Slovenian Lawmakers Begin Debate on Replacing Prime MinisterJasmina Kuzmanovic and Gordana Filipovic
Slovenian lawmakers debated replacing Prime Minister Janez Jansa over a corruption scandal as the country heads toward early elections amid a recession and banking crisis.
A vote on ousting Jansa and appointing Alenka Bratusek to try to form a government is expected late today, parliamentary spokeswoman Karmen Ugljesic said. If Jansa survives, he will command 30 of the legislature’s 90 seats. If Bratusek wins, she has 14 days to have a Cabinet approved by the legislature or early elections will be called.
“We expect the prime minister to lose,” Abbas Ameli-Renani, a strategist at Royal Bank of Scotland Plc in London, said yesterday in a note. A Bratusek government would be “short-sighted,” only “designed to guide the country toward early elections in about a year’s time. This will stifle reform and will keep political unease embedded in the country.”
Slovenia’s government is crumbling as the country is trying to avert a bailout and emerge from recession. Jansa’s loss of political support puts him at risk of joining leaders across Europe who were toppled by the waves of the economic crisis that started more than four years ago.
The benchmark SBITOP stock index rose 0.56 percent to close at 605.30 after declining the previous four sessions to its lowest since Dec. 10. The yield on Slovenia’s dollar-denominated bonds maturing in 2022 was 5.315 percent, rising from 5.212 percent yesterday, to the highest since Dec. 18, according to data compiled by Bloomberg.
Slovenia plunged into political uncertainty after the anti-corruption agency accused Jansa of failing to declare all his private assets, prompting his coalition partners to demand his resignation and increasing the prospect of an early vote. Regular elections are planned for 2015.
Bratusek, who for six years led the Finance Ministry’s division for the state budget, told Parliament the priorities of a temporary government would be balancing public finances after the budget deficit reached almost a quarter of full-year target of one billion euros in January and strengthening the public sector’s role as “a driver” of economic growth.
“I will lead Slovenia safely to elections,” she said.
Jansa, who addressed lawmakers after Bratusek, said the current economic contraction couldn’t be pinned solely on his one-year-old Cabinet.
The Adriatic nation that was the first post-communist country to adopt the euro, needs to continue efforts to fix its ailing banks. Slovenia faces a 2 percent decline in gross domestic product this year and has to ratify neighboring Croatia’s bid to join the European Union on July 1.
Slovenia, on the brink of becoming the sixth euro member to ask for a bailout, has drafted a 4 billion-euro ($5.2 billion) bank recapitalization plan that would take up bad loans from lenders.
“The vote marks a crucial staging post for Slovenia,” Matteo Napolitano, director for global sovereigns and supranationals at Fitch Ratings, said in an e-mailed response to Bloomberg questions. “It’s of key importance that whoever runs the government after today’s vote injects momentum into the twin efforts on fiscal consolidation and structural reforms.”
Bratusek’s nomination as caretaker prime minister doesn’t ensure the crisis will end. She has 14 days to have a Cabinet approved by Parliament. Citizens’ List party leader Gregor Virant said in a letter published on his party’s website Feb. 22 that his party may opt for early elections since the proposed scenario of a caretaker government and its program “are not good.”
“Without the support of the Citizens’ List party, Bratusek probably will be unable to forge a minority,” Timothy Ash, chief emerging-market economist at Standard Bank Plc in London, said in a report today. “If Jansa falls it doesn’t clear very much up. We will have to wait a couple of weeks to figure out” if Bratusek “can cut a deal on the policy front with Citizens’ List.”
The cost of insuring the debt with five-year credit-default swaps, which rise as perceptions of creditworthiness worsen, reached 260 at 11:10 a.m. in Ljubljana, compared with 207 points on Jan. 4, according to data compiled by Bloomberg.
The banking industry, struggling under the burden of bad loans, reported a pretax loss of 664 million euros for 2012, according to central bank data.
Standard and Poor’s cut Slovenia’s credit rating on Feb. 13 one level to A-, on par with Poland and Malaysia, citing the government’s announced support for state-owned banks, which will lead to a higher debt ratio than previously forecast.
Early elections would “delay the much-needed progress towards making the bank debt consolidation agency operational,” William Jackson, emerging-markets economist at Capital Economics Ltd. in London, said by e-mail yesterday. “This is important both if Slovenia wants to avoid being forced to turn to the International Monetary Fund for financial help and to help the economy escape from recession.”
Slovenia’s public debt rose to about 48 percent of GDP last year from 16 percent in 2008, a year after the former Yugoslav nation adopted the euro. Government support of the state-controlled banks at the level likely to be needed will increase the debt ratio to 59 percent at the end of 2013, S&P said.