The economy of Slovenia: from Yugoslavia to independence

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The Republic of Slovenia is a sovereign state, the capital of which is Ljubljana, located in the Balkan region. Its peculiar location, located between Croatia, Hungary, Austria and Italy, in addition to the Adriatic Sea, makes it a country that has both Central European and Balkan characteristics, which is reflected in its history, culture and economy. It became independent from the Socialist Federal Republic of Yugoslavia in 1991. It is currently part of the European Union, since 2004, and of the monetary union since 2007. It is also a member of the Council of Europe and the OECD.

A brief historical overview

The history of Slovenia reflects the peculiarity of being between two worlds. The territory that today makes up Slovenia was part of ancient Rome, was occupied by the Ostrogoths, joined the Frankish kingdom, was owned by the Habsburgs, as part of the Austro-Hungarian Empire, and was integrated into the Illyrian Provinces, a satellite state of the First Napoléon Bonaparte's French Empire.

In 1918, the Autro-Hungarian Empire disappeared, as a result of World War I; the Slovenian people joined the Kingdom of Serbs, Croats and Slovenes. This state, in 1929, changed its name to the Kingdom of Yugoslavia. With the start of World War II, the Axis powers occupied and dismembered this kingdom. As a consequence, the Slovenian territory was divided between Nazi Germany and Fascist Italy.

Slovenia in the 20th century

With the end of World War II, Slovenia became part of Yugoslavia again. This time, however, as a federated republic, with the name of the Socialist Republic of Slovenia, within the state that would be called the Socialist Federal Republic of Yugoslavia. This state was characterized by cultural, ethnic and linguistic diversity and, in addition, by its communist regime. A communist regime, led by Marshal Tito, very peculiar, given the distance it maintained for almost its entire existence with the Soviet Union.

Finally, Slovenia, after several moments of tension and conflict with the federation, declared its independence on June 25, 1991. This declaration gave rise to the Ten Day War, after which independence was irreversible. Since then, Slovenia has become closer to the West, as evidenced by its accession to the EU, the OECD, the Council of Europe or NATO.

The Slovenian economy within Yugoslavia

Socialist Yugoslavia maintained an economic and social model different from the one the USSR intended to expand. The Soviet model penetrated those countries in its orbit after the end of World War II. But Yugoslavia opted for the so-called self-managed socialism. In parallel, it remained neutral in the confrontation between blocks. In fact, he was one of the promoters of the Non-Aligned Movement, a kind of third way in a Cold War context between the two superpowers: the US and the USSR.

Within Yugoslavia there were differences between the parts that made up the whole. Slovenia was the most economically developed and the most industrialized. The difference, at the time of creation of the new Yugoslav state, between the richest region, Slovenia, and the poorest, Kosovo, was 3 to 1. This situation was consolidated and the difference increased, until it became, in the 1980s, from 8 to 1.

In this sense, it can be noted that Slovenia was not one of the territories economically aggrieved by its membership of the union, but rather was favored by its membership in the Yugoslav market. However, there are different versions of this fact. On the one hand, the Slovenian nationalists claimed that without membership in Yugoslavia, development would have been greater; on the other hand, the detractors of independence wielded these data as evidence against the pro-independence postulates.

The nationalist tension

In the late 1970s, Slovenia remained Yugoslavia's main economic power. Its GDP per capita was double that of the Union. Out of 100, average Yugoslav, the figure reached 195.3, by 129.2 for Croatia, 66.2 for Bosnia or 26.8 for Kosovo. As a consequence, a Federal Fund for the Development of Underdeveloped Autonomous Republics and Provinces was created, to no avail. The more developed republics, which contributed the most, expressed their rejection of this fund throughout the 1980s.

The economic problems had political repercussions. Since the 1970s and, above all, in the 1980s, revolts of a nationalist nature have become more and more frequent. Two steps were taken to try to appease them. The first, a new, more decentralizing Constitution, in 1974. The second, the approval of a Collective Presidency for all the territories of the federation, which was launched after the death of Tito. However, they did not work.

With the death of Tito, tensions multiplied. On the one hand, Serbian leaders wanted greater control and centralization. On the other hand, the rest of the republics were fighting for greater decentralization or even separation from Yugoslavia. The independence of Slovenia was getting closer and closer.

The declaration of independence and economic developments

In December 1990 Slovenia held a referendum not agreed with the federation. The favorable vote was majority, but the declaration of independence was postponed until June. Independence was declared on June 25, 1991. However, to make it effective, the so-called Ten-Day War had to be overcome. This war ran from June 26 to July 6. Slovenia faced the forces of the Yugoslav federation. Internationally, from that moment on, Slovenia was recognized as a sovereign state.

The economy since independence

The independence process was a serious blow to the Slovenian economy. It also affected the rest of the wars that took place in the Balkans. Before independence in 1991, GDP per capita was $ 8,656. A year later it had dropped to $ 6,052. However, since then, the Slovenian economy has gradually recovered until reaching, in 2000, a GDP per capita of $ 9,120. Industrial production was also dragged down by the situation, in such a way that it fell by 13.2%. Other sectors, in the general context of the conflict in the region, were affected, with the decline in tourism and trade. Starting in the second half of the 90s, the situation began to improve. From then until 2008, Slovenia maintained solid economic growth, reaching rates above 3%. Two were the bases on which it was based: export and construction.

However, in 2008, as in other countries, the crisis seriously affected the country's economy. GDP fell by 7.8% in 2009. For several years the Slovenian economy did not lift its head, until in 2014 it returned to the path of 3% growth.

GDP per capita in 2015 reached 83% of the average of the 28 countries of the EU with 18,693 million euros per inhabitant. Total GDP stood at 38,570 million euros.

Privatizations: a formula to overcome the crisis?

One of the features that characterized the post-Ugolan economy of the small Balkan country was the important role of the state in the economy. While the rest of the ex-socialist countries rushed to implement liberalization and privatization measures, Slovenia did not do so with the same urgency and intensity. Faced with the crisis that began in 2008, the EU angrily recommended the approval of a privatization plan. The objective was none other than to achieve economic stabilization and economic reactivation. Following these recommendations, the Slovenian government, left the polls in 2014, set its sights on issues such as bankruptcy legislation, the necessary credit “deleveraging” of companies to create an appropriate environment for business, the consolidation of the banking sector (with risk control and accountability measures), the privatization process and the flexibilization of the labor market.

According to data from 2016, Slovenia's GDP per capita stood at € 19,600. Public debt stood at 78.50% of GDP. Its public spending amounted to more than 18,000 million euros, 45.10% of GDP. Exports have reached 73.59% of GDP; and imports 68.28%. Throughout 2017, unemployment was around 6.5%. Its interannual CPI stands at 1.6%. In addition, the main rating agencies place it in a relatively stable position. It ranks 48th in the competitiveness ranking and 32nd in innovation.

With these data it can be considered that Slovenia is one of the most advanced economies in its region.

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