Government | SLEEPING WITH PENGOVSKY

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.

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.

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… 😎

Getting Fired For Actually Doing Something?

Finance daily ran a story yesterday about PM Janez Janša is set to kick interior minister Vinko Gorenak and justice minister Senko Pličanič out of the government come Autumn. While the government communication office denied the rumours (PM Janša remains mute on the issue) the story might actually have legs given its proximity to last week’s scare about the vote of confidence.

In foreground: Senko Pličanič, left and Vinko Gorenak, right (Photo by Matej Družnik/Delo.si)

At any rate, a government reshuffle is quite embarrassing this early in the term of the current administration, but is also far from problematic. In fact, it has become something of a tradition for a Janša administration. Early on during his 2004-2008 stint at the top job Janša had to find a replacement for Jože P. Damijan, who resigned his post as development minister after only three months in office, reportedly due to falling out with then-finance minister Andrej Bajuk over (non)selling of NLB. Slightly off-topic: in hindsight it appears Damijan had a point back then and lost no time rubbing it in the face of his former boss (Google translate here)

It should also be said that neither Pličanič nor Gorenak (offically) have any knowledge of PM’s alleged bad blood, with Gorenak writing up a rather heavy rebuttal (again, google translation) but, interestingly, avoiding the finer points of Finance story. In fact, a lot of it is actually a classic non-denial.

But the gist of the story is somewhere else entirely. A week or so ago PM Janša appeared on Vroči Stol (Hot Seat) programme hosted by Vladimir “Vudu” Vodušek. What was basically a farcical re-run of a similar event four years ago would probably be forgotten soonest , had Vudu (now owner of a financially embattled Info TV cable TV station) not been arrested the very next morning on charges of extortion and blackmail, unofficially of a CEO of a hardware company. It was all highly embarrassing for the prime minister, who – according to the Finance story – went apeshit over not being told that Vudu was a target of a criminal investigation. And this is where things get interesting.

The only thing is that the PM is probably the last person on earth who can be told of an ongoing criminal investigation. In a democratic state politics stays out of police work. It takes the widest berth possible. Which is why Janša’s (again: alleged but not denied) reaction is highly symptomatic of how this administration sees this country: as a top-to-bottom controlled organism with no horizontally or vertically independent sub-systems and with the head knowing everything and making all the important calls. There’s a word for that and it ain’t democracy.

Minister Gorenak maintains that he never spoke to Janša about the investigation. Which is fine, even though one can understand the sentence as if he himself did have prior knowledge of the investigation (which he shouldn’t have, as the police is under his portfolio but not direct control). Which would – bizarre as it sounds – mean that interior minister Vinko Gorenak did something right for a change and is looking down the wrong end of a gun-barrel for it. Go figure. Not that he would be sorely missed, but still…

And as for minister Pličanič, he too is apparently getting the short shrift for doing too much rather than too little. According to media reports the past six months have seen (some sort of) results solely in the areas of financial austerity and public administration, the former being the portfolio of finance minister Janez Šušteršič while the latter is the domain of minister Senko Pličanič (both, incidentally, of Gregor Virant‘s Citizens’ List)

What Pličanič apparently didn’t understand was that he was meant to do as little as possible save perhaps a token effort here and there. He really should have gotten the message when the State Prosecution was detached from his portfolio (justice) and joined with internal affairs (ran by Gorenak). But as things stand, he seems to be poised to play the sad role of collateral damage.

Administrative Reform Packages, pt. 2: On Fiscal Rule

Continuing the series on the sweeping constitutional changes proposed by SDS, SLS, NSi and DLGV, we turn our attention today to the so-called Golden (or fiscal) rule, where – broadly speaking – the constitution would be amended to limit the percentage of GDP up to which the state could borrow against or something along those lines. The idea is fairly simple. In order to keep public spending in check, a top limit of indebtedness should be set and anything above that would simply become impossible. The whole thing makes sense on a certain level, especially if you subscribe to the Thatcherian vision of having to run the economy the was you run home finances. The problem, however, is that should Article 148 of the Slovenian constitution be changed indeeed, we’re pretty much fucked.

(source)

Namely: the last draft does not specify the percentage of GDP against which the state can borrow money, but rather institutes the demand for a balanced budget. And – truth be said – even though it is the coalition which came up with this piece of Merkozy-induced crap (or is that Merkonti-induced crap), Positive Slovenia and Social Democrats happily went along with it. That much became clear after Monday’s huddle chez Janša, despite some reservations being voiced by the two opposition parties. The gist of it: a balanced budget would be mandatory, with an automatix tax increase the following year should a deficit be run in the current year. Lovely, innit?

First and most important of all, the constitution is no place for setting budgetary and tax policy. A budget is an annual thing, basically an elaborate accounting document which is part guess-work, part wishful thinking and all politics. A budget is a government’s primary policy tool, despite the fact that as much of 60 percent of any given Slovenian budget was, is and probably will go for funding various public, state and welfare services. Constitutionally setting the basic outlines of a budget would therefore unnecessarily restrict incumbent and future governments in their policy-making abilities, especially if a tax-hike loomed every time something didn’t go according to plan.

Second: Getting everyone to agree to a constitutional change requires time and energy that would power a small-sized city. This will become even more apparent as more details of constitutional changes emerge and people’s brains finally get in gear. If changes to Article 148 are rammed through and end up having negative effects (which they will) the enthusiasm for any other, perhaps more necessary constitutional changes will have disappeared faster than capital gains in Iceland.

Third: budgets do not exist to be balanced, they exist to be well spent and invested. Balancing the budget is fairly easy. You just slash everything on the spending side until it rhymes with the income side. The trick is to keep everything going while keeping public finances (that is to say, the budget, public debt and various non-budget funds) in some sort of an order in the long term. A balanced budget will do you no good if it means you can’t pay the teachers, cops or soldiers, can’t build new roads or can’t invest in R&D (to give some examples at random).

Fourth: What if the dictate from Berl… eeeer…. Brussels changes? What if suddenly Merkonti were to realise all of a sudden that what we actually need is not across the board austerity but cutting some spending cuts combined with some pragmatic economic policies and – not compulsory, but welcome nevertheless – finally open that can of whoop-ass on the financial and banking sector (not unlike what Sweden did in the 90s and what Iceland is doing today). Will we be changing the constitution yet again? And will we be doing it over and over, every time some economic zealot gets a hard-on for one approach or another?

And last but certainly not least: if and when the political landscape is once again redrawn and the SDS finds itself in the opposition once again, you can bet your ass they will not be exactly reaching out to whatever government will come up with its own set of constitutional changes.

What the government of Janez Janša set out to do could very well be achieved sans all the constitutional hassle, simply pass a few laws and stick to a few pledges. But since this would include having buckets of shit thrown at them, it is much more convenient to point at the constitution and go “look, it says we have to do it!”. Thus, what we are seeing here is nothing more than political parties (the whole parliamentarian lot of them) shying away from their responsibilities thus letting economic ideology become enshrined in the constitution.