For Slovenian Media, A CNN/Obamacare Moment

Earlier today the Constitutional Court ruled on the constitutionality of the 2013 banking bail-in. Back then, Slovenia was on the brink of a financial meltdown with investors and money-men in general being overtly nervous that the country will follow Greece and Cyprus and further lengthen the odds of survival of the common European currency. Once the amount of bad debt and other toxic assets within the banking system was established (5 billion euro cumulative) the nitty-gritty of actually coughing up the dough was worked out. It was decided, mostly by the European Commission, that state-aid-like recapitalisation of the mostly state-owned banks was allowed only if private investors took the hit along with the taxpayers. Effectively, a complete nationalisation.

Long story short, turns out that nationalisation not only erased the value of existing shares of Slovenian banks but also of subordinated debt, owned by around 1600 uninformed investors (mostly private individuals and small companies) who for some reason thought that buying 600 million euros worth of high-risk securities in a turbulent time (’twas the middle of the eurozone crisis) was a good idea. And when their investments were erased they raised hell, demanding they be compensated. They filed a constitutional appeal and it was all touch-and-go for a long time, at one point even threatening to derail the sale of NKBM bank since ruling the bail-in unconstitutional at least with regard to uniformed investors would basically upend the entire ownership structure in the banking system.

The Slovenian constitutional court has taken its time in coming to a decision and has – in what was widely perceived as an attempt to pass the bucket – even asked the European Court of Justice to rule on whether the bail-in was consistent with EU law. The court in Luxembourg ruled that a bail-in in general is legal but that doesn’t necessarily mean that the bail-in in Slovenia was done legaly as that is for the national court to decide (translation: piss off and earn your keep).

And so the constitutional court has decided. And the media got it wrong.

The ruling is fairly complex. Which means that the accompanying press release was equally complicated. Which means that a number of media outlets failed to understand what exactly were they reading. Instead, they went for what they thought was the main story and looked for parts of the press release to accompany it.

Ustavno sodišče odločilo. Kaj to pomeni? #podrejenci https://t.co/mxDiCfhovS

— SiolNET Novice (@SiolNEWS) October 27, 2016

Zakon, ki je omogočil razlastitev imetnikov podrejenih obveznic, neustaven https://t.co/GqmVbu8LTt pic.twitter.com/U1kBz8HToU

— Dnevnik (@Dnevnik_si) October 27, 2016

Izbris obveznosti v bankah je bil neustaven https://t.co/ADdWAZW30W

— Večer (@vecer) October 27, 2016

Ustavno sodišče je ugotovilo, da je bil izbris obveznosti v bankah v neskladju z ustavo. Več kmalu.

— Delo (@Delo) October 27, 2016

At least these four outlets, probably rushing to get the story out falsely reported that the court declared the bail-in unconstitutional.

But while the court did find some unconstitutional provisions within the bail-in legislation, these had to do with unnecessarily complicated mechanisms to challenge Bank of Slovenia in wiping out all shareholder and subordinated debt value rather than to declare the wipe-out unconstitutional per se.

You see, even a cursory reading of the court’s press release showed that while the court ordered the parliament to create legal pathways by which those 1600 uninformed users can realistically sue the state, it did not declare the bail-in invalid and has even reiterated specifically that a government cannot be held liable for individuals’ investments that went south. And yet it took a while for these and other outlets to realise just what exactly has transpired and start reporting on the issue correctly.

It was, in fact, their version of the CNN fiasco when covering the US Supreme Court decision on Obamacare.

Because in both cases all you needed was to read beyond Page One.