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Guest speaker at March’s Business Breakfast was Dr. Franc Križanič, Minister of Finance of the Republic of Slovenia. He presented us Public finance – confronting the crisis and achieving a developmental transformation.

He stressed that Slovenia is open to foreign investments, but he emphasized that by his opinion now is not the time for tax cuts, because there is the necessity to stabilize public finances.

He recalled a number of good practices of foreign investments in Slovenia, especially at retail.

Minister Franc Križanič expressed his view that euro is over evaluated. He thinks the real value of European currency in reality should be lower than the U.S. dollar.

Minister of Finance made aspects about CURRENT STATE OF THE LONG-TERM ECONOMIC CYCLE IN THE WORLD (Long-term economic cycles, Key factor on which prevailing technologies are based (cotton and iron – coal – steel – oil – chip), Accumulation regime and method of economic regulation, Input-output coefficients and “basket of goods”, We are in a cycle of informational and flexible technologies, which have become mature.), ABOUT CURRENT SHORT-TERM CYCLIC TRENDS IN THE WORLD (Changes of economic optimism is balanced by fiscal and monetary policy, Modern cycles are asymmetric, We are in a period of world financial crisis as a result of the realization of systemic risk after “Lehman Brothers” bankruptcy), CONTEMPORARY ACCUMULATION REGIME (Long-term saving and “financial products”, “Systemic risk” and state regulation of financial markets, Globalization of capital movements leading to co-operation among financial markets regulators, Investments depend on development policies), CONTEMPORARY INPUT-OUTPUT COEFFICIENTS (Digitalization of products, processes and information services, Globalization of supply and demand, International development competition, Mercantilism and dumping, with impact on employment at home and unemployment abroad, Exchange rate and investments in off-shore zones, Positive effects are convergence of economic development and demand growth on world markets), WORLD FINANCIAL MARKET AND THE SLOVENE ECONOMIC ENVIRONMENT (Overvalued euro, Effects of overvalued euro (shifts in production leading to lower employment in the euro area , slower economic growth in the euro area, slower growth of demand on the main export markets for Slovenia ), Confidence of investors in the euro area), WORLD ENERGY MARKET AND THE SLOVENE ECONOMIC ENVIRONMENT (Fast demand growth in newly developed countries, Constant relative growth of prices of oil and natural gas, Reduction in purchasing power and slower growth of aggregate demand in the import of these goods – also in Slovenia , Growth of purchasing power of exporters of these goods – potential new Slovene markets , Importance of state regulation for regular electricity supply )

Minister of Finance spoke about FINANCIAL CRISIS (Trade cycle 2002-2007, Growth in raw material costs (with oscillations), Interest rate growth (from 2004), Collapse of real estate market in USA – 2007, Contraction of credit activities because of assessments of increased risk – 2007 to 2008), Bankruptcy of “Lehman Brothers” investment bank and realization of systemic risk – 15 September 2008, Collapse of financial markets (October 2008 – March 2009), Start of coordinated fiscal expansion in the world, Gradual improvement of economic conditions from March 2009 onwards (growth of GDP))

Minister Križanič gave a detailed explanation about the reasons WHERE DID SLOVENIA’S EXPOSURE TO THE FINANCIAL CRISIS COME FROM?

¨ From 2002 to 2008 we began to become a structurally dependent region:

a) In 2002 we had a 247 million € current account surplus (1% GDP)

b) In 2004 we already had a 720 million € deficit (3% GDP)

c) In 2008 the deficit amounted to almost 2300 million € (6% GDP)

¨ At the end of 2004 Slovenia’s gross external debt was 15 bn € (57% GDP) and by the end of 2008 had increased 155% to 39 bn € (106% GDP).

¨ In 2004 Slovenia was a net creditor abroad of 0.9 bn € (3% BDP).

¨ In 2008 Slovenia was a net debtor abroad of 9.9 bn € (27% BDP).

¨ Increased exposure of business banks:

a) In 2004 business banks were net debtors abroad to a level of 2.7 bn €.

b) In 2008 their net debt had increased to 8.8 bn €.

c) The ratio between deposits and loans rose from 2004 to 2008 from 1 to 1.6.

He spoke about TACKLING THE CRISIS – MEASURES ON THE FINANCIAL MARKET (Full deposit-guarantee scheme, Guarantee for loans on the international banking market (12 bn €), Guarantee for loans for companies (1.2 bn €), Guarantee for loans to natural persons (300 mio €), State deposits in the banking system , Establishing a special subsidiary company of KAD: “Company for Restructuring” (PDP) for direct entry into uncreditworthy companies ), FISCAL EXPANSION (Shortening the deadline for VAT (from 60 to 21 days), Increasing tax reliefs for the investments of small and micro-companies, Reducing excise duties of liquid fuels for business purposes, especially in agriculture, Fiscal expansion (+790 million € › multiplicatively ~ 4.7% GDP in 2009), Measures on the labour market (369 million € – 183 million € more than 2008)), DEVELOPMENT TRANSFORMATION (Subsidies for technology centers, R&D and competitiveness (64.2 million €), Increasing funds of the enterprise fund – also for a risk capital fund (87.7 million €), Recapitalization of export-development bank SID (160 million €), EIB loans for development investments of the automobile cluster (230 million €), EIB loans for SME development investments (308 million €) , Total extent of measures: 850 million € = 2.4% GDP).

He acquainted us CONSEQUENCES OF THE CRISIS (Fall of GDP in 2009 in relation to 2008 (- 8%), Decreased number of employed (XII 2010 / XII 2008) by 61,277 or 7 %, Fall in public finance inflows 2009: – 1,237 mio € (- 3.6% GDP)) and PUBLIC FINANCE PROSPECTS (With economic growth, public finance deficits will be reduced, On average in the EU, 1% growth GDP › 0.34% reduction of public finance deficit (Mencinger, February 2010), The success of the developmental transformation will accelerate economic growth and remove the public finance deficit, It will be possible to maintain the public standard on a considerably higher level than at the start of the term of office 2008-2012.)

Special topics were presented by Minister included TACKLING LATE PAYMENTS and PUBLIC PROCUREMENT.

At the end of the AmCham Business Breakfast audience asked questions and pointed to the almost unfriendly attitude towards investors to Slovenia. They expressed their displeasure and at the same time expressed concerns and doubts if Slovenia has appropriate solutions and strategy to attract foreign investors and improve business environment.