Executive Summary

Tension-torn minority government
From September 2018 to January 2020, Slovenia was governed by a minority government led by Prime Minister Marjan Šarec. Based on a coalition of five center-left political parties (List of Marjan Sarec, LMŠ; Modern Center Party, SMC; Democratic Party of Pensioners of Slovenia, DeSUS; Social Democrats, SD; Party of Alenka Bratušek, SAB), the government depended on support from the leftist Levica party. Primarily held together by the desire to prevent a return to power on the part of Janez Janša, whose center-right Slovenian Democratic Party (SDS) had won twice as many votes as its nearest rival in the June 2019 parliamentary elections, internal political struggles within the center-left coalition left the minority government unable to carry out reforms.
Growth slows, unemployment declines; bank privatization progresses
Largely due to the Slovenian economy’s high export propensity and strong dependency on development in larger European economies, real GDP fell from more than 4% in 2017 and 2018 to 2.5% in 2019. Despite the unexpected economic slowdown, unemployment continued to decline which allowed the Šarec government to achieve a small fiscal surplus. Supported by the surplus, active public debt management, low interest rates and substantial privatization proceeds, public debt fell from 70.4% of GDP in 2018 to 66.7% in 2019. Projections suggest it will decline further in 2021 and fall below 60%. Compared to its predecessor, the Šarec government was more successful with the privatization of state banks, which has been on the agenda for some time. It sold 75% minus one share in the largest Slovenian bank (NLB) to institutional investors and the third largest bank (ABanka) to the U.S. fund Apollo, which owns Slovenia’s second-largest bank, Nova KBM d.d. The Šarec government also stuck to the controversial infrastructure projects initiated by its predecessor, the construction of a second Karavanke highway tunnel into Austria and the construction of a second railway line between Divača and the port of Koper. Both projects continued to suffer from mismanagement, corruption and delays in implementation.
Austerity measures terminated
As for social policies, the Šarec government terminated the remaining austerity measures dating back to 2012 and increased family benefits. In December 2018, the National Assembly approved a phased 10% increase in the minimum wage from €638 per month after tax to €667, starting in January 2019, and to €700 in January 2020. The Šarec government also initiated increases in pensions and unemployment benefits. The expansion of social benefits, especially of pensions, has raised concerns about financial sustainability. Despite pressing problems, the Šarec government achieved little progress with healthcare reform, a major leftover from the previous government. While it increased spending on education, it failed to address the sector’s structural problems.
Corruption a
continued concern
The quality of democracy has suffered from widespread corruption and growing media polarization. Allegations of corruption have featured prominently in the debates about the government’s infrastructure projects and the healthcare system. The continuing failure of parliament to adopt an ethical code for members of parliament, and the prosecution’s inability to present strong cases that would enable courts to convict some major political players (e.g., Zoran Janković, mayor of Ljubljana), have confirmed doubts about the political elite’s commitment to fighting corruption. The growing polarization between the mainstream and the opposition media has infringed upon media independence and pluralism and the quality of media reporting.
Lack of strategic policymaking persists
Governance in Slovenia is marked by a strong corporatist tradition, which has had a mixed impact on the government’s strategic capacity. As economic stability and growth continued under the Šarec government, the unions have become less willing to accept further compromise and put additional pressure on the government to make some concessions at the price of budgetary stability. Slovenia’s strong corporatist tradition accounts in part for the lack of strategic planning and policymaking, as well as the government’s limited reliance on independent academic experts, a weak core executive, an increasingly politicized civil service and a largely symbolic use of RIA. The Šarec government did not pay much attention to these issues. Instead of investing in institutional reform, it was preoccupied with holding together und securing support for its policy reforms in the National Assembly. Its only significant attempt at institutional reform in 2019 involved preparing a legislative package for Slovenia’s regionalization that was provided by a large expert group commissioned by the National Council.
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