5. The case of Slovenia By: Igor Guardiancich List of acronyms DeSUS – Democratic Party of Pensioners of Slovenia DLGV – Civic List of Gregor Virant EMU – Economic and Monetary Union ESS – Economic and Social Council EU – European Union GZS – Chamber of Commerce and Industry of Slovenia IER – Institute for Economic Research IMF – International Monetary Fund KNSS Neodvisnost – Confederation of New Trade Unions of Slovenia, Independence Konfederacija ’90 – Confederation of Trade Unions ’90 of Slovenia KSJS – Confederation of Trade Unions of the Slovenian Public Sector KSS Pergam – Confederation of Trade Unions of Slovenia, Pergam LDS – Liberal Democracy of Slovenia OECD – Organisation for Economic Co-operation and Development OZS – Chamber of Craft and Small Businesses of Slovenia NSi – New Slovenia PS – Positive Slovenia SD – Social Democrats SDOS – Union of State Organs of Slovenia SDS – Slovenian Democratic Party SLS – Slovenian People’s Party SNS – Slovenian National Party SVIZ – Education, Training and Science Union Zares – For Real – New Politics ZDOPS – Association of Employers for Crafts and of Entrepreneurs of Slovenia ZDS – Association of Employers of Slovenia ZDUS – Union of Associations of Pensioners ZLSD – United List of Social Democrats ZPIZ – Institute for Pension and Disability Insurance ZRSZ – Employment Service of Slovenia ZSSS – Association of Free Trade Unions of Slovenia ZZZS – Health Insurance Institute of Slovenia 95 CHAPTER 5 | THE CASE OF SLOVENIA Introduction1 Until the global financial crisis hit Slovenia in late 2008, the tiny republic was regarded as the post-socialist success story. After breaking away from Yugoslavia in 1990–91, Slovenia embarked on a gradual transition to a market economy and liberal democracy. Under the guidance of Janez Drnovšek’s Liberal Democracy (LDS), Slovenia prepared and fulfilled the conditions for membership of the European Union (it joined the Union in 2004), and of the Economic and Monetary Union (in 2007). Gradualism, bipartisan government, and constructive social dialogue at the national, sectoral and firm levels characterized the period 1992–2004. Nation-wide social pacts and encompassing sectoral collective agreements set firm developmental guidelines for the country’s industrial relations. This started to change in 2004: the Slovenian right-wing/conservative bloc, led by Janez Janša’s SDS, tried to shake up the economy through neoliberal policies and by uprooting the ruling socio-economic elites through the widespread reappointment of cadres. Most of his domestic reform attempts failed due to the consensual nature of Slovenian policy-making, and his imperative style was severely punished at the 2008 elections. As a consequence of stagnation and the drift into economic populism, the next, centre- left coalition government inherited a very unfavourable position with which to successfully deal with the looming economic and financial crisis. The financial crisis hit Slovenia with full force, despite 15 years of sustained growth, low unemployment, and moderate inflation. GDP fell by 8.0 per cent in 2009 and has not recovered since; unemployment almost doubled and most socio-economic indicators fell back to pre-accession levels. Four interrelated weaknesses are to be blamed. First, gradualism and lack of structural reforms went hand in hand, leading to postponements of the necessary restructuring in finance, tertiary education, the judiciary, health care, pensions, family benefits, and the labour market. Second, a wave of insider privatization in the mid-2000s distracted owners from productive investment, as most loans were used for ownership consolidation. Third, the economy entered a low productivity and low-value-added ‘trap’, where Slovenian firms could not compete with either the more productive West or the less expensive East. Fourth, a construction investment boom abruptly ended, leading to the bankruptcy of all major Slovenian construction companies. The crisis has been dealt with by two governments: a centre-left coalition led by Borut Pahor of the Social Democrats (SD), which ruled during 2008–11, and the centre-right coalition under the premiership of Janez Janša, which came to power in 2012. Both governments announced the intention to respect social dialogue and negotiate through the traditional tripartite forums. The first Pahor Government was unprepared, and committed the fundamental mistake of underestimating the severity of the crisis, which meant it did too little and acted too late. On the positive side, the short-term anti-crisis measures successfully prevented unemployment from skyrocketing, while on the negative side, the thorough reform plan that Pahor announced, also as a response to the EU and OECD requests, miserably failed. The most important structural reforms (pensions and the labour market) were defeated through various referendums in 2011, leading to the Government’s demise. The second Janša Government has so far adopted some sensible measures: its ministers drew up a fiscal consolidation plan that was approved with the consent of the social partners, allowing for a credible budget revision. Even though Janša seems to have learned from past mistakes, testified by the Government’s commitment to social dialogue, the road ahead is bumpy. Controversial reforms, such as that of the labour market, lie ahead, and given the critical situation, failure is not an option. The paper proceeds as follows: Part 2 describes the industrial relations that were set up before the economic and financial crisis, in particular, it delineates the actors involved, as well as the main features of 1 I would like to express my gratitude to journalist Mario Belovicˇ, who greatly helped me with collecting the necessary material to write this contribution. 96 RECOVERING FROM THE CRISIS THROUGH SOCIAL DIALOGUE IN THE NEW EU MEMBER STATES : THE CASE OF BULGARIA, THE CZECH REPUBLIC, POLAND AND SLOVENIA collective bargaining; Part 3 is dedicated to the description of the role played by social dialogue during the beginning of the attempted recovery; Section 3.1 analyses the impact of the crisis on the Slovenian economy and its labour market; Section 3.2 and 3.3 present the two sets of anti-crisis measures proposed by the Pahor I Government. Whereas short-term interventions successfully shielded the labour market from total collapse in 2008–09, important structural reforms led to the breakdown of social dialogue in 2010–11. Part 4 is dedicated to the operations of the Janša II government in 2012: the approval of the Public Finance Balance Act, and the negotiations for a new social pact for 2012–16. Part 5 offers some concluding remarks. 1. Industrial relations set up before the economic and financial crisis Among post-socialist countries, Slovenian social partners strengthened their socio-economic role during the transition. Trade unions represent both public and private employees, but their influence has been steadily declining, as union membership dropped from roughly two thirds in the early 1990s to some 29.7 per cent in 2010. Employer associations are prominent as well, and they retain high representativeness. Nevertheless, changes in their institutional structure may in the near future reduce their capacity to negotiate collective agreements. There are also various tripartite forums, of these, the Economic and Social Council (Ekonomsko- socialni svet, ESS) wields disproportionate power with respect to socio-economic legislation, producing yearly or biannual national social pacts. Sectoral and firm-level collective bargaining is thriving, but detailed records at the company level are missing. In other words, Slovenia has had a well-developed social dialogue, which somewhat deteriorated in the aftermath of the global financial crisis (Guardiancich, 2012). 1.1 Who are the actors of Industrial Relations in the country? The Pahor I and Janša II Governments In the period when the global financial crisis hit Slovenia, two distinct government coalitions ruled the country. The Pahor I executive (21 November 2008 – 10 February 2012) was composed of three centre- left parties: the Social Democrats (Socialni demokrati, SD), the Liberal Democracy of Slovenia (Liberalna demokracija Slovenije, LDS), the Party For Real (Zares - nova politika, Zares), and the single-issue Democratic Party of Pensioners of Slovenia (Demokraticˇna stranka upokojencev Slovenije, DeSUS); the Premier was Borut Pahor (SD). The following Janša II executive was instead composed of four centre-right parties: the Slovenian Democratic Party (Slovenska demokratska stranka, SDS), the New Slovenia (Nova Slovenija, NSi), the Civic List of Gregor Virant (Državljanska lista Gregorja Viranta, DLGV), the Slovenian People’s Party (Slovenska ljudska stranka, SLS) and, again, the single-issue DeSUS; on this occasion the premier was Janez Janša (SDS). Borut Pahor’s Social Democrats won the 2008 elections after four years of the Janša I government. As this was the first centre-right coalition that ruled in the country after 12 years of LDS domination, Janša prepared an all-out attack against gradualism, social-democratic policies and leftist oligarchies. He hired the so- called young economists, headed by the Minister for Reforms Jože Damjan who drew an ambitious reform agenda, which envisaged neoliberal reforms, including a flat tax rate and the liberalization of the labour market. However, Janša’s disrespect for social dialogue clashed against Slovenian traditional consensus- making practices. None of the structural reforms