Pengovsky is seriously slacking blog-wise. But the day refuses to have more than 26 hours on average, so there’s just not enough time. There’s lots to tell, but things will have to get worse before they get better, I’m afraid. But to offset the damage a bit, here’s a picture of foggy Ljubljana as seen by your average motorist. Just to make you feel better about your own morning rush hour 
Yesterday Slovenian parliament passed a law imposing additional 49% tax on wages exceeding 12,500 EUR per month and bonuses exceeding 25,000 EUR per year. The law, which effectively imposes a 90% tax on top wages of state-owned companies or companies which have applied for state help was proposed by Zares and is controversial enough to have caught the attention of Reuters. The law was supported by all parliamentary parties, which shouldn’t come as a surprise, given the current economic and financial crisis, in light of which wages and bonuses of some managers, which were huge to begin with, seem enormous in an economy which is projected to drop 8% in 2009 and which suffered a 10% year-on-year drop in the second quarter of this year.
Give me money by Magnifico. A must if you haven’t seen it yet
According to Slovenian Statistics Office, the average gross wage in Slovenia in July 09 was around 1,420 EUR (average net wage in the same period was 922 EUR), which means that earnings higher than ten times the average salary will fall under this “special tax” law. To be even more specific, the law applies to earnings between 1 January 2009 and 31 December 2010 or whenever state help scheme expires (in case of a privately owned company). The law was – among other things – prompted by the fact that former Marjan Kramar CEO of Nova Ljubljanska Banka (NLB) collected about one million euros in accumulated bonuses at a time when the country was already in turmoil over tycoon-loans and when the first contours of crisis were becoming visible. One million knaaks is a lot of money no matter how you look at it but in that particular climate it was just one excess by the fat cats too many.
However. This “special tax” law stinks and is probably the worst piece of populist legislation passed ever since Janez Janša got his ass kicked in the elections.
First of all, if the law indeed is (as it seems to be) a response to Kramar’s bonus excesses, this is yet another example of a introducing systemic changes to deal with specific problems. This was a trademark of Janša’s government, which went on a legislative rampage every time a specific individual needed to be replaced, demoted or otherwise made an example of. Four years of reflex legislation was quite enough, thank you very much. If the left bloc is going to use tricks of the political right, we might just as well close the shop and call it a day.
Secondly, the law will most likely be declared unconstitutional. Since it retroactively taxes wages and bonuses paid since 1 January 2009, it interferes with “an already acquired right or benefit” (not sure about the exact legal term). For this reason and especially in light of decisions in similar cases the Constitutional Court is expected to have a field day with it.
Thirdly. Immediately after the enormity of Kramar’s bonus became know, finance minister Franci Križanič publicly outlined legislation going along exactly the same lines (90% tax on very high wages) but was quickly rebuffed by legal experts for reasons cited above (another case of him working better than speaking).
Fourthly (is that a word?): When Križanič finally got his bearings and was persuaded not to try to introduce the special 90% tax (which, remember is to be comprised from the basic 41% tax for top wages and sweetened by additional 49% tax for excess wages and bonuses) he went about and tried to amend the current taxation system, by raising the top wage tax from 41% to 48%. All hell broke loose, the opposition and part of the coalition pinned him to the wall and he was forced to withdraw the proposal. And now everybody is happily introducing a 90% tax? What the fuck?
Fifthly (how about this?): The law holds mostly symbolic value. Monies returned to state coffers will be barely worth a mention. But since no political party can afford to look like it is protecting the fat cats, everyone voted for the law. But this is no time for symbolism. People are losing their jobs, GDP is southbound and budget deficit is bulging. Some real and bold moves are needed. But by passing symbolic measures the parliament and the coalition (and the opposition in this case) is wasting time we haven’t got.
And last, but certainly not least: I’m willing to bet the law was passed precisely because for reasons for which it shouldn’t have been passed. The opposition and the coalition probably knowing that it will meet its early demise in the Constitutional court, which meant that they could support it without the danger of actually making a difference. And thus everything will remain the same.
Dogs bark but the caravan moves on.
P.S: As you have no doubt noticed, pengovsky is posting a bit more irregularly as of late. Sorry about that, but it seems that one of the effect of the crisis is that we all have to work more for less, while the day refuses to be extended beyond 24 hours.
Today for the third year running The Firm™ will broadcast live Rock for Future Generations, a rock concert organised by Društvo Planet Zemlja (Planet Earth Society). This year the concert returns to Ljubljana and the line-up includes (among others) GlosaArt, Zlatko & Optimisti, Pavle Kavec & Oko, Ave, Jadranka Juras and Terra Folk featuring Anja Bukovec
Webcast will begin shortly before 1700 hrs CET. Silverlight plugin is required for viewing.
Shame Slovenia did’t win a medal Eurobasket, but apparently for some the championship continues
Just a quick update on the Pahor-Kosor agreement. After Slovenian PM Pahor took some serious flak for making the deal (words like “high treason”, “complete failure” and “utter defeat” were used”), the very same thing is happening in Croatia, where words like “deception”, “lies” and “betrayal of vital national interests” were used.
Symptomatically, both PMs are being vocally criticised by their respective opposition. In Slovenia, the People’s party (SLS) and the nationalists (SNS) are saying that the deal did not go far enough and that it basically concedes territory, while in Croatia, which finds itself in the early stages of a very hot presidential race, the highest ranking political casualty to date is Davorin Rudolf, who resigned as chief negotiator on the border issue. He stated that the second proposal by EU Commissioner Olli Rhen (the one which is stipulated in the agreement as the starting point for continuation of negotiations) is extremely bad for Croatia and that he will have nothing to do with it. Curiously enough, he resigned yesterday, was then reportedly persuaded by PM Kosor to become her personal advisor on the matter, but today he publicly stated that he will not accept any position vis-a-vis the issue. On the Croatian political front the Social democrats (SDP) and Democratic Union of Istria (IDS) say that the deal went too far and that it basically – concedes territory. Sounds awfully similar to what is being said in Slovenia. Go figure.
On that note, let it be known that although it criticised PM Pahor heavily, Janez Janša’s SDS abstained from the vote on lifting the blockade of Croatian EU negotiations. I guess that they are a bit unsure about how to play this thing. They know that Pahor went out on a limb, but voting against and then being proved wrong would be highly embarrassing, besides, they can’t afford to be made look uncooperative after they nearly derailed Croatian NATO entry by defending their creative accounting techniques earlier this year.
Pengovsky doesn’t know much about how things stand in the ruling coalition in Croatia, but he has it on good authority that the ruling coalition in Slovenia only grudgingly OK’d the broad outlines of the deal. There seems to be precious little enthusiasm for the agreement on either side of the border. Afterall, even pengovsky was unsure about what to make of it.
But the way I see it, if both of them are being called names for making the deal, then they must be doing something right.
Yesterday Slovenian parliamentary committees for foreign relations and European matters voted in favour of lifting the blockade of Croatian EU negotiations. In a joint session which lasted for several hours PM Borut Pahor explained the details and the mechanics of the deal he made last Friday with Croatian PM Jadranka Kosor.
As you know, at the centre of things is a letter PM Kosor sent from Pahor’s office to Swedish PM Fredrik Reinfeldt.There were conflicting accounts as to what was written in that letter, especially with relation to the exact wording and the effect it will have on past attempts to settle the dispute, most notably the Drnovšek-Račan agreement. Yesterday PM Pahor’s office finally released the original letter and put a stop to speculations. It is clear now. The Pahor-Kosor agreement nullifies any prievous agreements as well as unilateral actions. Therefore, there is no more Drnovšek-Račan agreement.
The important bit of the letter with the wording “documents or actions taken unilaterally” (source)
Things, however, were happening at lightning speed. Just as Kosor’s letter hit the mailboxes and caused a modest-to-severe elevation of some people’s blood pressue, a press release by Croatian foreign ministry was published (Croatian only), saying that the bottom line of the agreement indeed is that the dispute will be solved along the lines of what EU Commissioner for enlargement Olli Rehn proposed just before Croatia walked out of negotiations.
And last night I stumbled across Swedish PM’s reply to Jadranka Kosor (again, Croatian only), where he informs her that a special accession conference will be hels as soon as 2 October, because Slovenia informed the presidency that it has no more border-related reservations against negotiations with Croatia. Furthermore, PM Reinfeldt wrote that it is understood that the dispute will either be solved by arbitrage or by direct negotiations. And finally – and this is the most important bit – he writes that both letters (Kosor’s original letter and Reinfeldt’s reply) will become an integral part of accession documents.
Reinfeldt’s letter is of astronomical importance. It clearly states that the only way a deal will be reached is either by arbitrage or direct negotiations, which means that the International Court in the Hague (which was Croatia’s favourite venue of solving the dispute) is off the table. It was widely held that this particular court would have ruled completely in favour of Croatia, because it has little history of coming with outside-of-the-box solutions, which is clearly needed in this case. And secondly. By becoming an integral part of the negotiation documentation, both letters will also become part of the accession treaty, just as the Croatian maritime documents which started this whole thing.
So what we now have are established broad rules of the game which are not inherently bad for Slovenia nor are they inherently good for Croatia. And that is good. It is now becoming clear that both sides conceded a lot in the last few months, ehich is why the deal doesn’t seem so raw any more.
Pengovsky obviously was not the only one scrathing his had and going “asphinchtersayswhat?” after PMs Pahor and Kosor struck their deal on Friday. Neglecting for the moment the cat-calls and accusations of high treason, which predictably originanted on the more, shall we say, territorially-minded parts of Slovene political right wing (specifically, the Nationalists and SLS), a lot of questions were raised during the weekend and some of them went along the lines of my Sunday post
PM Borut Pahor on state television (source: ibidem)
Things heated up especially after Croatia hailed the agreemet as a triumph of their diplomacy and started selling it by saying that “Slovenia finally realised the error of its ways”. As you know by now, the only thing worse than a Croat saying to a Slovene that the latter is wrong, is a Croat saying that the Slovene admitted that he is wrong (it works the other way around, too). As a result, PM Borut Pahor went on live TV on Sunday, which is not your usual time for prime ministerial visits to state TV network, and explained the whole thing so that a four year old child could understand it.
Unfortunatelly, in a true Marxist manner there were no four-years-olds present, but let me try to make head and tail out of what was said:
Borut Pahor said that the key to the whole thing is the Croat concession that both sides will continue where they left off on 15 June 2009. To jogg your memory a bit, that is the date wen Croatia walked out of negotiations led by EU Commissioner for Enlargement Olli Rehn. Accoring to Pahor, Rhen’s final proposal on the method of solving the dispute proposed that an ad-hoc panel of arbiters would decide the issue, keeping in mind the fact that Slovenia needs access to high seas and that the deal must be ratifired before Slovenian parliament votes on Croatian EU entry.
This is of course very much different from the text of the Pahor-Kosor agreement, where it is stipulated that the method od solving the dispute (not the solution itself) will be agreed upon until the Slovenian parliament vote. And furthermore if the solution were to include some form of direct access to high seas, then the documents which Croatia included in the negotiation process will indeed have no effect on the border question, a point which pengovsky was very anal about even on other blogs.
However… Croatian PM Jadranka Kosor also did some ‘splainin’ and she said that nothing beyond the text of her letter to the Swedish EU presidency was agreed upon. I.e.: there are no deals under the table and Rhen’s proposal was not part of the agreement.
So, confusion looms. Technically, both Pahor and Kosor can be correct. It could be that Pahor is simply connecting the dots and saying “if we do A, than B necesarily follows”. But this may turn out to be a gamble of cosmic proportions. Because if we don’t have a deal on the border by the time Croatia concludes the negotiations, or – even worse – if we don’t even have a deal on the method of forging a deal, or – worst of all, but not at all impossible – if Croatia goes bad on its word, Slovenia will be out of options and will be faced either with swallowing hard and ratifying Croatian EU entry or derailing the entire enlargement process. None of which sounds like an apetising option.
The only thing going for us right now is the fact that Croatia will be faced with two more blockades immediately after Slovenia withdraws its objections. The Netherlands is blocking negotiations on judiciary, because Croatia is not fully cooperating with the Hague Tribunal, while the UK apparently has misgivings about Croatia (not) fighting the corruption and is keeping that particular chapter shut until further notice.