US embassy cable - 04LJUBLJANA1061

UNCLAS  LJUBLJANA 001061 
 
SIPDIS 
 
 
DEPT FOR EUR/NCE, EUR/ERA, EB 
DEPT PLEASE PASS TO USTR/ERRION 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SAVICH 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, ELAB, PGOV, PINR, SI 
SUBJECT: COM MEETS BANK OF SLOVENIA GOVERNOR 
 
REF: LJUBLJANA 1047 
 
1.  (U) SUMMARY: Ambassador paid a courtesy call on Bank of 
Slovenia's (BOS) Governor Mitja Gaspari on 17 November. 
Gaspari, BOS Governor since 2001 and a former Minister of 
Finance, highlighted the stable macroeconomic position of 
Slovenia and was optimistic about the planned introduction 
of the Euro in 2007.  Gaspari expects the new government 
will maintain a good relationship with the BOS.  Commenting 
on the much talked about privatization of current state- 
owned firms, Gaspari stated that he thinks that Slovenia 
should encourage greater competition in sectors to be 
privatized prior to any sales of the state-owned stakes. 
Gaspari also confirmed that the BOS and Slovenia would 
welcome an American banking investment.  End summary. 
 
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Stable economy 
-------------- 
 
2.  (U) Gaspari pointed out that BOS's main objective is to 
keep a stable macroeconomic situation in Slovenia.  He 
proudly explained that the inflation rate has been dropping 
and the exchange rate is stable. (Note: Inflation in 2003 
was 5.6%; current expectations for 2004 show likely 
inflation of approximately 3.3%. End note.)  Gaspari 
highlighted the good relationship that the BOS enjoys with 
the outgoing Government of Slovenia (GOS) and hopes that 
this will continue when the new government takes over.  He 
stressed a need for a strong, coherent government to work on 
economic restructuring and to implement health and pension 
sector reforms. 
 
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Introduction of Euro 
-------------------- 
 
3.  (U) Gaspari expects successful completion of the ERM II 
probationary period and is optimistic that Slovenia should 
have no trouble adopting the Euro as its currency in early 
2007.  He noted that a failure in the next year to meet the 
Maastricht criteria for Euro introduction could postpone the 
project for many years.  When COM mentioned the weakening 
dollar, Gaspari commented that this has actually helped 
mitigate the impact of high oil prices.  On the other hand, 
he mentioned, Slovenian trade with the Euro zone may face 
competitive challenges in the long run because of a stronger 
Euro. (Note: Slovenia is heavily reliant on trade and nearly 
70% of its trade is with Europe. End note.) 
 
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Competition first, then privatization 
------------------------------------- 
 
4.  (U) There has been much written in the Slovene press of 
late about the privatization of state-owned industries, in 
particular telecom.  When COM asked Gaspari for his opinion 
on this, Gaspari mentioned that a more transparent and 
competitive environment is a precondition for further 
privatization of state property in sectors like 
telecommunications or energy.  Stating that privatization is 
not a `panacea', Gaspari commented that the real challenge 
for Slovenia is how to make the current state-owned sectors 
more competitive.  Pointing at bad experiences with 
privatization in Croatia and Hungary, Gaspari commented that 
Slovenia was lucky not to have been forced to privatize in a 
hurry because of the success and stability of the economy. 
Gaspari stated that while there is no particular need for 
the state to be involved in certain sectors of the economy, 
state property as such is not necessarily bad, referring to 
high state stakes in countries like Germany or Italy. 
Gaspari sees opportunities for new FDI in telecom as well as 
in the energy, transport and financial sectors.  He believes 
that Slovenia needs `appropriate' investors who are willing 
to bring in new technology. 
 
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U.S. Welcome 
------------ 
 
5.  (U) When COM asked Gaspari about his well-publicized 
visits with Citicorp in the U.S., Gaspari mentioned that he 
supported the idea of U.S. investors in the banking sector. 
Having met with high-ranking officials at Citicorp several 
times, Gaspari seemed eager to attract non-European 
investment.  He stated that he did not want Slovenia to be 
`dominated by institutions from neighboring countries'. 
 
(Note: Austrian and Italian banks are the largest foreign 
investors in the Slovene banking system. End note.)  Gaspari 
went on to say that he hoped Citicorp or another U.S. 
financial institution would look as seriously at Slovenia as 
they would at other Central European countries.  According 
to Gaspari, Citcorp is waiting for a project proposal from 
Slovenia.  Gaspari stated that this is something he would 
take up with the new government after they `settled in' to 
their new positions.  (Comment: In a related meeting, on 18 
November COM received a courtesy call from Marjan Kramar, 
president of Nova Ljubljanska Banka, the largest commercial 
bank in Slovenia.  Kramar commented that he has also met 
with Citicorp and has explored ideas for their participation 
in the Slovene market.  Kramar indicated that while Citicorp 
may not be interested in Slovenia specifically, he mentioned 
that there could possibly be some regional niche 
opportunities in the countries of the former Yugoslavia. End 
comment.) 
 
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Public-Private Partnerships 
--------------------------- 
 
6.  (U) Following on from a recent discussion withAndrej 
Bajuk, head of the New Slovenia Party (reftel), COM asked 
Gaspari about the possibility ofPublic-Private Partnerships 
(PPPs) in Slovenia. Gaspari lamented the lack of PPPs in 
Slovenia and mentioned that there should be some 
opportunitie for these types of ventures in the energy 
secto.  When COM commented that the European Bank for 
Reconstruction and Development (EBRD) was active i the 
Central European region and did quite a bit of work on PPPs, 
Gaspari appeared visibly frustraed.  Stating that the 
problem was `on our side',Gaspari mentioned that while 
there was a draft lw supporting PPPs, `too many lawyers' 
have caused the approval of the law to stall and that the 
law remained `on a shelf'.  Echoing Bajuk (reftel), Gaspari 
commented that the use of PPPs would help the government 
optimize use of the budget. 
 
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Comment 
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7.  (SBU) COM's first meeting with one of the critical 
players in the Slovene economy was a successful one. 
Gaspari, while naturally reserved,  is a good contact for 
post and has a favorable perception of the U.S.  Despite 
highlighting several times that the BOS is an independent 
institution, we expect Gaspari will work very closely with 
the new GOS.  While it is unclear how successful he may be 
in attracting foreign financial institutions to a market 
that other Slovene bankers have described as `overbanked', 
he is encouraging of foreign participation in the domestic 
market. 
 
ROBERTSON 
 
 
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