Slovenia’s road to the EU
Slovenia has always been the most prosperous republic of former Yugoslavia. It has also emerged virtually unscathed from its 10 day war for independence in 1991. On 1 May 2004 it became a member of the EU and has already reached about 80 percent of the average GDP per capita of the EU-27, ahead of Portugal and all other new members from Central and Eastern Europe.
Slovenia started from a good position compared to other Western Balkan and even other Central and East European states. However, the process of EU accession has also played a major part in Slovenia’s internal transformation during the past 15 years.
There are interesting lessons from Slovenia also because it shares an institutional heritage with other Yugoslav successor states. Not everything went smoothly. At first it took Slovenia longer than any of the other new Central European EU members to sign its association agreement. Its gradual approach to transition to a market economy was also criticized by many outsiders.
However, looking back at the past two decades, it is hard not to consider Slovenia one of the outstanding examples of successful Europeanisation and reform. In 2008 Slovenia is also the first of the new EU member states to take over the EU Presidency.
Already in 1989, before the breakup of Socialist Yugoslavia, Slovenia adopted a political and economic programme called “Europe 1992 ” and started to conduct studies on how to prepare for new relations with Europe.
After independence, Slovenia was allowed to a large extent to rely on the privileges, including preferential access to EC markets, of the EC-Yugoslavia co-operation agreement from 1980. A co-operation agreement between Slovenia and the EU was concluded in April 1993.
The logical next step would have been to start negotiations on an association agreement (at the time called Europe Agreement), but this proved to be difficult, largely due to problems with Slovenia’s neighbour Italy. Bojko Bucar and Irena Brinar provide an illustrative account of these complications:
“Italy as a neighbouring state recognised Slovenia as an independent state together with most of the countries of the EU (on 15 January 1992). However, it immediately raised the issue of the status of the Italian minority in Slovenia. Italy’s diplomatic activities and allegations, all reports of international observer missions notwithstanding, resulted in the fact that Slovenia became a member of the CE as late as 14 May 1993, almost a year after it had been admitted to the UN. In the meantime, in August 1992, Italy recognised Slovenia’s right to succession to all relevant treaties (some 50 in number) that had been concluded between Italy and Yugoslavia. Among them was the Treaty of Rome (1983), an agreement on compensation for the expropriated Italian property in the border area.
But after the political situation in Italy changed and the right-centre government of Silvia Berlusconi and Gianfranco Fini came to power (10 May 1994), Italy refused to honour this contract and demanded the return of property in kind. Since Slovenia refused to accept this claim and insisted on the respect of international law, Italy vetoed negotiations on the Europe Agreement. It claimed that Slovenian legislation was not in accord with European legislation as regards the purchase of land by foreigners. It was of little help for Slovenia to argue that an obligation to sell land to foreigners is relevant only after a state becomes a member of the EU (according to the principle of the free movement of capital) nor that no similar demands have been made to other countries which had signed Europe Agreements.
For Slovenia it now became a demand by the EU, not Italy alone, to change its legislation. The EU considered the dispute a bilateral matter and would not jeopardise relations with one of its important members. The Slovenian government hat to make a declaration that before signing the Europe Agreement it would initiate a change of the Constitution allowing for the purchase of land by foreigners, and that the amendment to the Constitution would become effective before the end of the ratification process.”
“This allowed for the continuation of the negotiating process and even initialling the wording of the Europe Agreement on 15 June 1995. Yet Italy again vetoed the signing of the agreement until Annex XIII to the Europe Agreement had been added. Thereby Slovenia consented that after the treaty would enter into force, EU nationals who at any time legally and continuously had had a permanent residence for three years on the present territory of the Republic of Slovenia could, subject to reciprocity, acquire title to land.”
(Bojko Bucar, Irena Brinar, “Slovenia – Political Transformation and European Integration “, in: Anselm Skuhra (ed.), The Eastern Enlargement of the European Union. Efforts and Obstacles on the Way to Membership, Studienverlag, 2005, pp. 96-97)
The change of the Italian government, first to Lamberto Dini’s technical government and then to a centre-left government under Romano Prodi, led to immediate improvements in bilateral relations. A Europe Agreement was finally signed on 10 June 1996, four and a half years after Czechoslavakia, Hungary and Poland and more than three years after Bulgaria and Romania. It finally entered into force on 1 February 1999.
Slovenia was the last of the CEE-10 to sign a Europe Agreement. It was also the country that had the shortest interval between the signing of an accession agreement and the membership application. While the Visegrad-four had several years between these two key dates, Slovenia applied directly after signing the Europe Agreement, at the very same day. This was long before the Europe Agreement would enter in force on 1 February 1999 and even before the interim agreement was applied starting from January 1997).
It also turned out to be the right decision. The European Commission’s opinion on Slovenia’s application for EU membership, delivered at the same time as to the 9 other applicants from Eastern Europe, in autumn 1997, gave credit to Slovenia as a stable democracy fulfilling to the required degree the first two Copenhagen criteria (political and economic). It pointed out that Slovenia would have to make considerable efforts to be able to adopt and implement the acquis. Areas highlighted were internal market, environment, employment, social affairs and energy.
Slovenia was invited to start negotiations at the Luxembourg European Council in December 1997, together with Poland, Hungary, the Czech Republic, Estonia and Cyprus.
Slovenia was also well-prepared for the negotiations. There were a series of documents prepared between 1994 and 1996 to rely on: the “Strategy for Economic Development of Slovenia”, the “Strategy of International Economic Relations ” (SIERS) and the “Strategy for increasing Competitiveness Capabilities of Slovenian Industry”.
It was to a large extent on the basis of the latter two documents that Slovenia prepared its “Strategy for Accession to the European Union ” in 1998.
Janez Potocnik, Slovenia’s chief negotiator for membership, pointed out in an article (written together with Jaime Garcia Lombardero):
“In its earlier stages the negotiating process could [..] more appropriately be called a process of adjustment. In that period, at least in Slovenia’s case, the real negotiations took place within the country, with respect to its preparation to undertake the necessary changes not only in principle, but also despite interferences with the existing division of economic and political power.”
(“Slovenia’s Road to Membership in the European Union “, in: Mojmir Mrak, Matija Rojec and Carlos Silva-Jáuregui (eds), Slovenia. From Yugoslavia to the European Union, World Bank, 2004, p. 375)
These “internal negotiations ” were crucial for efficient and fast progress during the negotiations.
“Slovenia succeeded in reaching an adequate level of political consensus and support to allow the process to proceed efficiently and in a quite undisturbed manner. Slovenia’s favourable starting position, reflected largely in its relatively high level of development compared with the other candidate countries, as well as its small size, which allowed it adequate flexibility, helped Slovenia becomee on of the most successful candidates in the process of adjustment.” (Ibid., p. 375)
Even in a country which had already reached a high living standard and had carried out a wide-reaching reform process during the 1990s, the accession process had an important impact on reforms. As Potocnik put it:
“Just as, on the one hand, a successful transition was thus seen as a precondition for accession, so too, on the other, the accession process itself speeded Slovenia’s transition. The process helped Slovenia overcome certain obstacles – such as monopolistic firms and entrenched political interests – to necessary change. It established greater order and stability in the economy and society as a whole and contributed to the improved competitiveness of all economic agents – individuals, companies and the state itself.” (Ibid., p. 368)
Slovenia’s transition is usually described as having followed a gradual approach (versus the shock therapy approach of Poland). Some expected this to lead to difficulties. As András Inotai and Peter Stanovnik pointed out:
“The repeated delays in privatization, the slow and selective inflow of foreign capital, the weaknesses in the banking sector, and the country’s high production costs compared with the Czech Republic, Hungary, Poland and Slovakia noticeably narrowed Slovenia’s competitive advantages in the second half of the 1990s.”
(András Inotai and Peter Stanovnik, “EU Membership: Rationale, Costs, and Benefits “, in: Mojmir Mrak, Matija Rojec and Carlos Silva-Jáuregui, “Slovenia – From Yugoslavia to the European Union”, World Bank, 2004, p. 355)
The World Bank noted in 1999 that – despite the disruption of trade flows and the wars in the Yugoslav successor states – Slovenia had moved quickly to establish macroeconomic stability and to launch a systemic transformation of the economy. This led to the highest per capita income level among transition countries:
“This good performance notwithstanding, Slovenia’s economy still suffers from persistent structural weaknesses. The large share of the State in the economy, the limited role of the financial sector in resource intermediation, and the low share of the private sector in manufacturing and infrastructure, have all resulted in lower growth relative to other leading economies in Central and Eastern Europe (CEE). The country’s public financed are coming under increasing pressure from high and rising social security expenditures, mainly pension and health expenditures as well as from relatively high public sector wage increases in the early years of the transition.”
(World Bank, Slovenia. Economic Transformation and EU Accession, Volume II: Main Report, 1999, p. 1)
Slovenia also stood out in its own way as it never concluded a stand-by arrangement with the IMF.
However, Slovenia developed very well. GDP per capita hovered around US$ 10,000 from 1995 to 2001. It rose to more than US$ 24,000 in 2006. Exports more than doubled in one decade and reached more than US$ 21 billion in 2006. Unemployment declined slowly but steadily from 14.5 percent in 1998 to below 10 percent in 2006.
Total public debt remained always under 30 percent in these years, at below half of the Eurozone limit of below 60 percent. The budget deficit could be kept since 2002 under the 3 percent target and since 2005 is well below 2 percent. With inflation below the target of 2.6 percent, Slovenia became the first of the new EU members from Central and Eastern Europe to join the Eurozone in 2007. (Source: Deutsche Bank Research)
- EC, Opinion on Slovenia’s application, 1997
- EC, Regular Report on Slovenia, 1998
- EC, Regular Report on Slovenia, 1999
- EC, Regular Report on Slovenia, 2000
- EC, Regular Report on Slovenia, 2001
- EC, Regular Report on Slovenia, 2002
- EC, Comprehensive Monitoring Report on Slovenia, 2003
- EC, Accession Partnership, 1999/2000
- EC, Accession Partnership, 2001/2002
- V. Bobek, J. Potocnik, V. Ravbar, M. Rojec, P. Stanovnik and F. Stiblar (eds.), Slovenia: The Strategy of International Economic Relations – From Associated to Full-fledged Membership in the EU, Ministry of Economic Relations and Development, 1996.
- Bojko Bucar and Irena Brinar, “Slovenia – Political Transformation and European Integration “, in: Anselm Skuhra (ed.), The Eastern Enlargement of the European Union. Efforts and Obstacles on the Way to Membership, Studienverlag, 2005, pp. 93-133.
- James Gow and Cathie Carmichael, Slovenia and the Slovenes. A Small State and the New Europe, Hurst, 2000.
- András Inotai and Peter Stanovnik, “EU Membership: Rationale, Costs, and Benefits “, in: Mojmir Mrak, Matija Rojec and Carlos Silva-Jáuregui (eds), Slovenia. From Yugoslavia to the European Union, World Bank, 2004, pp. 353-366.
- Joze Mencinger, “Transition to a National and a Market Economy: A Gradualist Approach “, in: Mojmir Mrak, Matija Rojec and Carlos Silva-Jáuregui (eds), Slovenia. From Yugoslavia to the European Union, World Bank, 2004, pp. 67-82.
- M. Mrak, M. Rojec and J. Potocnik, Slovenia: Strategy of the Republic of Slovenia for Accesssion to the European Union, Institute for Macroeconomic Analysis and Development, 1998.
- Ministry of Economic Affairs, Strategy for Increasing Competitiveness Capabilities of Slovenian Industry, 1996.
- Janez Potocnik and Jaime Garcia Lombardero, “Slovenia’s Road to Membership in the European Union “, in: Mojmir Mrak, Matija Rojec and Carlos Silva-Jáuregui (eds), Slovenia. From Yugoslavia to the European Union, World Bank, 2004, pp. 367-380.
- Janez Potocnik, Marjan Senjur and Franjo Stiblar, Approaching Europe – Growth, Competitiveness and Integration, Institute of Macroeconomic Analysis and Development, 1995.
- World Bank, Slovenia. Economic Transformation and EU Accession, Volume II: Main Report, 1999.