Slovenia, a small country of two million people located between Central Europe and Western Balkans, gained independence in 1991 after the disintegration of Yugoslavia. EU accession immediately became a top national priority and a key source of legitimacy for domestic political elites. As the most developed Central and East European (CEE) country, with a strong political commitment to EU membership, Slovenia proceeded quickly towards Europe. The relatively good knowledge-based skills of its residents and its geostrategic location boded well for reaping the benefits of integration.
Following accession in 2004, Slovenia continued to be a “good student”. In 2007 it was the first of the CEE countries to adopt the euro. Political will seemed to have translated into economic benefits: in 2007 – the first year covered by the EU Cohesion Monitor – Slovenia’s GDP per capita was at 90 percent of the EU average. With GDP growth of 6 percent, it was expected to reach EU development level within two years. At the time, Slovenia was also about to become the first new member state to preside over the European Council, which was intended to serve both as a reward and as an example for others. No wonder that in 2007 it was one of the five member states in which attitudes towards the EU were the most positive, in spite of some negative effects related to accession, such as inflation in basic commodity prices and growing economic disparities. During its presidency in 2008, Slovenia proved its commitment to the EU by supporting Kosovo’s independence against its direct interests: the importance
of exports to Serbia within the Slovenian economy meant that it could ill afford to risk a dispute with its neighbour.
However, a soberer time soon followed. The global financial and economic crisis hit Slovenia hard, bursting economic bubbles and triggering capital flight. To keep the economy running, the government continued to spend. Public debt, which used to be one of the lowest in the eurozone, started to increase fast. And in 2010, Slovenia faced a second hit in the eurozone crisis. Because of the country’s growing public debt-to-GDP ratio, financial markets started to speculate against the ability of government to service its debt, forcing it to cut public spending, which further depressed growth. But the causes of the eurozone crisis went beyond government irresponsibility: the half-finished structure of European economic integration was also to blame. The common currency area provided “northern” members with market access. “Southern” economies were compensated through cheap credits that fuelled growth, while problems of structural competitiveness at the EU level and institutional quality at home went unresolved. Slovenia was no exception: during the growth period, politicians opened champagne, leaving their successors to deal with problems related to the negative trade balance with the eurozone and the poor
address the need for the collectivisation of the costs of debt financing as well as interference with fiscal autonomy, both equally politically sensitive issues. For the EU centre there was, however, no hurry: the crisis was, in fact, strengthening asymmetrical economic trends. It was not until 2014 when, in response to the risk of general contagion, the Eurogroup and the European Central Bank applied instruments to bring interest rates down.
The rest of the CEE countries were much less economically integrated with the EU before the crisis and thus were much less affected by it. Both Slovenia and the rest of the CEE countries, however, became more dependent on the EU during the period in terms of exports, investment, and programmes financed from the common budget. The economic crisis caused substantial political turbulence in Slovenia, forcing three governments to resign in the course of four years and creating obstacles in the reform process. In 2014, in terms of economic convergence, Slovenia was back where it was within a day of its accession. The crisis strengthened Euroscepticism and brought new radical parties such as United Left into parliament. Voters were more interested in punishing the existing political elites than seeking for alternatives to the EU, but participation in European parliamentary elections continued to decline, enabling less centrist voices to gain ground there.
The eurozone crisis is far from over. “Fiscal devaluation” does not seem to be solving all the structural problems of the eurozone. After five years of crisis, growth levels are still too low to bring debt and unemployment in the EU’s periphery to sustainable levels. At the same time, the “fiscal discipline pact” has further tied the hands of member state governments. Slovenia is the member state most exposed to a Greek bailout, which is why it is pressuring Greece to continue to save. Although this could be considered strange, considering Slovenia’s own experience, it is actually a reflection of power politics and dependence asymmetries in the EU.