Designated Survivor: Slovenian Edition

Shocking journalists around the world Europe who after more than a decade again had to struggle with the difference between Slovenia and Slovakia, prime ministers of both countries tendered their resignations yesterday within hours of each other. Pengovsky being pengovsky, however, we’ll skip Slovenia Slovakia and just do Muddy Hollows where Miro Cerar resigned on the heels of a court annulment of results of the referendum of the second line of the Koper-Divača railway.


…with apologies to Kiefer Sutherland

The gist of it is that while the government won the vote back in September of last year, it failed to win the constitutional challenge of the result, owing to some very weird and novel interpretations of the constitution and referendum legislation. Be that as it may, the Supreme Court, following the decision of the Constitutional Court, decided that the campaign was not fair (specifically, the government’s role in it) hence the result is invalidated and the vote should be repeated. However, there’s more to that than meets the eye.

Continue reading Designated Survivor: Slovenian Edition

Playing To Lose, Cerar Goes About Saving Private Mramor

Yesterday, finance minister Dušan Mramor offered to resign over a bonuses scandal that’s been overflowing for about two weeks now. In what was a somewhat unexpected move, PM Cerar did not accept the resignation. Instead he subjected Mramor to a mere slap on the wrist and then proceeded to extol Mramor’s track record at the ministry. Although the affair involved relatively modest amounts, the public and the media were indignant and the pundits were near-unanimous that Cerar will let Mramor go. Since he didn’t, the overall sentiment is that Cerar committed political suicide and will never be re-elected again. The truth, in pengovsky’s view, is somewhat different: Cerar has long since become unelectable, most likely on Day 2 of his tenure. It just took him over a year and two pan-european structural crises to come to that conclusion. Thus in terms of his own political future he has little to lose. He can, however, make the remaining three-and-a-half years count. And for that, he needs Mrarmor more than Mramor needs him.

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Miro The Man and Dušan The Man’s Man, some time ago. (source)

The gist of the story is that Mramor, while serving as dean of the Faculty of Economics in 2008, OK’ed use of special clause in labour legislation that provided for a 24/7 standby bonus. The clause was meant to be used to augment paychecks to various branches of first responders and similar services, but in mid-2008, apparently to circumvent the havoc wrought by the across-the-board austerity at the time, the faculty came up with this clause and, well, bent over backwards to expand its interpretation to cover university professors as well. The move worked so well that it was copied by nine out of eleven faculties, members of University of Ljubljana (Faculty of Theology and Faculty of Law being the notable exceptions).

Unmitigated disaster

Now, ever since the story broke, it has been an unmitigated PR disaster for Mramor and everyone else involved. This includes Minster of Education Maja Makovec Brenčič, former SD heavyweight and incumbent dean of the Faculty of Economics Metka Tekavčič and several other public personae. Especially daft was the feeble defence mounted by the faculty, now with Tekavčič at the helm, which only reinforced the perception of entitlement on the part of the academic elite. The fact that the whole issue centered on about half a million euros across nine faculties, did little to ausage the problem. Quite to the contrary. It is a known quirk of the Slovenian voter that the more he or she can relate to a number, the more emotional their response will be.

Case in point being Mramor who, over the years, accumulated around 45k euros in “standby bonuses”. 45,000 euros is not an unreachable amount of money. It’s about three-years-worth of average Slovenian wage. To put it another way, 45k will buy you an mid-to-upper-range BMW. Which is what makes the people so mad. They have an approximate idea about how much 45k euros actually is and they base their judgements on that. To put in perspective, only about a week ago, Slovenia was forced to pay 42 million euros (almost a thousand times more) to Croatia as damages for electricity not delivered from Krško nuclear plant between 2002 and 2003, when a political decision was taken to punitively and unilaterally withhold electricity from Croatia, even though the neighbouring country owns a 50% stake in the plant. Point being that the voters will more likely and more furiously take issue with smaller amounts of money. Doubly so if the payouts are legally dubious, as they are in this case.

Now, in the end Mramor has promised to pay back the whole amount, but only after being prodded by the media and – presumably – by the PM himself. Before that he somehow came to the conclusion that he would only pay back some 3000 euros. As if we learned nothing from the case of Gregor Virant in 2011.

Do-Goodnik becomes unelectable

But enough about Mramor. What he did was wrong, regardless of the motives. And while he’s not off the hook just yet, he does get to live another day or so and in politics a week is a lifetime. What is equally interesting, however, is why Cerar bailed Mramor out in the first place and squandered what little remained of the ethical platform the SMC ran on in 2014.

First, the already mentioned fact that Cerar has, in fact, been unelectable for some time. At the very least from the onset of the refugee crisis where he alienated a substantial part of the progressive vote by raising a razor-wire fence on the border with Croatia and empowering the military to police civilians. On the other hand, he only infuriated the right-wing which – although clamouring for these measures – predictably deemed them to little, too late, when finally passed. But in all likelihood, Cerar’s political demise began soon after he began his term, when the high-flying ethical do-goodnik platform met the bleak politcal and economic reality of Slovenia. After kicking ministers out for much smaller transgressions and having seen himself and Mramor brush with a similar affair, Cerar finally realized that it was in effect he himself who was pulling the rug from under his feet. Others were just helping.

Not that there was any lack of help. During yesterday’s press conference, Cerar took a swipe at SDS and SD, more or less saying that he will not have the composition of this government being dictated to him. That the SDS is making life difficult for Cerar is hardly news. After all, they’re the opposition, even if they’re being strangely blunt about that as of late. Namely, according to one source, the party openly threatened the SMC with making their life a living hell if the largest party does not support the SDS nominee for a vacant post at the European Court of Human Rights. The SMS refused to oblige. Hell did in fact commence.

SD ante portas

But the slap across the face of the SD was much more telling. The party, although still in relative ruin after its electoral flop, was given a new lease of life by Cerar’s strategic mistake of making them coalition partners. It soon started to re-establish its economic base and soon enough found itself in a massive brawl with the SMC over the sale of Telekom Slovenije. The SD lost that particular battle but stalled the whole thing just enough to derail the sale. Then came the beheading of the bad bank where SD gained a whole new range of informal power and – not unimportant – where Mramor lost. Which sort of made him the next target. And since he was apparently vunerable in the bonuses department… well, you now know the story.

From this point of view, had Cerar accepted Mramor’s resignation, the SD would have practically owned the government. They’ve squeezed a number of consessions out of Cerar as it is. The latest one being a shamelessly brazen creation of a party fief. officially known as the State Forest Company, it centralizes forestry management and falls under the purview of – yup, you guessed it – minister of agriculture, forestry and food, headed by leader of the SD Dejan Židan. Had Cerar allowed them to go any further, he would relinquish what little control he has on the home front.

Bond…. Sovereign bond

Ditto for the foreign front. Had Cerar relieved Mramor of his duties, Slovenia would in all likelihood start raising many-an-eyebrow of various investors all over the world. Until now, these were more or less happy to buy Slovenian debt precisely because Mramor and his predecessor Čufer handled the post-bailout situation adroitly and took the country of various watch-lists in Brussels, Berlin and Washington, even though (in all honesty) the pace of reforms and privatization has been glacial, at best. Bottom line, with the to-do list still being more or less the same as it was under Bratušek tenure, Mramor is Cerar’s best insurance against the possibility that the humanitarian and political crisis (in terms of EU issues) is joined by a resurgent financial crisis, too.

Thus, by protecting finance minister Mramor, Cerar conceded that he’ll lose the next elections. ironically, to win them, he probably has to play to lose, anyhow.

Do Things Really Bode Well For Slovenia?

A guest post by Primož Cencelj of KD Funds in today’s web edition of the Financial Times (link kindly provided by @AdriaanN) provided an itch pengovsky needs to scratch.


The new national logo (via FB)

Now, for the record: I wholly understand the FT serves a specific (if wide-ranging) public and I’ve no problem with Slovenians providing insight into Slovenian matters for foreign public. After all, this is exactly what pengovsky.com is about. That and tits. But I digress…

The problem with the said blogpost is that yet again an economist is trying to pass as a political analyst. Specifically, Cencelj argues that “while the low turnout indicates a majority of Slovenes feel disenchanted with politics, those who voted [in the presidential elections on 2 December] expressed a willingness to cooperate, to support austerity measures and to break the political deadlock – in effect echoing the cries of the protesters. So, in practice, the 66 per cent landslide for Borut Pahor has boosted support for a long-overdue programme to curb public spending. As a result, on December 4, parliament voted for pension reform and on December 6 for stringent state budgets in 2013 and 2014.” (full article here)

Now, if this were a government spokesperson, one could say that this was a thinly-velied attempt at a media spin (blaming both left- and right-wing radicals for the riots included) But since Cencelj is working for a private investment firm, one can only quote Val Kilmer in Top Gun. I mean, ferfucksake, there is no way in hell you can interpret a 60-percent absence in Slovenian presidential elections as any sort of support for anything. As pengovsky wrote days ago, the wave of protests and the low turnout are an across-the-board rejection of politics as we know it.

Pension reform, which was passed days ago, has absolutely nothing with the protest wave. In fact, the adopted pension reform, although unquestionably a good thing given the current demographics, is such a watered down version of what the previous government pushed for, that a new reform is inevitable in three to five years. Which is OK, but will do precious little for a lowered credit risk. Even more, the fact that the trade (labour) unions finally came to an agreement with the government shows the former still operate well within the framework of “politics as usual”. As such they are part of the problem, not part of the solution.

Case in point: days ago Branimir Štrukelj, one of the more prominent union leaders showed up at one of the rallies in Ljubljana. Seeing that he was fast becoming the centre of media attention, other protesters started chanting “no one represents us”. Which is a fact. The pension reform does not address the issue of the precariat. It only addresses the needs and issues of full-time workers. Which is all fine and dandy, but the point is that in a year and a half since trade unions and the now-ruling SDS shot down the previous government’s attempt at pension reform, so much has changed that the existing corporatism model of “social dialogue” between the unions, the government and the employers is of limited legitimacy at best. It should be noted that Štrukelj and his teachers’ union supported the previous pension reform attempt and that Pahor’s goverment for all intents and purposes could have been slightly more flexible in negotiations back then. But the point is that eighteen months later Slovenian economic future is no longer solely in the hands of the usual players. The new guys (the amorphic protest movement) don’t give a pair of fetid dingo’s kidneys about rating agencies, credit risk rating and equity premium risk.

Also, Cencelj writes that “the living standard will get worse before it gets better”. Which is the usual mantra in the age of austerity. And it may even be partly true. Partly, because in the five years since the crisis struck, the living standard only got worse. And it shows no signs of improving. History shows that things will eventually get better. But at what cost? One of the common messages of the protest movement, apart from “we’ve come to take back the country you stole”, is that the people are not the cause of the crisis, therefore are no longer willing to pay for it. And this is the (economic) gist of it. The bill for the economic slump is being shoved down people’s throats. And those who took to the streets are saying they will not foot it.

Some say those who protest really have no reason to, because they are not having it all that bad. Well, they’re not having it bad yet. According to the Slovenian Statistics Office as much as 13.6 percent of the population are officially poor while additional 5.7 percent are subjected to social exclusion (data for 2011). Altogether as much as 19.3 percent of Slovenes are not living the life considered average in Slovenian society.

Interestingly enough, the country with the highest rate of poverty is Latvia, which is being put forward as the model for solving the crisis. Really? This is the good that bodes for Slovenia? You see, when the really poor come out to protest, the credit risk will be the last thing on anyone’s mind. A lot of people will hold on for dear life if/when the boat starts rocking in that particular manner.

Bob forbid it should come to that. But if the proponents of “business as usual” continue to refuse accepting the new reality where the usual measures of things simply don’t count any-more (or, if they’re extremely lucky, don’t count as much any-more), everyone will find themselves yearning for the good old days of solid “industrial action”. And that includes labour unions.

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Has Janković Had Enough?

Days ago Ljubljana mayor Zoran Janković for the second time this month dropped a hint in the passing which none of the news media seems to have picked up. Namely, that this will be his last term as mayor of the capital. At the start of a new school year Zoki, while cutting the ribbon at the new building of Ljubljana Waldorf school said that any further expansion projects will be overseen by the new mayor. While there were a few gasps in situ nobody made a big deal about it. Ditto two days ago, when upon unveiling the concept of a new housing project, he announced the new head of City Administration (to take over soonest) and told her that she will have to see that the next mayor will provide funds for the project as well.


Tired? Fed up? Bored? Or just having fun… (photo by yours truly)

Now, Zoki being Zoki, this could mean absolutely nothing. He can change his mind in split second, again full of zest and vigor and carry on as if nothing happened. On the other hand, he does seem a bit, well, fed up. Also, things are not going especially well for him. After being subjected to a year-long tax audit, his case was now referred to the state prosecution which will decide whether or not to press charges. No points for guessing what the decision will be.

The list goes on. In some circles he is constantly being mentioned as a possible “technocratic prime minister”, a sort of Slovenian Mario Monti (but much less sombre), but in pengovsky’s opinion those are just wet dreams of people who still think in terms of getting to the power first and thinking about everything else second. Janez Janša and his government are a fine example of this approach and the disaster it brings about.

All things considered, it seems extremely unlikely that Janković will (again) resign before his term is up. But if he really intends to make this his last term as mayor, political parties in the capital should start getting their asses in gear, because right now not a single one of them can produce a person with enough clout to cover all the bases in the city. Autumn 2014 may turn out to be plenty of fun.

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Guess Who’s Back…


No sleeping with the fishes yet (photo by yours truly)

While pengovsky was sleeping vacationing chez les Croats shit was going on that needs to be covered here. The Catholic is being rocked by financial paedophile paternity scandals allegedly involving some of the most senior clergy men, the country is going bust while its prime minister is going bananas (at least some people think so), the government itself is repeatedly opening mouth and inserting foot while the mayor of the capital is looking down the barrel of a full-blown investigation into tax-fraud allegations.

Not to mention that there’s an election to be held in two months time. Stay tuned, pengovsky will bring you all of this and more in the coming days. Guess who’s back… 😎

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