After smoothing tensions in Slovenia, PM Bratusek seeks to win over Europe

Slovenian Prime Minister Alenka Bratusek has spent the first two months of her term trying to stave off a bailout. She may learn her country's fate on Wednesday.

If a week is a long time in politics, then two months can feel like an eternity. That has certainly been the case for Slovenian Prime Minister Alenka Bratusek.

Ms. Bratusek, the country's first female premier and the telegenic leader of Pozitivna Slovenija (Positive Slovenia), only took office in late March. But she has spent the short weeks since attempting to negotiate passage between the Scylla of a European Commission that demands solutions for Slovenia’s ailing banks and the Charybdis of a public with limited stomach for further austerity.

And while Brussels' verdict on Slovenia’s proposed reforms is expected tomorrow, she has already won plaudits at home for her handling of Slovenia’s biggest crisis since its secession from Yugoslavia in 1992.

"So, so far, so good," a leading Slovenian economist says of the new premier’s performance. The economist, who is close to the government, was not authorized to speak and so asked not to be named. "[She] has a nice public appearance ,and she hasn't antagonized the public in the way the former premier always did. Working in her favor is also the fact that she is a completely new figure in our politics," the economist told The Christian Science Monitor.

Financial crisis

The immediate cause of Slovenia’s current travails is a familiar problem across the eurozone’s struggling periphery: undercapitalized and struggling banks. Slovenia, a nation of 2 million tucked in between Austria, Italy, Croatia, and Hungary, has been in recession since 2011.

After independence – and particularly after membership of the European Union in 2004 and the euro in 2007 – Slovenian banks extended generous credit lines to the "managers" of many formerly state-run companies to purchase controlling stakes in these businesses. These so-called "management buyouts" were politically popular, as they ensured that Slovenian industry remained in national hands.

But questions have been raised about the probity of these management buyouts. In the wake of the 2008 financial crisis and the tightening of credit globally, many of the loans made to fund these purchases are underwater, taking Slovenia’s once-formidable banking sector with them.

Further, the bursting of a construction bubble that grew from 2004 to 2008 has left empty properties across the country, particularly in Ljubljana, and tens of thousands of unemployed. Anecdotally, emigration has increased.

Corruption

On the streets of Slovenia, frustration with the economy has been compounded by the corruption that has dogged Slovenian politics in recent years.

Bratusek only became leader of Positive Slovenia when former President Zoran Jankovic was forced to resign earlier this year. A state anti-corruption commission found that he failed to report fully €2.4 million ($3.1 million) of assets accrued during his six years in office. (He remains mayor of the capital, Ljubljana.)

The same anti-corruption commission also found then-Prime Minister Janez Janša guilty of systematically violating law on the reporting of assets. A coalition headed by Mr. Janša’s center-right Slovenian Democratic Party fell in February, to be replaced by a new coalition with Bratusek and Positive Slovenia at its apex.

Janša’s downfall was also fueled in part by protests that began last November in Maribor, the country’s second-largest city. Tens of thousands protested against Mayor Franc Kangler, also accused of corruption. Here, for the first time since independence, Slovenian riot police used tear gas on protesters.

Mayor Kangler was forced to step down in December, but not before the protests had spread across Slovenia.

Staving off a bailout

The fallout from the corruption probe left the relatively unknown Bratusek as an unexpected beneficiary. But while Bratusek might be a new face on Slovenian television screens, she has a relatively long political pedigree.

Although only elected to the Slovenian parliament in 2011, for six years she was head of the directorate of the state budget at the ministry of finance under the former Liberal Democracy of Slovenia (LDS) administration that ruled from independence until 2004. That has helped her navigate the tricky political maneuvering currently required in Slovenia, where Europe and the public are pulling in opposite directions.

"If the politicians are too tough, they are out at home. If they are too soft, they are out from Brussels," says Primoz Cirman, a leading economics writer for the Slovenian newspaper daily Dnevnik. "Right now [the government] are trying find out where the equilibrium is."

Earlier this month, Bratusek announced a series of measures aimed at convincing the European Commission that Slovenia, the most developed economy in the former Yugoslavia, can plug a multibillion-euro hole in its banks’ balance sheets and stave off a eurozone-led bailout. 

Proposals include the creation of a "bad bank" to allow the banking sector to offload non-performing debts; a 2 percent increase in VAT; and the sales of 15 publicly-owned businesses including Telekom Slovenia and national carrier Adria Airways.

Smaller protests

Bratusek's presence has softened the country's ongoing demonstrations, whose size and frequency have decreased in recent months.

In Metelkova, a former barracks of the Yugoslav National Army in Ljubljana that has been home to squatters since 1993, Anej Korsika from the nascent Initiative for Democratic Socialism explained that the change of government has taken some of the sting out of the protest movement.

"The struggle under Janša was much easier," he says. "[Janša] called the protesters ‘Communist zombies’ and ‘leftist fascists’ and all these things which really infuriated people and really mobilized them to go onto the streets in bigger numbers than they would otherwise."