The Enemy Within (Found in a Matter of Hours)
I promised to post some more on the disastrous way in which this government is “tackling” inflation. Instead of adapting its fiscal policy it launched a raiding party trying to “expose” those responsible. The current official rhetoric is mighty similar to that of socialism in its dying phase, when noone had any idea whatsoever how to curb the spiraling hyperinflation. The only difference between then and now being that Janša & Co. have yet to use the term “adminsitrative counter-inflation measures”.
However, it would seem that I was wrong in laughing at the search for “the enemy within”. It seems that the government found it while we were having our learned debate on inflation on Thursday.
Namely, the government has decided that Ljubljana Mayor Zoran Janković is to blame for the rising inflation.
I kid you not… Apparently, the government believes that the mayor increased the price of tap water by 16,8 % thus adding .4 % to aggregate inflation on national level. The mayor has (as seen in the video below) begged to differ. In slightly more colourful language, of course.
Zoki stopped just short of using the F word.
Funny thing is, though, that according to the mayor the price of tap water would actually go down instead of up. Someone around here don’t know how to count…
September 10th, 2007 at 1:53 am
There’s nothing the government can do. The people have drawn out huge lines of credit to buy overpriced real-estate and keep spending. Price controls will only produce a black market.
September 10th, 2007 at 12:08 pm
Obviously I’m not advocating price control. I’m only saying that the gov’t is going about solving this problem in a worryingly socialist manner (i.e.: finding those responsible) and that the next “logical” step would be to reintroduce price control.
There are things government can do. Especially in Slovenia, where the government is both single largest spender.
BTW: The Price Control Act is still in effect
September 10th, 2007 at 3:05 pm
Even though I didn’t vote for Zoki, one must admit the man’s got style. Zokiness
It’s good to have a mayor who can hold his own against the PM.
I wonder how many voters actually buy the excuses JJ has been producing as of late.
September 10th, 2007 at 3:52 pm
He he, government curbing its spending? Suuuuree…
September 10th, 2007 at 4:06 pm
@crni: I’m not saying it is. I’m saying it should
@dr. filomena: As little as possible, one would hope.
September 10th, 2007 at 4:45 pm
What I am saying is that it will never happen, under any kind of government.
September 10th, 2007 at 4:55 pm
Point…
September 13th, 2007 at 9:18 am
First of all let me say that I very much enjoy your insightful ramblings. Covering Slovenia from London I only get a partial picture, but you do more than your share to fill it out for me… :O)
As for inflation, it seems to me to be a purely political issue. In economic terms, Slovenia ceased having to conform to the Maastricht criteria when it joined EMU. Ireland and Spain (other higher-than EMU avg growth countries) have had inflation consistently higher than the EMU avg and this never really caused them much of a problem. Besides, SLovenia had 8% inflation just a few years ago, so 3.5-4% really is small fry…
September 13th, 2007 at 9:51 am
Waddayoumean “does not have to conform to Maastricht criteria anymore”
We’re being fed rhetoric saying that we have to keep conforming to the criteria indefinitely - otherwise the “blue letters” will start arriving from Brussels.
September 13th, 2007 at 3:24 pm
That’s a load of scaremongering. Ireland and SPain have consistentlt had inflation 1-2 percentage points higher than the EMU avg and to my knowledge noone in Brussels or F’furt batted an eyelid. Slovenia is experiencing underlying GDP growth twice as fast as the EMU’s, and needs to catch up to its living standards, so higher inflation is normal
September 13th, 2007 at 3:29 pm
Now that Slovenia is in EMU, it has to conform to the Stability and Growth Pact (SGP); the Maastricht criteria are for € hopefuls. What matters the most is fiscal discipline, and that’s pretty much assured in the short-term… the long-term is another story, and as long as politicians and society don’t understand that a pension overhaul is needed, that’s a pretty big problem
September 13th, 2007 at 3:56 pm
The big difference between Slovenia and Ireland (dunno about Spain) is the fact that Slovene GDP growth is fueled not by (foreign) investment but by heavy construction, which is beying paid by taking out loans.
Secondly, as far as I know, Ireland and Spain had their inflation above EMU average, but it was a declining trend - whereas Slovenia has a trend of growing inflation, which is worring.
The story about pension system being unsustainable is old news. Noone disputes it, obviously, but while the supposedly left-wing govt’s have kept pensions from growing together with inflation, one of the first moves this gov’t did was to approve the rise of pensions in accordance with rise in inflation. Which is all fine and dandy except the fact that it put even more strain on the pension system.
Re: fiscal discipline: As I said in this post, this gov’t is enlarging the budget deficit instead of lowering it.
September 13th, 2007 at 5:35 pm
Well, heavy (sometimes reckless)construction activity is one thing Spain excelled at, and was the main driving force behind its economic development. Take a look at the Spanish coastline or the Madrid suburbs next time you’re there :O)
Otherwise I agree with most of your points. This government has so far basically ridden its luck, and has got away with quite a few broken promises thanks mainly to strong economic growth covering its ass…
September 14th, 2007 at 2:36 pm
Exactly… And that’s the main problem. And when the bills start coming in Janša will be well into his second term, with his sights set on becoming the Prez in 2012.
November 17th, 2007 at 9:29 pm
[…] Also, there seems to be a new culprit responsible for the rising inflation - the euro. Remember, first it was the retailers and their cartel agreements. Then if was the City of Ljubljana. Now its the euro. All in all, a good portion of this interview was used up by Janša whimpering about his job and effectively saying that if they want this job they can have it. And so he’s off to appear before the parliament. […]