the only one of the 10 countries that joined the EU in 2004 to receive an invitation from the European Central Bank to join the euro this January, a process that went more smoothly than anyone dared hope. It has also enjoyed steady noninflationary growth; last year GDP grew 5.2%, with inflation at around 2.5%.
The second face, however, shows a country notorious for complacency and where foreign direct investment (FDI) is low as a result of an entrenched ambivalence towards privatisation, greenfield projects and, most of all, foreign ownership. Despite independence, the old guard remains entrenched in politics and business, which critics say are closely intertwined. Old communist habits prevail in many ways: there is little job mobility, and entrepreneurs are thwarted by bureaucracy and high taxes that until very recently could consume up to 70% of income. In a process that has more in common with, say, Belarus than an EU country, journalists requesting interviews from senior ministers must give weeks of notice and supply a detailed list of written questions, as well as being advised not to stray into areas that may embarrass or appear too negative. The fact that Slovenia has these two faces comes as little surprise to those familiar with this bewitchingly attractive country, but it’s certainly a puzzle to outsiders. One international newspaper recently suggested that far from being a star reformer, Slovenia beat other East European countries to the euro “by retaining elements from its communist past, shunning shock therapy and clinging to state control of banks and telecommunications companies” – and this is a statement with which it’s hard to disagree.  The current Slovenian Democratic Party government of Janez Jansa swept to power in 2004 promising to speed asset sales, remove obstacles to investment and free up the labour market. Three years on, little has changed; the administration’s earlier enthusiasm for reforming the country’s costly social security and pension systems has been dampened by strong union hostility and opposition from the public sector, which still accounts for around 40% of employment. Despite promises to sell state-held assets, the privatisation process has ground to a halt; earlier this year, Belgium’s KBC Group was denied permission to increase its 34% stake in Nova Ljubljanska Banka (NLB) to a majority despite having reportedly been given positive assurances when it invested five years ago. KBC Group retains its stake, though this could simply reflect a struggle to find serious buyers for the now-devalued holding.
With elections due next year (the presidency comes up for grabs this autumn), the centre-right government has indicated that it intends to move forward with asset sales but at its own pace. This is despite its retaining control of Peko (a shoe producer), Nafta Lendava (oil), Slovenské Elektrárne (energy production) and, most significantly, Telekom Slovenije – the sort of companies other countries sold into private hands years ago. |