Another Euro Member Heads for Turmoil After Nationalist Win

(Bloomberg) -- Nationalists won Slovenia’s general elections, setting another euro-area nation on course for political deadlock as rival parties united in condemnation of their anti-refugee rhetoric and vowed to block them from government.

Former Prime Minister Janez Jansa followed the tactics that led anti-immigrant populists to victory in three of Slovenia’s neighbors -- Italy, Austria and Hungary -- challenging the European Union’s mainstream. Jansa, though, may be contained as parties advocating middle-of-the road politics have a chance to keep him out of power. With a fractured parliament, the ex-Yugoslav country looks headed for a period of uncertainty either way.

“We don’t rule out new elections," Alen Kovac, an analyst at Erste Bank wrote in a note Monday. "Political risks are looking to remain elevated in the coming period as well."

Jansa’s Slovenian Democratic Party won a quarter of Sunday’s vote. In second place was the List of Marjan Sarec, a comic-turned-mayor who derided Jansa’s campaign as scaremongering. Joined by most other parties of the record nine that won seats in parliament, Sarec has vowed to thwart him from a third term but faces his own fraught path to form a coalition.

President Borut Pahor has said he’ll give the first coalition mandate to the "relative winner." Jansa, who campaigned alongside Hungarian Prime Minister Viktor Orban and praised his neighbor’s goal of creating an "illiberal democracy" that has put him on a collision course with the EU, may try to lure detractors into a cabinet.

Motley Coalition

The coalition-building process may begin around June 15 when Pahor will call the first session of parliament, his spokeswoman Spela Vovk said by phone. A premier designate may be named in late July, and in a best-case scenario, a government could be in place by mid-August, she said.

Whoever emerges with the mandate to form a government, it will be difficult to navigate a constellation of parties with shifting alliances and animosities. The motley group of partners may make any dramatic policy changes impossible in a fragile coalition. Also, Sarec’s political experience is limited to an unsuccessful presidential bid last year and being the mayor of Kamnik, a city of 14,000 people just outside the capital Ljubljana.

"Sarec, with no political experience on the national level, would really have a hard time putting together a left-leaning government," said Zarko Puhovski, a professor at the University of Zagreb. "And even if he does, it would last only a couple of months because of his inexperience."

Victory in Vain

Jansa’s last government collapsed in 2013 in scandal and he served six months for a bribery conviction that was later overturned. He said he was open to cooperation with other parties but stopped short of saying he intended to lead the next administration.

"It’s a victory in vain for Jansa," Otilia Dhand, a political analyst for Teneo Intelligence, said by phone. "As for Sarec and his coalition building effort, it will be a nightmare."

Investors have warmed to Slovenia since 2013, when it suffered the second plunge of a double-dip recession and enacted a 3.2 billion euro ($3.7 billion) banking rescue to avoid a Greece-style bailout. The yield on the country’s 10-year government bond stood at 1.174 percent on Monday, from more than 6.8 percent half a decade ago.

The next administration now faces important economic decisions, starting with the sale of the former Yugoslav republic’s largest lender, Nova Ljubljanska Banka d.d., which has been postponed by successive governments that have dragged their feet in disposing of state assets.

The new formation will also pick the next governor of the Slovenian central bank after Bostjan Jazbec left in April for another job, weakening the country’s voice on the European Central Bank’s Governing Council.

©2018 Bloomberg L.P.

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