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Department of Political and Social Sciences
The Uncertain Future of
Slovenian Exceptionalism
Igor Guardiancich
Political Economy Research Group
Budapest, 5 December 2011
Central European University
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Department of Political and Social Sciences
Slovenia as it is perceived…
The Varieties of Capitalism literature in CESE has
unambiguously placed Slovenia at the far end of the liberalcorporatist spectrum by labelling it as:
-neocorporatist (Bohle and Greskovits, 2007)
-Coordinated Market Economy falling within the Continental
European model (Buchen, 2007)
-corporatist social-welfare state (Adam, Kristan and Tomšič,
2009)
due to a combination of highly consensual democratic
institutions, low party polarization, strong social partners, and
developed social dialogue.
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…and as it is now.
Since the fall of the Liberal Democracy of Slovenia (in
government during 1992–2004) the political underpinnings of
neocorporatism have faded away:
-polarization increased;
-union (and other social partners’) legitimacy declined;
-social dialogue collapsed in the aftermath of the 2007-9
financial crisis.
The 2010 pension reform is a test case showing that
consensual decision-making has become increasingly difficult
in Slovenia. Its failure created far greater dilemmas that the
incoming government should address.
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Content of the paper
1) Main characteristics of Slovenian exceptionalism.
2) The Slovenian transition from independence to the
financial crisis.
3) Political-institutional structures, weakening of the social
partners and collapse of social dialogue.
4) The 2010 pension reform: chronology, perceptions and
repercussions.
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Neocorporatism Slovenian style
- Highest union density in CESE countries (44.3% in 2003).
- Compulsory membership of employer associations (GZS
and OZS).
- Powerful tripartite bodies at corporatist – Economic and
Social Council – and political levels – National Council.
These generate collective wage, income and social policy
agreements that cover the entire working population.
What pulls Slovenia away from a pure CME is the insider
ownership structure and an interventionist state. Due to the
1992 Ownership Transformation Act managerial rather
than purely market-based capitalism emerged.
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Socioeconomic indicators
Slovenia developed one of the most egalitarian societies in
the EU, not only among NMS.
- 2.6 EPL, between Belgium and Germany.
- Total spending on social protection higher than OECD
average (23.0% in 2005 compared to 20.5% of GDP).
- 0.247 Gini coefficient as a consequence of the
redistributive tax system, lower only in Denmark and
Sweden.
- 11% gender wage gap in 2004.
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The transition
-
From self-management to a market economy.
From socialism to a pluralist democracy.
From a regional to a national market.
From federation to independence.
From Yugoslavia to the EU and the EMU.
Characterized by gradualism, immobilism and elite preservation.
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Slovenian transition: Gradualism
Converting the political-institutional structures inherited from
Yugoslavia was a complicated exercise.
Transforming a regional a national economy, breaking away
from Yugoslavia and its socialist legacies demanded caution,
broad consensus, and strong social partnership.
Consensualism prevented shock therapy from being applied
(apart from to macroeconomic stabilization only).
Double-edged sword:
- Social peace was preserved and the transformation was
successful due to initial conditions and competitive
corporatism;
- It bred widespread immobilism.
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Slovenian transition: Immobilism
By resorting to gradualism, decision-makers (mainly LDS)
negotiated at length with organized interest groups, delaying
and diluting structural reforms.
Economic restructuring was slow in crucial sectors:
-Financial services, where a capital market never emerged;
-Tertiary education, which is inward looking and cronystic;
-Judiciary, inefficient and with a growing backlog of cases;
-Health care, pensions, family benefits, and the labour market
need thorough reform.
Gradualism entrenched vested interest groups, which further
delay reform (e.g. Åslund, 2007).
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Slovenian transition: Elite preservation
The high level of elite reproduction under LDS was far from
beneficial, bringing long-term negative effects, including the
establishment of monopolies and rent-seeking behaviour.
This had several negative repercussions:
-Delayed and inefficient privatization following the 1992
Ownership Transformation Act;
-Extreme ideological division between the left-liberal (SD,
LDS, Zares) and right-conservative bloc (SDS and other
parties of the ‘Slovenian spring’).
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The political underpinnings of consensualism
1) Government that can reach to an ideologically distant
opposition and/or social partners.
2) Internally legitimate trade unions that are in the position
to negotiate with policymakers and employers.
3) Strong employer associations.
Since 2004, and especially during the most acute moments of
the crisis, all three preconditions have been missing in
Slovenia.
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The weakening of government
Since 2004 the polarization of the political space has
increased, leading to the impossibility to strike bipartisan
deals and to heated electoral competition. 3 reasons:
1)The difference in electoral support for the two main parties
has narrowed (polarization 1990-2008 is 0.286, but entirely
imputable to the post-2004 period).
2)The era of grand coalitions is definitely over. Since 2004
neither Janša’s nor Pahor’s governments contain any parties
from the other bloc.
3)EU accession compressed the political space until 2004,
after that it decompressed entirely.
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The weakening of the unions
Slovenian unions, especially the successor ZSSS are extremely
strong and participate in most tripartite fora.
They underwent progressive weakening, mainly due to:
1) dwindling membership (in the service and private sectors);
2) loss of internal legitimacy (workers circumventing reps in
Gorenje).
ZSSS
Pergam KSJS
KNSS Konfederacija ‘90
436
88
-
196
40
European Commission – 2004 or later data 300
87
73
40
40
Ministry of Labour – 2011 estimates
70
70-75 5-15
Lukšič – 1997 data
250-200
5-15
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The weakening of business
Due to relative high growth and low unemployment levels,
business enjoyed a favoured position in Slovenian
negotiations. This changed for two reasons:
1) Until 2006 the membership in GZS and OZS was
compulsory, and these represented all Slovenian firms. In
GZS it is not the case: if density will fall under 50%, the
automatic extension of collective agreements to entire
categories is not guaranteed;
2) widespread company insolvency and low
competitiveness led to mass layoffs and concern of
the associations with their own narrow issues.
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The crisis
In the period of sustained growth 2005-7, Janša’s government
did not build budget surpluses and the European Commission
failed to warn against such lax fiscal policy.
Slovenian banks became illiquid in late 2008, and since
Slovenia is a small open economy, the fall in international
orders triggered an economic collapse.
The unemployment rate rose from a low of 4.2 per cent in
September 2008 to 7.8 per cent in December 2010, and GDP
fell by 8.1 per cent in 2009 (Eurostat 2011).
Consequently, the global financial meltdown exacerbated all
the negative traits of the Slovenian economy.
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Failure of social dialogue
The accumulation of structural delays forced Pahor’s
government to propose several unpopular measures.
The Slovenian Exit Strategy 2010-13 envisaged:
-structural measures (reform of the pension system, health
care, and long-term care)
-institutional adjustments (to corporate governance, financial
supervision, financial services, and competition).
Pahor was initially inclined towards social dialogue, but
excessive haste (the government was pressured by the EU and
OECD) and the radicalization of the social partners’ positions
prompted unilateral decision-making, which invariably failed.
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The 2010 pension reform
1)
2)
3)
4)
5)
Previous reforms and persisting problems
Technical content
Policy disagreements
Social dialogue and perceptions
Failure and consequences
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Previous reforms and persisting problems
The 1992 and 1999 pension reforms achieved too little and
arrived to late. The latter stabilized expenditures in the
medium term, by maintaining a relatively generous system.
However, by 2010:
- Certain categories of retirees, especially single women, are
at high risk of poverty.
- The possibility to deduct years spent childrearing, implies
that the effective retirement age stayed low.
- ZPIZ has been running deficits since 1996, when the
government decreased the contribution rate for employers.
Projections forecast 20% of GDP total spending by 2050
and a deficit of at least 8% of GDP.
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Technical content
The initial proposal of the 2010 reform was very radical (NDC
+ FDC in 2 steps) but was diluted during negotiations:
1) Statutory retirement age 65 for all, compounded with steeper
bonuses/maluses.
2) Assessment base 30 best consecutive years (minus 3 worst).
3) Indexation 60:40.
4) Simplification of professional and supplementary schemes.
Macro effects: 2% of GDP lower overall spending.
Micro effects: delays individual retirement by 2-3 years.
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Policy disagreements
- Government
While DeSUS backtracked on its own concessions (80:20),
ZDUS was in favour of finding a compromise (60:40).
- Unions
ZSSS – as opposed to Pergam – did not accept a quid pro quo
to lift the request for retirement without decrements at
58/60 for women/men with 38/40 years of service period.
- Employers
Repeatedly warned that the Slovenian labour market is not
ready to absorb elderly workers without additional
incentives, such as progressively decreasing social security
contributions.
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Social dialogue and perceptions
The claim that ‘social dialogue in Slovenia is dead’ (Pergam)
does not correspond to Pahor’s initial intentions. Between
March 2009 and September 2010, the social partners held 50
meetings and the government produced 300 documents.
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Failure…
- ESC
As the ESC could not reach agreement, Pahor sent a draft ZPIZ2 to the National Assembly in September 2010.
- National Assembly
DeSUS voted against, hence ZPIZ-2 passed with the votes of
opposition party SLS.
- National Council
Vetoed the law, approved by the Assembly (absolute majority).
- Referendum
ZSSS collected 40,000 signatures. The Constitutional Court
confirmed admissibility. 72.2% voted against.
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…and consequences
- Pahor’s government resigned in September 2011, after a vote
of no confidence.
- The new government will face the same problem of a fiscally
unsustainable pension system in the following years (SDS’s
stance was ‘the worse, the better’).
- Indexation of current pensions has been frozen since 2010
and the erosion of valorization coefficients hasn’t been
stopped. Hence, a growing number of retirees will either have
unacceptably low pensions (if no corrective action is
undertaken) or will simply fall onto social
assistance/minimum benefits.
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“So we entered a blind alley. . . . But there is no real
alternative to dialogue. It is something that concerns us all,
both present and future generations. I wish that this time
would be employed to thoroughly figure out what kind of
dialogue we need and to also implement it. We did not
manage to develop a culture of compromise, way too often is
debate perceived as confrontation, where one of the parts has
to be defeated, has to capitulate. And this is really bad for our
political culture.”
Danilo Türk, President of RS
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Thank you very much!
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