Slovenia’s democratic performance has for several years surpassed that of the other EU-10 states and only Estonia has been able to come close to its level of democratic consolidation. However, this excellent democratic performance record did not translate into economic effectiveness when the global economic crisis hit. GDP growth had averaged a solid 5% from 2005-2008, Slovenia experienced a sharp decline in growth to  –8% GDP in 2009, and despite a moderate rebound in 2010, the 2011 and 2012 statistics still show a country in recession. The government has committed to put up guarantees of as much as 4 billion euros, more than 11% of gross domestic product, to help the country’s banking sector unwind bad real estate and commercial loans. Bad loans now account for 6 billion euros or 12% of Slovenian banks’ lending portfolios. After a housing market bubble burst, the construction industry also significantly slowed down.

Attracting foreign direct investment was not a priority for Slovenia’s government in the past, thus for the last two decades FDI growth was slow, limiting the adoption of new technology and impeding productivity growth. With the recession at hand, Slovenia’s international borrowing rates have been extremely high (10 year bonds have been above 6%) and financial market confidence low.

Globalization had been a major factor in Slovenia’s booming economy, but also played a great role in its rapid economic deceleration. Like many other new EU member states, the loss of export demand coupled with the rapid decline of the already low foreign investment left a large hole in the economic system. Unemployment became a problem despite the government’s tireless efforts to prevent it.

A great deal of tension and animosity has existed in politics while dealing with the crisis. Both the Minister of Environment and the Minister of Economy resigned during the crisis. Prime Minister Borut Pahor lost parliamentary elections in 2012 after an entire party splintered off from his coalition, and also as a result of his failure to push through important reforms. Former Prime Minister Janez Jansa (2004-2008) took over the office again in 2012, and has begun to take austerity measures in order to prevent the country from needing an EU bailout. PM Jansa’s government has produced an austerity budget for 2012 which includes large cuts in government spending, labor market reforms and a greater focus on attracting FDI. Experts believe that Slovenia might need a bailout in 2013 as the recession continues to worsen.

Nevertheless, these political battles and great public dissatisfaction over the recession have so far not reversed the consolidation of Slovenia’s democracy.  The country remains one of the top democratic performers of the EU-10.



You may share this content as you like provided that you share it in its entirety, attribute it to the Foreign Policy Research Institute, and include our web address ( If you receive this as a forward and would like to be placed directly on our mailing lists, send email to Include your name, address, and affiliation. For further information, contact PDT at 215-732-3775×232

Copyright © 2001–2012 Foreign Policy Research Institute, All Rights Reserved