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The Politics of Europeanization
in Europe’s Southeastern Periphery: Slovenian Banks and
Breweries on S(c)ale
by Nicole Lindstrom and Dóra
Piroska
Many theoretical approaches to Europeanization of EU applicant
states portray the process as top-down: governing elites in
applicant states conform to EU conditions, constituents provide
a permissive consensus, and all applicant states converge toward
a single EU model. Such approaches direct less attention to
how Europeanization is a dynamic, contradictory, and contestable
process. This case study considers how common pressures of Europeanization
both constrain and enable domestic politics in particular domestic
fields. We focus on two sites of Europeanization in Slovenia:
political debates surrounding the restructuring of the Slovenian
banking sector and political turmoil over the sale of Slovenian
breweries to foreign investors. In both cases domestic societal
actors managed to hinder, and in one case halt, the full-scale
liberalization and privatization of the Slovenian economy. These
actors not only appealed to national interests, namely the preservation
of Slovenia’s gradualist or nationalist-capitalist development
path; they also framed these political struggles within a larger
European political sphere.
Introduction
“Slovenia: the Sunny Side of the Alps.” This Slovenian
tourist bureau slogan is designed to attract potential visitors
to this overlooked small country tucked in Europe’s southeastern
periphery. Slovenia suffers a similar level of neglect in academic
literature on Central and East European EU applicant states.
Whereas many studies examine processes of transition and Europeanization
in Poland, Hungary, and the Czech Republic, scholars have devoted
relatively little attention to Slovenia. This case study seeks
to address this omission. The “sunny side of the Alps”
might also be read as a reversal of standard representations
in which the West European “core” is presented as
the only light to which all peripheral European states should
follow. Various approaches to Europeanization portray the process
as top-down: governing elites of applicant states adapt to EU
conditions, their constituents provide a permissive consensus
on all matters related to the EU, and every applicant state
ultimately converges towards a common set of EU norms and regulations.
Such approaches often neglect to consider, however, the ways
in which Europeanization intersects with particular political
configurations and historical institutional legacies within
different applicant states. Viewing Europeanization as a dynamic,
contradictory and ultimately contestable process, we seek to
show how Europeanization both constrains and enables politics
in applicant states. In this case study we show that while the
Slovenian government met most EU demands in the negotiation
process, domestic pressures hindered, and some cases blocked,
full-scale liberalization and privatization of the Slovenian
economy.
The paper is divided into three sections. The first section
provides an overview of competing theoretical approaches to
understanding Europeanization of Central and East European applicant
states. We suggest that instead of viewing the process as strictly
“top-down,” we must investigate the ways in which
the common pressures and constraints of Europeanization are
processed, mediated, and contested in particular national contexts.
In the second section, we focus on two “sites of Europeanization”
in Slovenia: an important step in the restructuring of the Slovenian
banking sector and a recent political turmoil around the privatization
of a local Slovenian brewery. We show how different groups of
domestic societal actors – including economic experts,
political parties, media and public opinion – blocked
the Slovenian government’s attempts to open banking and
breweries to a certain type of foreign competition. We conclude
by suggesting ways in which theories and empirical accounts
of Europeanization must consider how the process challenges
and reinforces national models and practices to different degrees
and in divergent ways. Incorporating a broader range of actors
in analyses of Europeanization can lead to a more substantive
understanding of ongoing transformations on both the national
level and within an enlarging EU.
Europeanization of the Eastern
Periphery
In recent years European studies scholars, dissatisfied with
the findings of conventional Europeanization literature, have
renewed interest in modern dependency theory. Rethinking dependency
theory in a European Union context involves structuralist and
innovative historical revisions. Such analyses challenge the
notion that one can apply theories conceived in the context
of EU core member states to understand the unique dynamics of
Europeanization in peripheral applicant states. Given the asymmetrical
political relationship between the EU core and its eastern periphery,
in addition to a wide economic development gap, these theorists
call for more structural understanding of this process. Some
current re-conceptualizations of core–periphery relations
also incorporate institutional and agency oriented views into
traditional structuralist frameworks (see van Apeldoorn 2001;
Bohle 2002). In the following section we first briefly examine
a number of these arguments and offer two points of consideration.
A number of theorists highlight the asymmetrical nature of
the accession negotiation process (Böröcz 2000; 2001).
This view stands in contrast to the common portrayal of accession
negotiations as a basic bilateral framework in which two symmetrical
entities – the European Commission and applicant state
negotiation teams – face each other in free patterns of
communication. For one, these approaches highlight the structural
asymmetry in negotiations, whereby EU applicants cannot seek
various opt-outs already negotiated by many current member states
in the areas of foreign, monetary, social or border related
policies (Zielonka and Mair 2002: 3). Rather than allowing constituents
in applicant states to adjudicate between competing claims to
the good, the accession process collapses these options into
one, non-negotiable set of procedures – a “take
it or leave it” proposition. Moreover, while actors in
EU states can lobby the EU on multiple levels (c.f. Marks, Hooghe,
and Blank 1996), negotiations between applicant states and Brussels
are conducted almost solely between state executive bodies and
the European Commission. Until these states are granted official
membership in the European Union, therefore, most constituents
are effectively excluded from participating in the decision-making
processes that shape every realm of their societies. This apparent
double standard – of the Commission fostering a democratically
unaccountable process that makes democracy a central precondition
– is not lost on many critics.
Other views suggest that the literature on “conditionality”
– conceived largely in terms of structural adjustment
demands placed on developing states – might be more relevant
to eastern enlargement than theories based on the notion of
“adaptability,” which implies a certain degree of
autonomy (Smith 1997; Grabbe 1999). Once applicant states enter
formal negotiations with the EU, the relationship between the
EU and applicants changes from one of indirect influence to
direct leverage (Rupnik 2000). Moreover, some applicant countries
are required to meet stricter standards than those imposed on
current member states. Competition policy serves as a notable
example (see Estrin and Holmes 1998). Thus according to these
critics, Central and East European states’ aspiration
to join the EU has resulted in an asymmetrical and dependent
relationship that calls for comparisons with other “developing
states” rather than with states in the developed European
core (Jacoby 2002).
In order to highlight the asymmetrical relationship between
the EU core and its East European periphery, most analysts tend
to portray Europeanization as a strictly top-down process in
which applicant states passively receive and implement EU mandates.
Bohle (2002) expands this line of critique by introducing a
theoretical framework that allows for an analysis of the changes
in the underlying rationales of actors in both EU and applicant
states. According to Bohle, the coherent strategy of integrating
the CEE countries economically is motivated by an overarching
project of neo-liberal restructuring at the EU level. Exporting
a more radical market variant of neo-liberalism to applicant
states, without extending more inclusionist or re-distributive
features of the European project, serves the interests of those
actors who seek to capitalize on differences in social and wage
standards. Moreover, Europeanization also serves the interests
of elites in applicant states who seek to secure external rationales
for economic restructuring and to solidify transnational economic
ties and political influence. Thus, while Bohle perceives the
impact of the EU on the applicant states as a constraint in
applicant state development, she also acknowledges that the
enlargement process has a feedback effect by redefining these
very constraints, namely a neo-liberal restructuring of the
EU polity. By considering the interests and actions of the actors
involved – the elites of the applicant states as well
as the core countries – she thereby augments structuralist
accounts of the Europeanization of the Eastern periphery.
These various structuralist analyses of the European accession
process have considerable analytical and political appeal. They
show how structured relations of social power permeate the process
of Europeanization, and how these relations of social power
have significant consequences for political life and the reproduction
of social life as a whole. Yet the overriding emphasis on the
“top-down” impact of Europeanization on domestic
institutions and policy-making often obscures that social power
relations are always dynamic, contradictory, and contestable
processes. We argue that structuralist accounts of Europeanization
might be augmented in the following ways. First, Europeanization
indeed delimits the context and structures in which applicant
states’ policies on Europe are directed and legitimated.
However, by conceiving Europeanization in terms of discourse
and practice, one must consider how the process both constrains
and enables actors, and interactions between these actors, in
particular domestic fields (Bourdieu 1991; Leander 2001). Moreover,
while scholars such as Bohle (2002) examine how certain political
and economic elites propel the process of Europeanization forward
in these states, fewer scholars seek to uncover competing political
projects within these dominant ones. By placing more emphasis
on these marginal positions, we seek to highlight the political
struggles over European norms and structures, a perspective
largely absent in the burgeoning literature on EU enlargement
to Central and East European applicant states.
Second, by conceptualizing Europeanization as historically
contingent and locally bound processes we examine how common
pressures impinge upon, challenge or reinforce national policies
and practices to different degrees and in divergent ways. Asymmetrical
economic and political relations between the EU and the candidate
states undoubtedly shape the terms of the EU accession process.
The EU enlargement process constitutes an important factor in
forcing adaptation – through conditionality, engineering
and crafting – towards a neo-liberal regulatory framework,
both in EU applicant states and the EU as a whole. Yet this
push towards policy convergence does not necessarily push states
in a common political direction (Zielonka and Mair 2002: 2).
The Europeanization process varies in different functional areas,
interacts differently with other unifying factors (such as Americanization
or globalization), and intersects with various centrifugal forces
within states – all leading to different institutional
configurations and domestic political struggles. Moreover, the
evolution of the EU has always involved inter-state and intra-state
political struggles, subject to both the particular dynamics
and logic of domestic politics (Héritier 2001: 2) and
transnational and supranational forces. Thus political struggles
within applicant states over the terms and understanding of
Europeanization could be viewed as evidence of the gradual emergence
of European politics as usual.
In the following case study we thus draw attention to the actors
and stakeholders who sought to renegotiate politically the structural
and normative constraints of Europeanization. We suggest that
the actual development of capitalism in Slovenia, like in other
Central and East European states, did not simply entail strict
structural adaptation to EU norms. The process was also dependent
on the interactions of various agents, historical legacies,
and institutions. By expanding the notion of Europeanization
to include a wider political field, we challenge the common
portrayal of Central and Eastern European elites – and
citizens – as passive participants in the process of Europeanization.
Instead we examine how they are actively involved in shaping
and contesting this process.
The Slovenian way: A gradualist
path to Europe
The “return to Europe” was a prominent rhetorical
devise in Slovenia movement for self-determination, epitomized
by the 1990 Demos coalition’s campaign slogan “Europe
Now!” (Evropa zdaj!). Since 1990 Slovenian has pursued
two simultaneous goals: transition and Europeanization. Most
authors suggest that these two processes worked in tandem in
most CEE states, with Europeanization perpetuating and solidifying
free-market and democratic reforms already underway in these
states. We show through the Slovenian case that Europeanization,
if only viewed as process of strict adaptation to pre-established
norms and rules, presents a paradox. Arguments for a “top-down”
understanding of Europeanization mainly focus on three mechanisms.
First, implementing all laws laid out in the 31 chapters of
the acquis. Second, meeting the three Copenhagen Criteria for
accession. Third, analysts such as van Appeldorn, Bieler, Bohle
and others also emphasize the role of private investors in pressuring
both the EU and applicant states to open their markets to investment.
Such a view directs our attention to the decisions and policies
of ruling governments and formal authorities. Indeed, throughout
the 1990s Slovenian authorities actively prepared for membership
in an economic union that clearly prioritizes (but often fails
to achieve) free access of all parties to member states’
economies. However, Slovenian authorities simultaneously sought
to protect their internal market through mechanisms that were
outside the official channels of EU accession. Although the
public also supports the overall goal of EU membership certain
cases mobilized various actors to shape the terms of this process.
Privatization provides an ideal case in which to understand
the various facets of Europeanization.
If we expand our understanding of Europeanization to include
the impact of Europeanization on the public sphere broadly conceived,
such competing trends might appear less of a paradox and more
of a case of European politics as usual. In the following section
we examine two such sites of Europeanization: public debates
and struggles over the privatization and sale of banks and breweries.
We seek to show how two transactions, which pointed towards
a greater involvement of European firms in the Slovene economy,
took on a heightened political significance in the Slovenian
public sphere. Economic experts, political parties, the media,
and the public coalesced around the issue to contest the perceived
threat that Europeanization posed to Slovenia’s unique
gradualist and national-capitalist development path.
Case Study I: Opposition to the
Privatization of Nova Kreditna Banka Maribor
In 2001, the Slovenian banking sector was undergoing the most
significant property changes since Slovenia gained independence
a decade earlier. The privatization process of the two major
state-owned banks, Nova Ljubljanska Banka (NLB) and Nova Kreditna
Banka Maribor (NKBM), coincided with the process of selling
two private banks: Banka Koper from the Italian border region
and Krekova Banka, once the catholic church’s saving institution.
In the previous year Société Général
took over Slovenia’s largest private bank, SKB Banka,
with a 10.3 percent market share. As foreign presence was hitherto
rather low and the Slovenian economic policy was marked by a
solid gradualism, sudden property changes attracted a considerable
degree of public attention and mobilization. Although property
changes in banking sector was a major concern in most CEE countries,
in Slovenia a joint media campaign, public protest and political
opposition brought a halt to the privatization of Slovenia’s
second largest bank.
In this section we will analyze the nature of this public resistance
to bank privatization. We proceed by describing the actions
of three groups of societal actors in this debate. First, we
show how economic experts’ informed public debate not
only in relation to foreign investment into the Slovenian banking
sector, but regarding Slovenia’s unique developmental
path more generally. Second, we describe the struggle among
political parties for influence over bank privatization that
occurred within and outside formal parliamentary channels. Third,
we suggest how public debates around bank privatization shaped,
and were shaped by, public opinion polls and the media.
Overview
On 30 May 2001, the Slovenian Government adopted a privatization
plan for the Nova Kreditna Banka Maribor (NKBM) and Nova Ljubljanska
Banka (NLB). The NKBM privatization program called for the reduction
of the state owned share in the bank from the current 90 percent
to 25 percent plus one share, with 65 percent minus one share
being sold to a foreign strategic investor (Slovenian Business
Week 2001a). After the plan was adopted the government elected
a commission supervising the sale of NKBM responsible 6 for
making an independent assessment of the bids. At the same time,
the government retained the right to make the final decision.
The European Commission, in its regular reports on Slovenia’s
progress towards meeting accession criteria, has repeatedly
raised the slow pace of bank privatization as a main concern.
The Commission cites bank privatization as evidence more generally
of the “gradualist approach to structural reforms in Slovenia”
(European Commission 2003: 36). In its general evaluation of
economic criteria in the 2001 report, the Commission cited the
May 2001 privatization decision as an “important step
forward” in reducing the role of the sate in the economy.
The Commission reported that while “restructuring of the
banking sector has progressed somewhat,” they cautioned
that “further work remains” (Commission 2000: 30).
More specifically, the Commission warned that the intention
of the state to keep a blocking minority share in the banks
would diminish the interest of potential key investors. In the
2003 “Comprehensive Monitoring Report on Slovenia’s
Preparations for Membership the European Commission” concludes:
“Although limited and partial privatization is taken place
in the banking sector, the state remains strongly present in
this sector while further privatization would promote reform
conducive to competitiveness” (authors’ emphasis,
European Commission 2003: 8).
On 16 July 2001 the Finance Minister invited leading financial
institutions to express their interest, first preliminary and
non-biding offers followed by biding offers. The European Commission’s
warnings seemed to be vindicated (Slovenian Business Week 2001b).
To the great surprise of Slovenian government officials, who
predicted they would receive at least 26 offers, only six financial
institutions replied to the Ministry’s call for a show
of interest. Moreover, out of these six offers only three met
the minimal requirements to be taken seriously as biding offers.
The three invited institutions were Italian bank Unicredito,
Austrian Bank Austria and Activa Group (a Slovenian company
heading a consortium of Slovenian and foreign financial institutions
comprising Isralel’s Ganden Group, Slovenia’s Factor
Banka and European Privatization and Investment Corporation)
(Slovenian Business Week 2001c). Government representatives
stated publicly their disappointment that no “major”
bank expressed interest in NKBM. In October 2001, Finance Minister
Anton Rop reported that the offers received for the NKBM are
too low and would have to be raised during the negotiations
phase or otherwise the privatization process would be brought
to a halt. NKBM’s privatization began to slip behind schedule.
The commission supervising the privatization of NKBM asked all
institutions that placed bids to provide additional clarifications
and soon after entered talks with all three bidders.
The initiation of formal talks spurred vociferous public debate
surrounding the NKBM privatization. In late October the Maribor
based “Movement for People” sent a public letter
to Finance Minister Rop arguing that the sale of NKBM would
not be profitable and could have negative effects. The mantra
“Our Bank” became an epical topos in relation to
NKBM. The letter was followed by a well publicized political
and media campaign against the sale of NKBM, with the greatest
amount of activity in the Maribor region (Slovenian Business
Week 2001d). In early November 2001 one of the most influential
daily newspaper published a telephone based public opinion polls
showing the generally ambivalent attitude of the Slovenian public
towards privatization to foreigners, which we discuss in greater
length below.
In January and February 2002, negotiations were further prolonged
(Slovenian Business Week 2002d). According to the chair of the
supervisory commission, Darko Tolar, the prolongation was an
attempt to wait and see what the governing parties decided,
until 22 March 2002. The commission supervising the sale evaluated
two major aspects of the offers: their actual price offer and
the future plan for the bank.among themselves in relation to
privatization. The commission decided to wait until the central
bank made a decision in relation to the cases of SanPaolo IMI’s
attempt to take over Banka Koper and Raiffesen Zentralbank’s
effort to buy Krekova Banka (Slovenian Business Week 2002a).
Both of these foreign takeovers had already prompted heated
debates in the Slovenian public sphere. Bidders were asked to
prolong the validity of the biding offers, which expired on
February 8th. According to these two criteria the best offer
came from Unicredito. Bank Austria scored second and Activa
Group third. It is also telling that the future plan of Activa
Group seemed the most attractive to the commission, as unlike
the two other bidders they would have maintained the independence
of NKBM and increased its activity in the Balkan region.
In the end of March 2002, almost a year after the privatization
program was announced the commission decided that none of the
bidders that submitted biding bids met the privatization conditions
(Slovenian Business Week 2002). After examining all elements
of the privatization process, the Ministry of Finance made a
decision to temporarily put a halt on the procedure. Representatives
of BACA expressed surprise about the decision, noting that during
negotiations nobody had informed BACA that its offer was not
in line with the privatization conditions. Meanwhile, unofficial
information that the sale would not go ahead had been circulating
in Slovenian media in the previous weeks before the announcement.
According to the media the final decision to block privatization
was taken at the highest level during a meeting between Prime
Minister Drnovsek and Finance Minister Rop held on 18 March.
However, already on the 14 March President Kucan told the Financial
Times that this was not the best time to sell banks to foreign
investors, as the supply of banks for sale exceeded demands,
and expressed doubts on the need to sell Slovenian banks to
foreigners (Slovenian Business Week 2002f).
The European Commission in its 2002 regular reported positively
that bank privatization had started but “not without problems,”
citing the government’s decision to stop the privatization
of NKBM and halted the other in “the final stages of the
process” due to increased “political resistance”
(Commission 2002: 31). In its general evaluation of Slovenia’s
progress in meeting economic criteria, the Commission stated
that the “competitiveness of the economy would be supported
by speeding up structural reforms.” In particular, the
Commission cited “further privatization in the financial
sector” and the “final liquidation of the Slovenian
Development Corporation” as two main goals to be achieved
by the close of accession negotiations (European Commission
2002: 23).
Debating foreign presence: economic
experts, public opinion and political parties
The decision of the government to block privatization may be
understood within various frameworks. For more structuralist-oriented
analysts, the decision might be viewed as an exception to the
understanding of Europeanization as an external force that pushes
CEE governments to unilaterally open up their markets. Against
this view we suggest to understand the decision of the government
in light of the ideas that were circulating in the early 2000s.
In this way we can see the numerous internal reference to EU
and the definition of the Slovenian national interest within
the enlarged European economic and political arena. Europeanization
emerges as an internal process that reorganizes the domestic
public sphere.
This reorganization proceeds in three ways. First, from the
part of the governing parties there is a tendency to legitimize
their actions as a prerequisite to the European Union membership.
With this move they seek to shift the source of legitimacy from
the domestic realm to the external realm, and from popular legitimacy
to institutional legitimacy. This strategy has been used less
frequently in Slovenia compared to other applicant states, perhaps
attributable to the significant party cleavages within ruling
coalitions. Second, we observe that along with changing the
source of legitimacy the Slovenian government also engages in
double talk with its European private and public partners and
with the Slovenian public itself. The government interprets
its action according to the exigencies of its intended audience.
These two trends weaken political accountability of the governments
to the public and shifts power from the public to narrower political
circles. Finally, that the issue of privatizing banks became
a heated political debate shows that in the context of the ongoing
European integration of Slovenia the public becomes more sensitive
to particular issues. The public resisted attempts to discuss
privatization solely according to its economic aspects (financial
costs and benefits) and treated the issue as a larger question
of Slovenian national interest. This process can be viewed as
attempt on the part of the public to countervail the first two
trends and try to increase responsiveness of governing parties.
In order to highlight these aspects of the reconfiguration
of politics in Slovenia first we look at the economic experts
arguments that were presented not only in scientific conferences
but also regularly quoted in the media as well. Second, we provide
a short overview of the result of the public opinion polls conducted
at the heyday of the political turmoil. Finally, we show the
political parties struggles as the site of mediation between
competing interests:
1. The economic experts’
arguments
Economic experts from the Faculty of Law were since long involved
in the political debates regarding the role of Central Bank,
monetary policy and bank ownership in the Slovenian public sphere.
Prominent figures such as Ivan Ribnikar, professor of economics
at the University of Ljubljana, or Joze Mencinger, former Minister
of Economy, fulfilled important positions as the members of
the Board of the Bank of Slovenia. They also regularly contributed
opinions and analyses in the Slovenian public media. The media
were motivated by the political turmoil surrounding bank privatization
in Slovenia throughout 2001 and 2002. They were concerned with
the issue of selling the state-owned banks to foreigners and
they argued that the government’s aim of increasing private
participation in banking and thus meeting the Copenhagen criteria
could be met via privatization to domestic investors. The thrust
of the argument was twofold. On the one hand, they analyzed
the structure of ownership in Western and Eastern European market-economies
and underlined the marked differences between the two regions.
On the other hand, they highlighted the monetary consequences
for small economies of opening markets fully to foreigners.
The first line of argument presented by economic experts was
that compared to EU banking sectors, foreign presence and penetration
in CEE banking sectors is extremely high. They argued that in
some EU countries, the share of foreign banks in total assets
is rather small (3.3 percent in Austria and 4.3 in Germany in
1997), while the Euro area average in 1997 was 12.7 percent,
much lower than the CEE average. They attributed the high foreign
presence in other CEE countries to insufficient domestic capital,
lack of expertise and deficient technology. To support their
argument, they presented data that clearly showed divergence
in the banking sectors in terms of foreign presence and state
involvement between EU and CEE countries (see Figures 1 and
2 below). Moreover, they argued that Slovenia has been an exception
because it had a relatively better developed banking sector
at the beginning of transition and had rehabilitated banks with
domestic resources. Through the 1990s, Slovenia opened up to
foreign banks only gradually. Still, they assured, among CEE
countries, Slovenia’s banking sector is one of the most
stable and most developed in terms of products offered.
Figure 1: Share of foreign bank
branches and subsidiaries in EU countries (% of total assets,
1997)
Source: ECB (1999) cited in Moore, D. and Zajc, P. (2000: 10).
Figure 2: Share of foreign banks
in CEE countries (% of total assets, 2000)
Source: National central banks, EBRD (1998) cited in Moore,
D. and Zajc, P. (2000: 10).
The second argument against selling banks concerned the monetary
effects that large capital inflow would potentially cause in
a small open economy. Namely they argued that it would have
adverse effects on the exchange rate and would thus increase
the cost of Slovenian exports. A recent quote by former Minister
of Economy and leading Slovenian economist Jože Mencinger
suggests how influential economic experts portray foreign investments.
We quote Mencinger at length (Panic 2002: 102):
" The demands by foreigners for an end to the Slovenian
‘national-capitalism’ are increasing, although I
think that we have the right to defend our interest and our
capitalism, since others also have that right. … [I]t
is at least useful that foreigners have realized that here enterprises
can not be bought cheaply. As far as banks are concerned I don’t
know why the government is in a hurry right now to privatize
the banks and sell them to foreigners. The inflow of currency
would cause a greater pressure on the appreciation of [Slovenian]
tolar. It is probably not accidental that the majority of banks
in Western Europe are predominantly in domestic ownership, while
in Eastern Europe it is in foreign ownership. Banking is not
something we would not know how to do ourselves. There is no
proof that foreign banks are more effective than the domestic
ones. Not only that, studies…show that at least in Slovenia
the things are the reverse: foreign banks do not behave differently
from domestic ones, they are only more successful in avoiding
paying the income tax."
2. Political parties and parliamentary
debates over bank privatization
Slovenian political parties have long fought for influence over
the issue of privatizing state-owned banks. The final phase
of the bank rehabilitation process was marked by consent between
the two most influential members of the governing coalition.
This agreement resulted in the division of the demanding task
of supervising the two largest state banks. In 1997, the government,
like today, consisted of four independent political parties.
However, only the two largest parties, the Liberal Democrats
of Slovenia (LDS) and the Slovenian People’s Party (SLS),
gained substantial influence over the banks. In 1997, LDS was
granted the right to nominate representatives to the supervisory
board of NLB and SLS to the NKBM.
The conclusion of the bank rehabilitation program was announced
once this supervisory body was established.
Once Slovenia signed the European Agreement in 1997, the Government
quickly engaged in amending the Slovenian legal framework to
adopt the aquis communautaire. The Government started to substantially
liberalize the banking sector and to dismantle many of the barriers
to entry that were kept in force throughout the 1990s. They
also began negotiations regarding the privatization of the banks.
With the new Banking Law of 1999, substantial changes were evident
in the opening up of the Slovenian financial system. Since 1999,
foreign banks have been permitted to open branches in Slovenia.
The different treatments of domestic and foreign investors acquiring
an ownership share in a domestic bank have also been abolished.
The new law also abolished the inter-bank agreement on the maximum
deposit interest rates. New banking groups were formed and the
privatization of NLB and NKBM began.
With the start of the privatization program controversies ensued
between the Prime Minister and the parliament namely over who
could make final decisions over bank privatization. Janez Jansa,
leader of the main opposition Social Democratic Party and former
President of the National Assembly, fought for the legislative
branch to play the major role. Due his weakening popularity
he did not manage to push through a law in the Slovenian parliament
regarding privatization. Thus in Slovenia, unlike in most CEE
countries, no bank privatization law was passed by the parliament.7
This resulted in the Prime Minister’s office being granted
greater freedom in terms of planning and execution of bank privatization.
It also contributed to limiting public transparency of the issue.
As decision-making shifted to the executive branch, controversies
and competing views continued within and between governing coalition
parties regarding privatization that now had to be reconciled
outside formal parliamentary channels.
The major governing party, LDS, has been a strong supporter
of bank privatization for various reasons. First, Slovenian
Prime Minister Janez Drnovsek and his ministers have been enthusiastic
supporters of European integration. They have dutifully fulfilled
the EU’s formal and informal requirements to gain EU membership.
Second, Finance Minister Anton Rop was concerned with the level
of public debt Slovenia once contracted with various banks to
cover the cost of the bank rehabilitation process. He hoped
to gain revenue from quick bank privatization to finance the
outstanding public debt. However, between 1998 and 2001 LDS
was constrained in its pursuit of bank privatization by members
of its coalition governments. Marjan Podobnik, president of
SLS, was generally opposed to selling banks to foreigners. Podobnik
advocated a plan that would have split the major banks into
small regional units (ironically a common tactic of Yugoslav
politicians in the past).8 According to this plan, originally
conceived by a prominent opposition leader Andrej Bajuk, president
of the New Slovenia party, the head of the banks would stay
in Ljubljana while local political representatives would supervise
smaller units. While SLS was willing to accept the privatization
of NKBM, they opposed the privatization of Nova Ljubljanska
Banka, Slovenia largest and most important bank.
The LDS-led coalition also met continued opposition to their
bank privatization plan from other opposition parties. The United
List of Social Democrats (or ZLDS), the former League of Communists,
advocated that both banks should be kept in state hands until
domestic investors could purchase a governing share. Although
a junior partner in the government, ZDLS has major influence
in the Maribor region. The Mayor of Maribor, a ZDLS elected
official who holds significant influence as the leader of the
second largest city in Slovenia, is an ardent and outspoken
opponent of NKBM’s privatization.
In sum, one must consider the role that political parties played
in the process leading up to the final decision by Prime Minister
Drnovsek and Finance Minister Rop to block privatization on18
March 2002. The privatization plan was in line with the suggestion
of the privatization supervising committee. The strong political
involvement in the issue by left- and right-leaning parties
within and outside the governing coalition suggests the difficulty
of the commission to make an independent decision about the
privatization of the NKBM based solely on economic criteria.
The victory of the coalition of the Slovenian People’s
Party and the Slovenian Christian Democrats in the April 2000
parliamentary elections interrupted the LDS’s lock on
power since 1992. While LDS quickly regained political power
in the October 2000 elections, right-leaning parties are now
more united in opposition towards the government. Increasingly
these parties – such as Bajuk’s New Slovenia Party
– are introducing more overt euro-skeptical and euro-critical
arguments into parliamentary and public debate.
3. Media and Public Opinion
The issue of bank privatization was hotly debated in the Slovenian
media, particularly around the sale of Nova Kreditna Banka Maribor.
The media tended to be critical towards or outright oppose quick
privatization and sale of banks to foreign owners. The financial
daily Finance was one of the only periodicals to argue strongly
in favor of these policies. They utilized many of the common
arguments in favor of privatization of banks to foreigners,
such as increased expertise and technology, the possibility
of integration into international financial networks, as well
as sound financial backing. Critical perspectives were much
more ubiquitous in the Slovenian media.
Critiques of the rapid privatization and sale of banks centered
on a number of arguments. First, the media often framed the
issue in terms of preserving national autonomy and protecting
national interests. Many media accounts highlighted Slovenia’s
unique capability of relying on its own resources and capital
to build a strong national economy. They also suggested that
selling national assets to foreigners would threaten the existence
of the Slovenian nation. Such arguments were often made in the
context of European integration, whereby the influence of small
states like Slovenia were said to be constantly threatened by
the increased power of larger and more affluent EU member states.
Second, the media focused on the strategic importance of banks
to the autonomous development of the Slovenian economy. Critics
suggested that selling banks to foreigners threatened to reduce
the existing influence of these banks in supporting Slovenian
companies. Finally, commentators argued that increased foreign
influence in the banking sector would also bring about a corresponding
rise in political influence. Foreign owners would begin to finance
political parties either directly or indirectly, thereby gaining
influence in national level decision-making.
Critical views towards quick privatization and sale of banks
to foreigners are also reflected in public opinion polls. Public
opinion distinctively identifies with Slovenian banks, which
are believed to be the pillar of its economic system. Numerous
public opinion polls show that the public believes that Slovenian
capital should be defended. In a poll conducted in November
2001, which coincided with the public campaign against the sale
of NKBM to the highest bidder, an overwhelming majority of respondents
expressed opposition to the privatization of banks, as summarized
in Figure 3. In the same survey, however, when asked whether
they believed it was feasible for NLB and NKBM to remain in
Slovenian ownership in the long run, a majority (47.7 percent)
reported that they believed there was high possibility that
Slovenian buyers would eventually sell the banks. Slightly over
26 percent of respondents remained optimistic that the banks
could remain in Slovenian hands.
Figure 3: What is your opinion
regarding privatizing Slovenian banks?
Source: Delo Stik, 8 November 2001, n = 706
In another survey conducted in November 2001, respondents were
asked whether and how the type of ownership (domestic or foreign)
would have an impact on their personal banking decisions. When
asked whether they would keep their savings in a bank that came
into foreign ownership, 45.1 percent of respondents reported
that they would transfer their savings to Slovenian banks, 35.4
would keep their savings in the bank, and 19.5 were undecided
on the issue. Yet when asked what factor they considered most
important in their decision to deposit money in a particular
bank, only 6.5 percent of respondents said the ownership of
the bank was a major factor.
Asked what they believed the government should do to galvanize
larger bidders to invest in state owned banks in Slovenia, the
largest percentage of respondents (43.5 percent) said that the
state should retain ownership for a longer period of time. Approximately
35 percent said that the government should sell to Slovenian
buyers, depending on their capital, while only 8.6 percent said
that the state should sell the foreigners. When asked to give
reasons for the biggest disadvantage of foreign banks over Slovenian
ones, respondents expressed both practical and larger political
concerns (see Figure 4).
Figure 4: “What is the
biggest disadvantage of foreign ownership of banks?”
Source: Delo Stik, 8 November 2001, n = 706
That a majority of respondents suggested that the main disadvantage
of foreign ownership of banks was the political implications,
rather than more practical concerns such as the cost of services
or interest rates, suggests that the arguments offered by the
media had some impact on public opinion.
Case study II: The Battle of
the Local and Foreign Brewers
This ambivalence towards privatization and opening markets has
been most evident in the banking sector. We suggest that this
ambivalence towards opening to foreign investors, also visible
in other sectors, might be better understood in the broader
context of Europeanization. The battle between the Belgian based
Interbrew and the Slovenian brewer Pivovarna Lasko over the
takeover of the Ljubljana-based Pivovarna Union brewery was
framed by local actors has a battle between David and Goliath:
between a large EU-based conglomerate and a small, Slovenian
“national” brewery. This public “battle”
– involving a state agency, foreign investors, the media,
political parties, and local breweries, in which the local investors
prevailed – was notably fought during the most intensive
stages of final EU accession negotiations. This case highlights
how contentious public debate over opening the Slovenian market
occurs and is often framed within the context of Europeanization.
The Slovenian beer market has long been dominated by two popular
local brands: the Ljubljana-based Union brand, favored among
Ljubljana connoisseurs, and the Maribor-based Lasko, the favored
brand outside of the capital. The rivalry between the two brands
involved more than a question of taste in beers; it is a matter
of regional and national pride. In November 2001 the Belgian
based brewing company Interbrew entered a bidding war with Lasko
for controlling shares in Union. Interbrew is well established
in other parts of Central and Eastern Europe, having purchased
local breweries in Bulgaria, the Czech Republic, Hungary, Romania,
and elsewhere. Interbrew’s entry into other Central European
markets undoubtedly raised little public attention. Yet in Slovenia
the proposed takeover prompted a heated public debate. The so-called
“brewers’ war” raised larger questions in
Slovenia of whether privatization should be led by domestic
or foreign capital, culminating in a panel debate on the subject
broadcast on national Slovenian television (Bandelj 2003).
The takeover battle between Interbrew and Lasko rested in large
part on the actions of two proto-governments funds: the Pension
Fund Management (KAD) and the Slovenian Reimbursement Company
(SOD). Interbrew acquired its 10 percent stake in Union from
the KAD in December, thereby gaining 38 percent ownership of
the firm. Lasko alleged that Interbrew violated the act on takeovers
by upping its offer without issuing a new public offer, a claim
that was eventually dismissed by the Slovenian Securities Market
Agency. Lasko, which owns just under a quarter of Union shares
but is believed to control over half of Union indirectly, then
proceeded to obtain a 12 percent share previously owned by the
SOD. The sale turned out to be a one-man move by the SOD director,
who was later ousted from his post by the SOD supervisory board.
Responding to charges filed by Interbrew, in December 2001 the
Ljubljana District Court interdicted Lasko from freely using
the 12 percent share acquired by the SOD, maintaining that the
SOD had single-handedly signed the contract on the sale of SOD
shares and had thus abused office. The District Court also temporarily
banned Lasko from purchasing further shares. The High Court
overturned these District Court rulings in February, thus allowing
Lasko to wage another takeover battle. At the same time the
Slovenian Competition Protection Office launched proceedings
against Lasko for violating the anti-trust legislation, following
a complaint filed by Interbrew.
While the battle between Interbrew and Lasko was being waged
in court, a heated public debate ensued over foreign versus
domestic ownership. A multi-party coalition of over 30 members
of the Slovenian Parliament petitioned to convene an emergency
parliamentary session of the sale of Union to Interbrew. The
campaign, led by Slovenian National Party Chairman Zmago Jelincic,
argued that it was in Slovenia’s national interest to
keep its best and most competitive companies in Slovenian hands.
Moreover, they called on the government to dismiss the chairman
of the KAD for selling its stake to Interbrew, alleging that
Interbrew “prearranged the deal and put Lasko in an unequal
position” (Slovenia Business Week 2002a). Borut Korun,
leader of the Eurosceptic NGO called the December 23 Movement,
argued that foreign investors come to Slovenia merely for profit
and that EU members skillfully use the relative poverty of the
countries of the former Eastern bloc to their advantage (Slovenia
Business Week 2000c). (The story of the battle between Interbrew
and Lasko over the control of the Union brewery may be read
as a classic tale of David and Goliath. Yet it is important
to note that Lasko has pursued an aggressive strategy to expand
its market in Southeastern Europe. It bought Jadranska brewery
in Split, Croatia in 2000 and is currently in the process of
fighting Interbrew for control of a spate of privatizations
going on in Serbia and one in Bosnia for the Banjalucka Brewery.
“[Interbrew] can spend more, of course, than we can spend,”
says an adviser to Lasko's managing director. “But we
know the market . . . the mentality, the language” (Heaps
2002). See Jaklic and Svetlicic (2003) for an expanded discussion
of Slovenia’s enhanced transition through outward internationalization
to the Balkan markets.)
European officials also weighed in on the debate. An EU official
commented on the disputes by stating that “foreign direct
investment is undoubtedly positive for Slovenia’s integration
into the European economic arena” (Slovenia Business Week
2000b). Spain’s Ambassador to Slovenia remarked that Slovenia
must “find a balance between strengthening its own identity
and opening outwards” (ibid.) Slovenian Prime Minister
Janez Drnovsek was prompted to comment on the battle in a January
press conference, remarking that “Slovenia’s national
interest is not protected by domestic ownership. The national
interest is job, high-quality products and a high standard of
living” (Slovenian Business Week 2000a). He went on to
say that the government did not take sides in the battle, stating
that: “through its institutions, the state only wants
to assure that the procedure is transparent and that the rules
of the game that we have adopted are observed” (ibid.).
In sum, understanding these two cases as part and parcel of
Europeanization may not be evident. Yet we argue that the many
facets to be incorporated into the analysis of the Europeanizing
Slovenian political and economic fields. Both the restructuring
of the Slovenian banking system and the “brewers’
war” were fought over underlying conceptions of the Slovenian
market economy, namely over what counts as European practice
and how Slovenian national interests should be defined within
a larger European sphere. The cases also illuminate the politicization
of economic issues, a marker of the redefinition of traditional
political struggles. The cases highlight the increasingly prevalent
role of numerous actors outside the state in domestic political
debates, actors that in a conventional view would not account
as strictly “political” such as NGOs, media, European
officials, business actors from Slovenia and abroad. The cases
thus suggests that scholars must consider the roles of larger
range of actors active both in and across public and the political
spheres.
Conclusion
We are witnessing today an apparent convergence at the level
of the institutional development of Slovenian capitalism to
that of the EU member states. Indeed, the Slovenian government
has complied with all outstanding EU requirements, unilaterally
agreeing to privatize the banking sector and opening the economy
more generally towards greater flows of FDI from the EU. Yet
by focusing solely on this outcome scholars fail to consider
how the process of Europeanization operates not only in the
course of institutional adaptation, but also involves the processes
of public contestation. Viewing the dynamics of Europeanization
with regard to both processes, and the interactions between
the two, allows us to see beyond the general concerns of European
studies scholars, namely to what extent do we find converging
patterns in institutions and structures. It creates room for
assessing the nature of the changing politics that incorporates
a broader range of actors and issues from the domestic and larger
European public sphere. Moreover, methodologically it requires
us to augment top-down approaches to Europeanization by emphasize
locally bound discursive constructions and political struggles.
We do so in this paper via the examination of two ‘sites’
of Europeanization, the restructuring of the Slovenian banking
sector and the recent battle between local and foreign breweries.
We share Slavoj Žižek’s (1999) cautious optimism
that by being forced to live out and sustain the competing and
often contradictory demands of the national and transnational,
Central and East European actors are placed in a privileged
position to invent creative ways out of this dilemma. We suggest
that Slovenian societal actors have explored one possibility.
By promoting a more gradualist nationalist-capitalist pathway
to Europe from the periphery, these actors contest the neo-liberal
logic that sees no alternative for Central and East European
countries. Recognizing such possibilities, however, requires
that we rethink the nature of European accession as it now stands.
Core-periphery analyses of Europeanization tend to present the
relationship as a top-down one. By looking only at the structural
dimensions of Europeanization we ignore the ways in which local
agents become active participants in this process, both at the
national level and within an enlarged European political sphere
as well. As the EU prepares to integrate ten new members in
May 2004, it becomes even more politically and analytically
imperative to reconceptualize Europeanization within a broader
European political space that will transform the East-West divide.
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Paper abstracted from: "Queen’s Papers on Europeanization
No 4/2004"
Nicole Lindstrom
Assistant Professor
International Relations and European Studies
Central European University
Lindstromn@ceu.hu
Dóra Piroska
Ph.D. Candidate, Junior researcher
Institute of Economics – HAS
Central European University/
Piroska@econ.core.hu
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