Slovenia’s Cerar May Reverse Election Vow on Asset SalesBoris Cerni
Slovenia’s next likely premier may backtrack on pledges to slash the previous government’s asset-sale plans, risking the same voter backlash that brought down his predecessor, said economists in London and Prague.
Miro Cerar’s party, which garnered the most votes in the July 13 ballot, will have 36 lawmakers in the 90-member assembly, which started its first session with new members in the capital Ljubljana today. To build a majority cabinet, he may secure cooperation from the pensioners party, the Social Democrats and the Alliance of outgoing Premier Alenka Bratusek, according to preliminary talks that started last week.
“There already appears to be a difference between Cerar’s pre-election stance on privatization and his post-election one,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “He is no fan of state ownership and may even speed up some of the asset sales.”
The Adriatic nation that adopted the euro in 2007 last year flirted with an international bailout before Bratusek rescued banks with a 3.2 billion-euro ($4.3 billion) capital boost and started selling state-owned enterprises, including phone company Telekom Slovenije DD and bank Nova Kreditna Banka Maribor d.d.
The yield on Slovenia’s euro-denominated bonds maturing in 2024, which surged to almost 8 percent in November 2011, advanced for a second consecutive session, rising 8 basis points, or 0.08 percentage point, from yesterday to 3.3 percent at 4:13 p.m. in Ljubljana, according to data compiled by Bloomberg.
The cost of insuring Slovenian bonds against non-payment with credit default swaps has fallen 152 basis points this year to 130 basis points. That compares with a record 510 basis points in August 2012, data show.
Lawmakers elected Milan Brglez from Cerar’s party as speaker of the parliament.
In going ahead with selling state enterprises, Cerar risks the same backlash from the populace and opposition that undid Bratusek’s government.
Bratusek last year pledged in a plan sent to the European Commission to sell 15 companies, which later ignited a leadership contest in her ruling Positive Slovenia party. She lost that bid to Ljubljana Mayor Zoran Jankovic, triggering the collapse of the administration in May and paving the way for the July early vote.
Still, Cerar’s strategy may lie in his ability to manage the flow of sales, ensuring the state retains control over the infrastructure of utilities, said Spiro.
“Cerar has a number of things working in his favor and one of them is that he doesn’t have markets breathing down his neck,” Spiro said. “Yet, the absence of market pressure risks lulling the new government into a degree of complacency about the fiscal and structural reforms that need to be undertaken.”
The new government, which should be in place by mid-September, must lure foreign capital, restructure corporate debt and push ahead with asset sales to underpin the December bank rescue, central bank Governor Bostjan Jazbec said in a July 23 interview.
The budget gap, which ballooned to almost 15 percent of economic output in 2013, is projected by the central bank to narrow to 4.1 percent of GDP by year-end with the outgoing government saying the target is on track.
As the financial industry recovers, growth in Slovenia’s export-dependent economy will double to 1.4 percent in 2014 from 0.7 percent this year on improved trade with the rest of the euro region, Jazbec said.
Should he be confirmed as prime minister by the incoming parliament, Cerar will probably refrain from shrinking Bratusek’s list of 15 companies on offer and may be pressured by the European Commission to widen it, Jaromir Sindel, an economist at Citigroup Inc. in Prague, said in e-mailed response to questions.
Even so, he will have to listen to potential coalition partners as he balances avoiding Bratusek’s fate and continuing with austerity measures, said Sindel.
“We believe Cerar will continue with privatization, but it will be influenced by the composition of his government,” Sindel said.