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EBRD Head: Slovenia Can Solve Issues On Its Own (interview)

Bled, 03 September (STA) - Slovenia has achieved a lot in the past 20 years, and now it is crucial that it returns to the path of prosperity, President of the European Bank for Reconstruction and Development (EBRD) Suma Chakrabarti told the STA on the sidelines of the Bled Strategic Forum on Sunday.

"Slovenia has achieved a lot - let's not forget that. It is too easy to forget the progress Slovenia made over 20 years, which is faster and better than many other countries. So the crucial thing is to get back on that path of prosperity," Chakrabarti said. He is confident that Slovenia is "able to solve these issues on its own", without external help.

The EBRD president praised the government's attempts to get the budget deficit down to about 3% of GDP. "That's a big cut, frankly, but it was necessary," he said, adding that Slovenia's public debt grew very fast, from 20% of GDP to almost 50% in the past four years. "That's too fast."

Slovenia must now adopt an important decision, Chakrabarti believes. "Does it really believe in the private sector as the engine of growth in the economy, or does it believe the state is the biggest engine in the economy."

"I think this is a decision that has been postponed for too long, but it seems to me that Slovenia is now decided that through reforms, the private sector is going to play a much bigger role, and I think that's the right decision."

The EBRD head also stressed Slovenia must fix its banking sector, where there are also important opportunities for the private sector to play a role, provided the state is willing to decrease significantly its stake in the banks.

It is absolutely necessary, however, that this time the state is serious about selling its stakes in banks. "If I was a private investor, I would need confidence that this time, the government really means it. Because we've been here before with Slovenia...and this time (the government) really has to do it."

Asked about the argument of "national interest", Chakrabarti stressed that the argument fails to work on the long term. "You miss out on innovation, creativity, that comes through interaction with other countries and other firms...That sort of economic nationalism is very outdated now," he said.

"But it's good that the debate is happening in Slovenia now," he added.

The EBRD expects the Slovenian economy to shrink by 2% this year and by another 1.4% in 2013 in what is the most pessimistic forecast among foreign and domestic institutions. Chakrabarti believes it is important that Slovenia gets ready for 2014.

It is still 18 months until then and the Slovenian economy should have recovered by that time, the EBRD head believes. But it will only recover if reforms are adopted now, he added.

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