ECB Nomination Defies Call for Fresh Candidates in Slovenia

(Bloomberg) -- Slovenia’s president picked a former treasury director of a rescued lender to lead the country’s central bank and sit on the ECB’s Governing Council, defying the top ruling party’s request for a fresh list of candidates.

President Borut Pahor nominated central bank Acting Governor Primoz Dolenc to take on the position permanently on Wednesday, his office said in an email. Prime Minister Marjan Sarec, who has vowed to sweep out what he calls a cadre of elites from state institutions, including the central bank, said this week that Dolenc and four other people on a short list for the spot wouldn’t win backing in parliament.

“Dolenc has expertise and experience to fill the post,” Pahor said in the statement. It said that after Dolenc presents his program to lawmakers, he “will win support.”

The nomination may extend a cloud of uncertainty among eastern European countries with representation on the European Central Bank’s policy board. Latvia’s delegate to Frankfurt is fighting bribery charges, and Slovak central bank Governor Jozef Makuch said he might not finish his second term. Slovenia’s parliament must vote on the nomination within 30 days. Sarec’s coalition lacks a full majority in the assembly and is ruling with the tacit support of the Left party.

The central bank said that Dolenc wouldn’t comment on his nomination before he presents his program on Sept. 24, according to an email.

Preferred Candidate

Sarec’s party would have preferred the nomination of another candidate, central bank vice-Governor Marko Bosnjak, spokeswoman Nika Vrhovnik said by phone. The party respects the president’s decision and will hold discussions about whether or not to support Dolenc after he answers lawmakers’ questions, she said.

“Pahor isn’t risking anything by nominating a non-viable candidate, because this is his last term,” said Zarko Puhovski, a political science professor at the University of Zagreb in Croatia. “And if this candidate fails to get support, he then gets to pick the next one.”

If approved, Dolenc would replace former Governor Bostjan Jazbec, who resigned early in May. He stepped down amid a police investigation into the central bank’s role in a 2013 bailout of state lenders that cost taxpayers 3.2 billion euros ($3.7 billion). The rescue came after years of mismanagement and political interference in the banking sector, in which Slovenia, unlike most of its post-communist peers, had resisted relinquishing state control.

Abanka Focus

One of the banks affected by the bailout was Abanka DD, where Dolenc served as treasury director from 2006 to 2008 before Pahor appointed him to the central bank two years ago. Debt written off at Abanka during the bailout that was issued when Dolenc was a director is now at the center of a push by investors to get their money back that may put the tiny Balkan state on a collision course with the European Union and ECB.

Panicos Demetriades, a former Governing Council member who published a book about his own experience as head of the Cypriot central bank during a bailout similar to Slovenia’s, criticized Pahor’s pick.

“Bankers whose banks have failed are not fit and proper to have any role in banking, let alone to oversee other banks as central bank governors,” Demetriades wrote in an email. “The ECB has a duty to the integrity of the Eurosystem to find a way to stop this appointment.”

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