Accession strategy entails painful reform in Slovenia

Date: 30/10/1997

AS SLOVENIA debates its new EU accession strategy this week, few illusions persist over the structural pain which preparing for Union membership entails.

Assuming that its parliament eventually accepts Prime Minister Janez Drnovsek's proposals, Slovenia can look forward to some momentous upheavals in its tax regime, pensions system, financial sector, public utilities, pricing and company law.

“It will be painful,” admitted Dr Janez Potocnik from Slovenia's institute of macroeconomic analysis and development.

The question is whether Slovenians, and citizens of the other nine central and eastern European applicants for Union membership, will remain quite so enthusiastic about the EU when they realise how tight their belts may become over the next five years.

Although no strangers to the rigours of economic transition, the 100 million EU hopefuls still face rampant restructuring in areas which directly impinge on their everyday lives.

Liberal energy prices, capital-growth pension funds and foreign competition may be basic elements of a healthy European economy, but in the short term they spell more years of the economic pain which has already left the region's population exhausted.

Furthermore, if the applicants mean what they say about their hopes of EU membership by 2002, these reforms - which took most western European countries half a century to achieve - will have to be completed in a startlingly short period of time.

According to Potocnik, Slovenia expects to prepare, adopt and implement the lion's share of the EU acquis by the end of 2001, on the working assumption that it will join the Union the following year. Privately, however, he admits that this time-scale is extremely optimistic and sticking to it will be far from easy.

Over the coming years, price liberalisation and tax reforms could lead to dangerously high inflation, gross domestic product growth will be slowed and unemployment will rise.

As living standards drop - or at least do not rise in line with expectations - popular support for the changes could decline, with the EU finding itself a scapegoat for subsequent discontent.

To avert this scenario, Potocnik has already started a pre-emptive public relations campaign. “Even without joining the EU, our major steps would have to be the same,” he asserted. “I am doing everything I can to persuade people that this is not the fault of the Union.”

Delaying action, although less painful in the short term, could sentence Slovenia to more monetary restrictions, low profitability, sliding competitiveness and insufficient public funds, he warned.

Luckily, Slovenians do seem relatively pragmatic about the changes, counting themselves lucky to have escaped the Balkan tragedy.

Poles and Czechs may not be so willing, as evidenced by increasing anxiety among trade unions and rural communities.

That might explain why, although all have adopted at least some kind of EU membership strategy, many Union applicants have not gone nearly far enough, according to European Commission officials.

“We will be taking a good look at these strategies,” said one analyst. “We expect many of the candidates to do a lot more.”