Slovenia

Slovenian finance minister Cufer agreed to the outside banking audit just last week.

Last night, after everyone in Brussels had spent most of the day digesting the European Commission’s reports on all 27 EU countries’ budget plans, officials quietly posted far more interesting documents online: the “staff working papers” that underpin the policy recommendations issued earlier in the day.

According to Commission officials, this was done intentionally. They wanted reporters and national officials to focus on the recommendations and not the analysis behind them.

But starting this morning, Brussels Blog began combing through the working documents – which are much longer and more detailed than the Commission recommendations – starting with the country many consider the next eurozone bailout candidate: Slovenia. It makes for eye-opening reading. 

Bratusek: "Slovenia can on its own without any supervision resolve its problems.”

Amid all the talk that Spain, France and the Netherlands will get waivers next week on tough EU budget rules, allowing them to breach yet again Brussels-mandated deficit ceilings, there are growing signals that one country may not get let off: Slovenia.

Although Slovenia has budget deficit problems similar to its western European counterparts, Brussels’ real concern is about its banking sector, which needs another infusion of taxpayer money to return it to health as non-performing loans continue to rise. Questions about the stability of its three largest banks, all state owned, has put a target on the small former Yugoslav republic as potentially the next eurozone country to need a bailout.

As a result, Slovenia’s demarche from EU economics chief Olli Rehn on Wednesday is likely to come from a place outside the eurozone’s budget deficit rules: new post-crisis enforcement powers Rehn has never used before, the awkwardly named “excessive imbalance procedure”. This authority allows the European Commission to poke around more deeply into a eurozone country’s entire economy – not just government fiscal policy – and demand reforms under threat of swingeing fines.

Alenka Bratusek, Slovenia’s recently-minted prime minister, isn’t too pleased with the prospect of being the first eurozone country to be subject to the EIP. In a meeting with a small group of reporters after Wednesday’s EU summit, Bratusek said officials in Brussels seem to think an EIP citation would help her. She says it won’t. 

Slovenia’s announcement last Friday that it is ready to lift its veto on Croatia’s European Union entry talks gave a welcome boost to the EU enlargement process.  Other than Iceland’s decision in July to apply for membership, enlargement has been running into one brick wall after another in the past couple of years.

This is partly because of petty arguments such as the Slovenian-Croatian maritime border dispute (still unresolved, in spite of last Friday’s breakthrough) which held up Croatia’s talks.  But it is also because of a certain fatigue and disillusion in many of the EU’s 27 member-states, especially in western Europe, about admitting new entrants. 

So exciting are European Union summits that they sometimes distract attention from developments that, though perhaps less eye-catching, tell you a lot more about what’s going on in the EU.  For example, the latest two-day summit is concentrating on financial regulation, guarantees for Ireland’s sovereignty so that it can hold another referendum on the EU’s Lisbon treaty, and the nomination of José Manuel Barroso for a second term as European Commission president.

But a more interesting story was the breakdown on Thursday of EU-mediated talks between Slovenia and Croatia over their bilateral maritime border dispute.  This makes it virtually certain that Croatia will not complete its EU accession negotiations by the end of this year – the goal that Barroso and Croatia’s government had originally set themselves.