It speaks volumes about the increasingly fractious nature of Slovenian politics that the nomination of Alenka Bratusek at the beginning of March as a candidate to be the new prime minister was treated with almost undisguised scorn by her political rivals. In most countries, the news that a woman had been mandated for the first time ever to form a government would be welcomed as proof of its social progressiveness.

But outgoing premier Janez Jansa, who was ousted from power by a vote of no confidence at the end of February, gave the lie to that assertion with his catty prediction that Bratusek's term as the head of any future administration would last as "as long as her skirt" a none-too-subtle reference to the fact that in the still largely male-dominated political arena in Slovenia, the sight of a professional woman wearing an above-the-knee skirt still ranks as something shocking.

The 42-year-old Bratusek, who boasts a master's degree in management, has spent the last two weeks trying to stitch together a new majority administration in the 90-seat National Assembly, Slovenia's parliament. Bratusek, leader of the centrist Positive Slovenia (PS) party, eventually managed that on the evening of March 13, cobbling together a coalition with the the Social Democrats (SD), the Pensioners' Party (DeSUS) and the Citizens' List (DL) party, representing by 66 MPs, thus giving her sufficient political clout to push through much-needed socio-economic reforms.

Or not as the case maybe. In the run-up to the formation of the new government, the parties that supported Bratusek's nomination for prime minister had already called for a delay in the passage of legislation that would have provided the framework for an accelerated privatisation of state-owned companies proposed by the outgoing Jansa-led government. In the face of widespread opposition by employees, trade unionists and opposition politicians, the authorities in Ljubljana had already shelved plans to sell off government stakes in the likes of drug firms Krka and Novo Mesto, port operator Luka Koper, rail outfit Slovenian Railways and toll motorway firm Dru?be za avtoceste v Republiki Sloveniji (Dars).

The delay in the passage of the proposed accelerated privatisation law means that there will be continued uncertainty about the future ownership structures of major enterprises such as telecommunicatios operator Telekom Slovenije, oil company Petrol, insurance company Triglav and flag carrier Adria Airways. Matej Lahovnik, a professor at the Faculty of Economics in Ljubljana criticised the decision to shelve the proposed legislation for the moment, saying he felt it perfectly illustrated the type of political impasse that has resulted in Slovenia failing to emerge from a double-dip recession, which last year saw Slovenia's economy contract by 2.3% as unemployment hit 12%. "When rowers in the same boat are rowing in a different direction, the boat just stands still or moves in a circle," he was quoted by STA newswire as saying, referring to the fact that some parties in Bratusek's proposed government are opposed to state sales while others are in favour.

With regard to future economic policy decisions, Lahovnik said that he believed that there is unlikely to be any major departure from the history of past, failed policies. "I'm afraid that we will again be faced with tax rises and increase public spending, which is not promising."

Bank bailouts

Meanwhile, on the banking sector front the situation continues to go from bad to worse. Although the final figures for 2012 have yet to be announced, analysts believe that banks in Slovenia racked up a record-breaking €600m or so worth of losses last year on the back of rising bad loans, which are estimated to have hit the €7bn mark, roughly equivalent to 20% of the country's annual GDP. That's a far cry from the pre-crisis era, when the Slovenian banking sector recording a profit of €540m in 2007, for example.

One of the biggest villains of the Slovenian banking sector piece continues to be the country's leading player NLB, which recorded a loss of €273m in 2012 that has further eroded its capital base, despite a state-funded capital injection of €383m last July. Consequently, with a Tier 1 capital ratio of 8.77% as at the end of 2012, the bank remains below the European Banking Authority regulatory mininum, prompting the need for a further capital injection this year. As a result, this week rating agency Moody's Investors Service cut NLB's long-term deposit rating from 'B2' to 'Caa2' with a negative outlook, citing concerns that the bank's creditworthiness profile has been "further weakened by the necessity of a further capital injection, ongoing material losses undermining its already weak capital base, and expectation of further losses in 2013."

The ratings downgrade was announced on the same day that Belgian bank KBC formally ceased to be a part owner of NLB, with the final conclusion of the sale of a 22% stake to the Slovenian government for just €2.76m. KBC had originally bought a 34% stake in state-owned NLB for €435m back in 2002 and had hoped to eventually secure majority ownership of the bank at a later date. However, in 2006 a previous administration led by Janez Jansa opposed any increase in KBC's ownership of the bank, leading to tensions between the two owners. Under the terms of an EU-funded bailout of KBC in 2008-2009, the Belgian bank was obligated to offload stakes in non-core subsidiaries such as NLB.

The paltry price it got won't do much for KBC's bottom line, but getting out of the dire situation that is now engulfing Slovenia probably will help in the longer run.

Source: bne