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Sunday, December 3, 2023

SDS: The biggest financial fiasco of independent Slovenia happened when the government was led by Alenka Bratušek

By: C.R.

The parliamentary groups of the Slovene Democratic Party, Nova Slovenija and the Party of the Modern Center have submitted a request to convene an emergency meeting of the Finance Committee. At the meeting, the committee members will discuss the impact and consequences of the judgment of the European Court of Human Rights in the lawsuit of expropriated investors in bank shares and subordinated bonds against Slovenia, on the country’s future fiscal policy and respect for human rights in the Republic of Slovenia.

The biggest financial fiasco in the history of Slovenia happened when the government was led by Alenka Bratušek. The wrong and conscious decision harmed more than 100,000 holders and more than 1,600 owners of subordinated bonds, as about 1 billion euros of private property was erased or confiscated from them. As can be seen today, the then Prime Minister Alenka Bratušek, during her tenure at the helm of Slovenia as the person with the greatest political power in the country, was fully aware that the rehabilitation of the banking system would knowingly violate fundamental human rights of expropriated owners of bank shares, hybrid instruments and subordinated bonds. In response to the lawsuit of the European Court, Alenka Bratušek’s party wrote, among other things, that they expected such an outcome and that the plaintiffs would receive minimal compensation and that they needed to be provided with effective judicial protection as soon as possible.

In 2013, the then Prime Minister of the Republic of Slovenia Alenka Bratušek, accompanied by Finance Minister Uroš Čufer, said at the appointment of the new Governor of the Bank of Slovenia Boštjan Jazbec in July 2013: “All three of us, our trio, are confident and determined that we will be able to solve our problems on our own, without the second and the next trio.” With this she confirmed the words spoken in an interview with the American media house CNN, which resonated both at home and abroad, namely that “We do not need help, we just need time.” That we will not need help from the European Rescue Fund in Slovenia – ESM and that we can rehabilitate the banking system ourselves, the same as Alenka Bratušek, the Minister of Finance Uroš Čufer kept repeating to the public. These statements by Alenka Bratušek resonated greatly at home and abroad, as Cyprus asked for help in rehabilitating the EU banking system during this period. In order to determine the actual situation in Slovenian banks, stress tests of banks began in the summer of 2013, on the basis of which the actual capital situation of the banking system would be clarified.

Shortly after the start of the stress tests, questions arose about the transparency of the tests and the adequacy of their findings regarding the state of the Slovenian banking system, which could be reflected in the capital inadequacy of Slovenian banks and the need for larger recapitalisations than would be necessary. All this information further fuelled speculation about the seriousness of the situation on the Slovenian banking market, which was reflected in the ever-increasing interest rates demanded by international financial markets for access to money for Slovenia.

In the second half of 2013, the Ministry of Finance under the leadership of Uroš Čufer, when adopting the 2014 budget, informed the public that the Republic of Slovenia had borrowed 1.5 billion euros in foreign markets, despite the fact that the MF had announced that the country would no longer borrow this year. From the moment of this disclosure, Slovenia’s indebtedness was accompanied by allegations of non-transparency of the sale and high interest rate of the issued bond, which was negotiated by the only pre-selected buyer, whom the then Ministry of Finance did not want to disclose. In 2016, information came to light about the statements of the then governor Boštjan Jazbec that this indebtedness was the only reason why the trio did not come to Slovenia. With regard to the issuance of this bond, the then opposition also convened an emergency meeting of the Public Finance Control Commission.

At the time of these statements and events, the Slovenian public and investors in the Slovenian banking system could not or did not know how to imagine how the Slovenian government led by Alenka Bratušek envisioned the rehabilitation of the Slovenian banking system, in agreement with the European Commission and the Bank of Slovenia, since after many years, the whole story is slowly coming to light, which results in the biggest financial fiasco of independent Slovenia.

In October 2013, the government of Alenka Bratušek submitted an amendment to the Banking Act (hereinafter ZBan-1L) to the urgent procedure for admission to the National Assembly, which represents the foundation and basis of the entire fiasco. It follows from the written main solutions of the proposed amendment that a mechanism for providing the bank’s capital using private funds, namely funds of the bank’s shareholders and certain categories of the bank’s creditors, will be introduced into Slovenian law, which will reduce requirements regarding the use of public funds in the rehabilitation of the banking system. The government of Alenka Bratušek and the Bank of Slovenia justified the strict legal provisions of the bill with Brussels guidelines, as otherwise Brussels would not grant state aid to Slovenian banks.

Despite warnings and opposition from the then opposition parties SDS and NSi and the professional public and investors, the amendment to the Banking Act was adopted by the votes of the Positive Slovenia party with president Alenka Bratušek, Igor Lukšič’s Social Democrats, Karl Erjavec’s DeSUS, and Gregor Virant’s Citizens’ List. At the same time, petitions and requests for review of the constitutionality of the amendment to the law were submitted to the Constitutional Court. Later, we also found several stories in the media about what irregularities were happening at Banka Slovenije and the then political leadership, where they wanted to achieve complete deletions of existing shareholders, putting pressure on bank managements that opposed such actions.

Pursuant to ZBan.1L, the Banka Slovenije issued decisions on extraordinary measures in December 2013 and in 2014 to NLB, NKBM, Abanka Vipa, Banka Celje, Probanka and Factor banka, on the basis of which bank shares, hybrid instruments and subordinated bonds were deleted. Simultaneously with the expropriation of the existing owners of bank shares, hybrid instruments and subordinated bonds, the state allocated a recapitalisation of these banks in the form of cash, bonds and takeovers of bad debts in the total amount of 3.6 billion euros. With this decision, more than 100,000 holders of bank shares and more than 1,600 owners of subordinated bonds were harmed, as about 1 billion euros of private property was erased or confiscated from them.

The full request to convene an emergency meeting of the Finance Committee can be viewed here.


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