Slovene Premier Quits as Political Cracks Appear in East EU

(Bloomberg) -- Slovenia’s prime minister unexpectedly resigned just months before the small euro-zone member holds elections, opening the way to an upstart party that’s pledged to sweep the country’s political elite from power.

Premier Miro Cerar’s announcement coincided with an offer to resign by his counterpart in another ex-communist country, underscoring an atmosphere of political turmoil that is sweeping the European Union’s eastern wing. Slovak Prime Minister Robert Fico made a conditional offer to step down amid that nation’s biggest anti-government protests since the fall of the Iron Curtain.

After facing public-sector strikes, resistance to reform by his ruling partners, and a plunge in popularity, Cerar said “the final straw” was a ruling by the nation’s top court that annulled a referendum backing a new rail link, his government’s main investment project. With opinion polls showing him a distant fourth before elections expected in June behind the frontrunner, former-comedian Marjan Sarec, the move may be a last-ditch effort to save his party.

“Although his move looks like a principled act, which is something we haven’t seen a lot in this region, it also has an embedded PR value,” said Tvrtko Jakovina, analyst and contemporary history professor at Croatia’s University of Zagreb. “Cerar now looks more principled than others.”

Investors are for now ignoring the political turbulence in a region used to political turmoil. The yield on Slovenia’s bond maturing in March 2028 was little changed at 1.21 percent, the lowest in five weeks. The rate on Slovakia’s January 2031 securities slid 1 basis point to a seven-week low of 1.32 percent.

Plunging Popularity

Cerar sent his resignation to parliament, which must formally acknowledge it, according to the STA newswire. He met with President Borut Pahor, who said in a statement that he wouldn’t propose a new prime minister and would rather opt for early elections in the second half of May. The president will consult next week with parliamentary leaders, because they have the right to propose a replacement.

Tens of thousands of Slovene teachers stayed home from work on Wednesday after trade unions failed to reach an agreement with the government on higher pay. The stoppage at schools and day-care centers followed a wave of strikes and protests last month by police, nurses and other public employees who complain they haven’t benefited from an economic boom in the nation of 2 million people.

Sarec Rises

That’s benefited Sarec, a mayor of a small town who narrowly lost to Pahor in presidential elections last year. His party has found traction among voters with a pledge to sweep what he calls a political elite out of Slovenia’s state institutions, including the monetary authority, whose governor is a member of the European Central Bank’s Governing Council.

Despite the economic boom, Slovenia’s EU and euro-area membership has not been all rosy. The second-richest ex-communist EU nation, its living standards initially climbed after EU entry, rising to 90 percent of the bloc’s average in 2008. But they plunged after the global economic crisis, and in 2016, the figure stood at about 83 percent, lower than when it joined in 2004.

Economic growth of 6 percent last year has helped undo damage from a double-dip post-crisis recession. But Cerar’s government has refused to hike public wages, saying it can’t afford the 1 billion euro ($1.2 billion) price tag that public workers are demanding as it tries to balance the budget after a 2013 bank rescue swelled the fiscal deficit to 15 percent of output that year.

The taxpayer-funded rescue has also been a source of conflict, after Cerar’s government has reneged on a pledge to sell the nation’s largest bank, Nova Ljubljanska Banka d.d. last year. The European Commission has told Ljubljana to put the banks in private hands after years of political influence and mismanagement triggered the 3.2 billion euro bailout.

“Cerar is seeking a better position before election, which he can now approach as just one of candidates,” said Zarko Puhovski, analyst and political science professor at the University of Zagreb.

To contact the reporters on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net, Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net.

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Michael Winfrey, Paul Abelsky

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