Books on Slovenia
% of GDP
Update No: 104 - (01/01/06)
The Slovenes protest at last
Slovenia is seen by outsiders as a placid, successful country on a par with
fellow Alpine Switzerland. This is rather misleading. Its GDP per capita is
still under one-third of the Swiss level here. There is a lot of hardship
The country saw the largest demonstration in recent history at the end of
November, as tens of thousands turned out in protest against the government's
current economic reform plans, which are more radical than anything so far
attempted since achieving independence in 1991. Around 40,000 people crowded
into the central square of Ljubljana, the Slovenian capital, on 26th November to
demonstrate against economic reform plans recently announced by the government.
It was the biggest demonstration since the country's independence from
Yugoslavia in 1991. The reform package consists of 70 new regulations the
government plans to pass in the course of 2006 in a bid to improve the economic
climate in Slovenia.
Among the most controversial measures, an idea first initiated in Estonia, is a
flat tax that is likely to hit those with lower incomes hardest. Trade unions
claim the plans would mean the end of the welfare state while the government
deems them necessary for maintaining the country's competitiveness in a
globalised economic environment.
Despite heavy snowfall, around thousands of Slovenes flocked to Ljubljana on
26th November from all parts of the country, most of them mobilized by various
labour unions. Angry workers, students, unemployed and pensioners, all of whom
critics say would be hit by the proposed reforms, flooded the city's Congress
Square and shouted anti-government slogans.
Joze, one of the thousands of protesters, told TOL: "Believe me, I would
have come even if the sky was falling. I'm working 10 hours a day in a
steel-processing factory. In this hard job I barely earn enough to get my family
and me through the month. If the government introduces new taxes, I really
cannot imagine how we are going to live even just a decent life," he added.
The leader of the Federation of Free Labour Unions of Slovenia (ZSSS), Dusan
Semolic, told the crowd, "The course offered by the government to boost our
economy is not the right course, this is not a course for workers, students, or
Drago Lombar, another union leader, stressed that the workers had already been
victims once, during the transition, and strongly rejected any measures that
would further depress their standard of living. The head of Slovenia's student
union, Miha Ulcar, told the cheering crowd, "If the government goes on with
all the reforms, we will surely spice up their governing. We will go all the
The rally was backed by several trade unions from other European countries as
well as by the European Trade Union Confederation, whose secretary, Joel
Decaillon, urged the preservation of a Europe based on social rights.
The run-up to the demonstration was dominated by the question whether opponents
of the reforms were too heavily influenced by the opposition. Sources close to
the government claimed the opposition was using the workers only as a tool
against the government. The organizers rejected such accusations and pointed to
several big social protests in the past that were held under different
Two small unions, however, refused to join the protest since they support the
reform efforts of the centre-right government of Prime Minister, Janez Jansa.
The turning point
If the rally was a show of force, meant to be a clear signal to the government
that a compromise solution would have to be found between the unions, employers,
and the government, it was also an indication that Slovenia - the most developed
and economically successful new member state of the European Union - is at an
Slovenia's unemployment rate currently stands at around 10 per cent; the average
net salary is 735 euros. But Slovenia's pole position is increasingly under
threat by booming Estonia. With a highly liberalized economy, a flexible labour
market, and a flat tax, the Baltic republic has - together with Denmark - become
a role model for the government's push to implement its ambitious reform agenda.
Part of that agenda is to free Slovenia's labour market from all sorts of
restrictions and regulations. Employers will be able to fire workers more
A standard wage supplement for lunch and transfer to work might be scrapped.
Workers on sick leave might get less money than the current 80 per cent of their
salary. Students might have to pay higher income taxes and new tuition fees.
Another plank in the reform platform is the privatisation of state hospitals,
raising concerns that good medical treatment would only be available to those on
The government also wants to introduce a new tax system based on the highly
controversial flat tax. According to Finance Minister, Andrej Bajuk, the flat
tax would be combined with measures to ensure social sustainability, to ease the
tax burden on workers, and to eliminate the payroll tax. Bajuk's ministry will
have to prepare around 40 per cent of the required legislation, and the
implementation of the reform package will be coordinated by a new minister for
How the new tax system would affect the population is the subject of heated
debate in Slovenia. While the government plans to prepare a study on the effects
of the proposed changes, the unions are already warning of its negative
consequences for those on lower incomes. Dusan Semolic of the ZSSS expects
prices of food, transport, and medicines to increase. Semolic says that 70 per
cent of Slovenes would see their living standards drop. "The flat tax rate
favours the rich," Semolic said.
Data from the Pension and Disability Insurance Institute shows that almost
250,000 pensioners receive a monthly pension of less than 420 euros while
another 410,000 receive 625 euros. Estimates by the vice-president of the
Pensioners' Trade Union, Branko Pintar, suggest that under the new system,
retired people with a 420-euro pension would need an additional 200 euros every
month to keep their current standards of living.
Prime Minister Jansa, by contrast, pleads for speedy reform: "If we don't
tackle reforms in time, we would risk having to introduce them under the next
government in more difficult circumstances, which would imply more severe
The government's blueprint was welcomed by the Central Bank of Slovenia, but the
bank's board of governors warned that in cutting public spending the government
would need to take into account the overall economic effects as well as the
impact on the people that might feel the pinch worst.
The unions aren't flat-out opposed to the reforms. They are willing to maintain
a social dialogue with the government. Opposition parties also support reform in
principle, but are strictly against the flat tax.
Several prominent economists cautiously welcomed the reform. Former finance
minister Dusan Mramor warned that Slovenia's competitiveness could only be
increased if curbs in public spending and a tough wage deal also came into the
mix. "Easing the tax burden on labour while simultaneously raising taxes on
consumption and property, plus the complexity of administering wages and social
transfers, certainly doesn't' provide the right framework," Mramor told the
Slovenian Press Agency.
A final element in the reform process is the privatisation of state-owned
companies. According to a recently released report on corporate governance in
companies listed on the Ljubljana Stock Exchange found that the role of the
state in governance is still too strong, both directly or through the
state-controlled Restitution Fund (SOD) or Pension Fund Management (KAD).
On average the state had a share of 24 per cent in the 28 companies quoted on
the stock exchange, with stakes as high as 30 per cent in 10 of these companies.
The state has effective control and the opportunity to influence the business
and strategic decisions of these companies, an "inherently unhealthy
relationship, which gives the people in power direct control and opens the door
to political manipulation in the majority of big Slovenian companies," the
The report urges the government to urgently withdraw from company ownership.
"In addition to the fact that the state is a sub-optimal owner, [the
current system] leads to untransparent cross-ownership under the patronage of
politics and general meddling of the state in corporate affairs.
The state should define which investments are strategic and turn these into
transparent, direct ownership shares," the report proposes. Among the
paper's authors is Joze P. Damijan, who chairs the government's reform
committee. Damijan is the most likely candidate to be minister for reforms,
which suggests that big sell-offs of state property might be on the agenda for
Although Slovenian society is still pretty stable, the protest has already
become the first real challenge for the new chief, Prime Minister Jansa, whose
government has been in power for about a year. In the coming months, the
government will need to prove it can run a persuasive social dialogue with the
labour unions and at the same time preserve the main elements of its reform
Some supporters of a liberal economy fear that Slovenia's labour unions are too
strong and that the government will in the end have to give in to some of their
demands. It is unavoidable that some sort of compromise will have to be found.
Already, the labour unions are threatening to demand referenda on each law that
might substantially affect established social benefits. But Premier Jansa is
kicking the ball right back into the unions' court: "If this happens,
whoever does it will have to take responsibility that Slovenia has failed to
implement reforms in time."
Slovenian drug company Krka on London Stock
Slovenian drug company, Krka, plans to list around 15 per cent of its shares on
The London Stock Exchange, reported business daily Finance.
Listing in London would "bring the company closer to sources of
financing," Chief Executive, Joze Colaric, said in an interview. The
percentage of foreign shareholders in the company has grown to 5.6 per cent from
2.9 per cent in the last two years.
"In the next few years, a lot of patents will expire, and we'll be able to
market new, profitable products. Also, our markets still have room for growth,
since the use of drugs in Eastern Europe isn't as widespread as in Western
Europe," Colaric said. The company is also gearing up to enter the markets
of South and Central America, Colaric explained, hoping to widen its market and
grab a bigger share of business in those countries.
Slovenian largest retailer Mercator invests in Serbia
Mercator opened a shopping mall, its fourth in Bosnia and Herzegovina, in the
capital Sarajevo. Mercator said it expects its 2005 sales in Bosnia to rise by
31% on the year to 48.4 million Euro. It has a 2% share of the Bosnian retail
market, New Europe reported.
Mercator will open a mall in western Serbia, and another one in Central Serbia.
Currently, the Slovenian retailer has only one mall in Serbia, in the capital
Belgrade. Mercator's competitors in the Serbian market are German Metro, French
Cora, Greek Veropoulos and Serbia's three largest retail chains: Maxi, C-Market
and Pekabeta. Mercator consolidated 9-month net profit went up 135.3 per cent.
Telekom Austria buys rest of Slovenia unit
A subsidiary of Telekom Austria has struck a new deal to acquire the remaining
25-per cent stake in its Slovenian unit, New Europe reported.
The deal will see Mobilkom Austria speed up acquisition of the outstanding
interest in Si.mobil, wrapping up a process that began in 2001 when Telekom
Austria Group bought a 75 per cent interest in the Slovenian company.
"Through our concerted efforts we have been able to achieve a turnaround
and materially improve the financial performance of Si.mobil," said Telekom
Group COO Boris Nemsic. "By increasing our shareholding in Si.mobil we are
demonstrating our commitment in the country." The purchase of outstanding
shares from six stakeholders will cost the Austrians about US$46 million, which
is a more than a five-percent discount from the original purchase price agreed
upon in 2002 when Mobilkom agreed to buy the entire company.