2013-04-16

Slovenia's crisis

A good post about Slovenia's economic troubles:

Slovenia Is Not The Next Cyprus, but That Doesn’t Mean It’s Not in Trouble

To summarize my take on it:

When the global economic crisis hit, countries like Latvia, Lithuania, and Estonia took immediate austerity measures. This had the short-term effect of deepening the crisis, but their economies recovered swiftly thereafter, and have been doing well since then.

Slovenia, on the other hand, had massive protests against austerity, and so austerity measures were not implemented. Instead, the state used its control over major banks to influence lending decisions in an attempt to prop up the economy. As a result, the share of non-performing loans held by Slovenian state banks rose from 2-3% in 2007, through 5% in 2009, all the way to 30% in 2012. Part of this was corruption, but you don't get to 30% of non-performing loans through corruption alone; not in Slovenia.

Now the banks are broke, and need a rescue, and the suffering endured as the crisis is dragged out will have been higher than if the population had allowed austerity measures to happen when they were needed.

Much like Greeks, the Slovenian people brought this upon themselves. They cherish the illusion of having things for free - so they pay for them much more dearly, later.

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