Global Economics

Cracks Appear in Slovenia's Model Facade


Slovenia assumed the rotating presidency of the European Union on Jan. 1. But rampant inflation and concerns about government censorship are causing problems

It's a bitterly cold night in the Slovenian capital Ljubljana, but the mood is just heating up at "Zvezda," where women in high-heeled leather boots and men wearing designer eyeglasses clink champagne glasses. Ursa Sefman Sojer, a lively woman with sparkling eyes, her reddish-blonde curls tied back in a pigtail, stands in the midst of the crowd, celebrating the opening of her newest café. The décor at Zvezda, which translates as "The Star," is decidedly modern, complete with light brown leather benches, dark-stained chairs and stylish lighting fixtures.

Sefman, 34, wears a tight, black wool dress, imitation leopard-skin sandals and a brooch with a picture of Marilyn Monroe. She opened her first café eight years ago, taking the plunge into entrepreneurship because, as she explains, she loves to bake. Her specialties are fruit and chocolate cakes. She left her job in the PR industry to open her first café, working up to 20-hour days at first. Her mother helped her by washing the table linen every night after the guests had gone, and Sefman went to bed exhausted every night.

"We did everything ourselves," she says today, "but it was worth it. Business is booming." The first Zvezda has since become a popular spot in the Slovenian capital, earning Sefman, a mother of two, about €800,000 in annual revenues and prompting her to open a second location.

Sefman is only one of many success stories in Slovenia. Igor Akrapovic is another one. His company about 35 kilometers (22 miles) from Ljubljana, which produces exhaust systems for motorcycles in a factory, is now a leading global player in the motorcycle racing industry. And then there is Elan, a company that produces skis and snowboards near Slovenia's border with Austria and a few years ago invented the carver design that has had skiers raving from Aspen to St. Moritz.

Slovenia, a nation of two million people on the southeastern edge of the Alps, is without a doubt the most dynamic and ambitious of the former communist countries that joined the European Union in May 2004. Business is booming in this small country, which is about the size of Israel. According to EU Commission statistics, the Slovenian economy grew at rate of 6 percent in 2007. Its roughly 500 small and mid-sized companies, known as Gazellas, are an important contributor to this economic success story, exporting products like wine, auto parts and leather goods. The Slovenians themselves have even begun investing their money abroad, especially in the Balkans. They are already among the leading foreign investors in Bosnia.

In the days of former dictator Josip Tito, Slovenia was already the economic engine of Yugoslavia, a confederation of several ethnic groups. The funds Slovenia pumped into the Yugoslav coffers were used to prop up the poorer republics in the south. It remained largely unscathed by the Balkan wars, and the Slovenian army spent only ten days fighting minor skirmishes with Yugoslav units immediately after the country proclaimed its independence in 1991.

The industrious Slovenians, dubbed the "Germans of the Balkans," already enjoy a standard of living higher than Portugal's and just behind that of Greece. And on Jan. 1, 2008 Slovenia, which had already introduced the euro, became the first of the new EU member states to assume the bloc's rotating presidency.

Most tourists crossing the border by car from Austria are surprised by what they see: freshly painted houses, balconies lined with flowers and, farther south, a flourishing tourism industry in Adriatic vacation spots like Piran and Portoroz. The drab and dreary face of other former Socialist countries is completely absent in Slovenia.

Ljubljana, known as Laibach for centuries, when Slovenia was part of the Habsburg empire, remains a gem of magnificent Austro-Hungarian architecture today. Home to more than 50,000 students, who seem to spend much of their time socializing near the castle that once served as a prison, Ljubljana lives up to its name, which translates as "The Lover." There is a Mediterranean feel to the city, where residents can even be spotted sitting outside drinking coffee in the middle of winter.

But Ljubljana's cheerful image is deceptive. In fact, the city has seen better days, and since the introduction of the euro in early 2007, prices have been climbing steadily. The average price of food products alone jumped by 20 percent over the course of the year.

"It's really hard to make ends meet," says Ingrid Dorner, a 21-year-old who wears nickel glasses and has her hair dyed bright red. She comes from Maribor, Slovenia's second-largest city, and is a psychology student in Ljubljana. Dorner says that she earns about €800 working in a restaurant, and spends €300 of her earnings on rent alone. "The money practically runs straight through your fingers," she says.

High Inflation Mars Image of Model Pupil

The Slovenians began expressing their frustrations in late November, when around 70,000 people took to the streets in Ljubljana -- a massive demonstration for such a small country. In what was the largest rally since the Slovenians proclaimed their independence, trade unions, students and pensioners protested against the rising cost of living and demanded more social justice.

Slovenia's inflation rate of 5.7 percent -- the highest in the euro zone -- does give rise for concern. In early November, EU Commissioner for Economic and Monetary Policy Joaquín Almunia even felt the need to issue a public warning to Slovenia, a model economy until then. An inflation rate higher than 3 percent, Almunia said, sends "a bad signal" to the countries next in line for Euro-zone membership.

The condition of the center-right government of Prime Minister Janez Jansa is not exactly rosy as the country enters its EU Council presidency. Danilo Türk, a leftist politician and experienced diplomat who was former United Nations Secretary General Kofi Annan's right-hand man for six years, won the recent presidential election, while Lojze Peterle, the administration's favorite, finished a disappointing second. "The election outcome is a warning for Jansa's cabinet," says Vedran Dzihic, a Vienna-based expert on the Balkans. "The country is losing its image of the model pupil."

Jansa's decision to propose a confidence vote in late November was more for show than anything else, with the National Assembly voting in his favor, as expected. Nevertheless, the prime minister has his share of problems on the domestic political front. Five hundred and seventy-one journalists recently launched a petition criticizing what they see as massive restrictions on freedom of the press and excessive political pressure from the government. A letter outlining their grievances was sent to many newspapers and press agencies throughout Europe in the autumn.

While Jansa seeks to paint the petition as a campaign stage-managed by the opposition and even accuses the rebellious journalists of treason, many consider the protests justified. Blaz Zgaga is one of them.

The 34-year-old journalist, one of the two initiators of the petition, is currently seen as the Robin Hood of the Slovenian media community. Zgaga sits in front of his favorite bar in downtown Ljubljana, wearing a heavy woolen cap and a padded jacket. He says that he spent years writing about the activities and scandals of Slovenia's intelligence agencies in the newspaperVecer, but that last year the paper began removing passages critical of the government. He was eventually reassigned to write about less sensitive issues. Nowadays, he says, it is all but impossible for him to pursue investigative journalism. "They put me on ice."

More Democracy with EU Presidency?

Zgaga's is not an isolated case, says Brankica Petkovic, who monitors the media community for the Slovenian Peace Institute. Recently, she says, critical journalists have repeatedly been demoted, unwelcome articles have been suppressed and senior editors in print and radio have been replaced by pro-government journalists. "Pressure is being exerted on the press in a very subtle way," says Petkovic.

Within the last two years, says Grega Repovz, the editor-in-chief of Mladina, a news magazine, state-controlled companies like Telekom and Mobitel have taken to canceling their advertising without explanation. His publication has posted losses of several hundred thousand euros in the past year alone, which, according to Repovz, is a clear punishment for his critical reporting. Repovz, who is also the chairman of the Slovenian journalists' association, is convinced that the "intervention has never been this bad."

Critics believe that Janez Jansa, 49, is the real problem. A former journalist who was involved in the communist youth organization in the 1980s and became an authoritarian conservative after the fall of communism, he has only one goal, says Spomenka Hribar, a respected Slovenian philosopher: "that the state should control everything." It is because of sentiments like these that many Slovenians see the EU Council presidency as an opportunity for more democracy.

Translated from the German by Christopher Sultan


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