STA, 9 October 2019 - After issuing a set of recommendations last November to warn against imprudent consumer lending practices, Banka Slovenije moved from recommendations to formal restrictions on Wednesday while also further stiffening conditions. "This is also to let the public know where the limits of healthy borrowing lie," Deputy Governor Primož Dolenc said.
The restrictions, which will become effective in November, include maximum 84-month maturity for consumer loans, down from 120 months recommended last year.
Banks will moreover for the most part have to keep loan-to-value ratios (loan payments relative to the client's annual income) to below 50% for clients with monthly income of up to twice the gross minimum wage and below 67% for those making more than that.
What is more, the borrower will have to be left with at least 76% of the gross minimum wage after paying the monthly instalment or more if they have a dependant family member, the head of the central bank's department for financial stability and macro-prudential policy, Tomaž Košak, told the press.
The same loan-to-value ratios will also become obligatory for housing loans. Remaining only a recommendation to banks is that the ratio between the value of a loan and the value of the housing assets used to insure it should not exceed 80%.
Notably, certain derogations will also apply. Up to 15% of the newly granted consumer loans will be allowed to have a maturity of up to 120 months, and up to 10% of consumer as well as housing loans will not be constricted by the loan-to-value ratio pertaining to annual income.
Explaining the decision, Dolenc said the central bank had established that the risks related to these loans were not decreasing despite the recommendations issued last November.
"The annual growth rates remain high, in double-digit territory," Dolenc said, while Košak noted that the average value of a consumer loan increased by EUR 2,000 and stands at EUR 8,000.
The decision to move from recommendations to binding restrictions came as Banka Slovenije discovered that almost a quarter of the total value of loans approved digressed from the recommendations.
Dolenc said credit growth in Slovenia was comparable to the average in the eurozone, but he warned that it was distributed unequally among the segments.
It has stabilised at 5% for housing loans in recent years, which the deputy governor labelled sustainable and appropriate, growth in loans to companies remains under 5%, meaning low but stable, while it stood at a very high 11.7% in August year-on-year for consumer loans to amount to EUR 2.9 billion.
Dolenc said the goal is to keep the growth of these loans on a par with trends in other areas. GDP growth is at roughly 3%, unemployment is at a historic low with a negative turn expected sooner or later, while double-digit growth is recorded for consumer loans along with the trend of ever longer maturity. "The problem is not people's debt levels, but the trend in this field," he added.
The measures will negatively affect the profitability of banks in the short-term, but the central bank expects the long-term effect to be positive for banks as well.
Meanwhile, the measures were rejected today the Slovenian Bank Association as too restrictive, arguing they "could hurt the socially most vulnerable segments of the population and cause major economic damage".
The association claims the new measures will encourage these segments to seek loans outside of the regulated banking system and face unfavourable credit conditions along with problematic loan recovery methods.
It highlighted the regular loan repayment habits of people in Slovenia, who are moreover among the least indebted in Europe while also having a lot of savings.
Also, comparable restrictive measures have only been adopted by three EU member states, the association said in a press release.
It called for a structured, professional and broad debate on the actual effects of the announced measures on individual segments of the population and on the economy, stressing economic growth was increasing based on private consumption, so the measures could have an extremely pro-cyclical effect.
STA, 8 October 2019 - Fortenova, the successor of the bankrupt Croatian food conglomerate Agrokor, is devising a secret plan to slash up the Slovenian retail group Mercator into parts and take control of the cash flows between the core company and its subsidiaries in Croatia, Serbia and Bosnia, the news web portal Siol reports.
Siol says that several sources have confirmed the plan is in the making, while Fortenova would not respond to the portal's questions. Fortenova would not need the consent of Mercator's creditors for the plan because their loans pertain to the core company in Ljubljana.
In its response for Siol, Mercator merely noted its role as the largest grocer in Slovenia and in the region and as such a platform for the long-term development of regional suppliers. "A successful financial and operational renewal of Mercator is what we believe the new owner will appreciate in all future decisions," the company is quoted as saying.
Siol says that Mercator's division into parts by countries would mean its irreversible folding into the concern Fortenova, which would assume control over Mercator Group's cash flows. The move would also undermine the position of Slovenian suppliers.
According to Siol, Mercator representatives have not been involved in the making of the plan, the ground for which started being prepared in the autumn when a taskforce started looking for synergies between the companies of former Agrokor.
The plan was given a new impetuous when the ownership of Fortenova passed into the hands of international banks and financial funds. Its biggest owner is the Russian state-owned bank Sberbank, whose sole interest is that it gets repaid a EUR 1.1 billion loan.
The debt's repayment depends on the financial sustainability of Fortenova, which in turn depends on Mercator. Without Mercator's cash flow, the financial architecture of Fortenova would collapse, and so would the Russian bankers' calculations, Siol writes.
Mercator remains in Agrokor's ownership as all creditor banks as well as the regulator need to give their go ahead for the retailer's transfer to Fortenova. The banks NLB and Abanka are said to have given their consent, while Siol's information indicates that the state-owned SID Banka and Bank Asset Management Company are not planning to give theirs for the time being.
Fortenova notified the European Commission of its Mercator concentration plan for Slovenia and Croatia in August. While the Slovenian competition watchdog has decided not to re-examine broader implications of the concentration, the Serbian market regulator did opt to do so at the end of last week.
STA, 8 October 2019 - Adria Airways, a German-owned Slovenian airline in receivership since last week, ended 2018 with a net loss of EUR 18.6 million, up from EUR 5.4 million in 2017, shows the audited financial statement, which was released on Monday.
The air carrier's operating loss amounted to over EUR 16 million, up from EUR 3.3 million in 2017, with its negative working capital standing at EUR 14.2 million.
The airline's revenue, on the other hand, increased by 12.5% to EUR 179 million, of which the revenue from passengers rose by 1.5% to EUR 149 million.
By leasing its planes and flight crews to other airlines, Adria generated more than EUR 17 million in 2018, says the business report, which official receiver Janez Pustatičnik posted on the website of the AJPES agency yesterday.
The company attributed the loss to growing fuel prices (EUR 7.7 million) and to the cost of hiring planes with flight crews (EUR 5.5 million).
And while Adria carried 1.23 million passengers in 2018, up 1.5%, its occupancy seat rate dropped by 3.7 percentage points to 64%.
The financial statement also shows the company had 503 employees at the end of last year, a rise of almost 27% over the year before.
The auditor PwC gave the financial statement a qualified opinion because of Adria's manoeuvre with selling its brand in 2016 and then acquiring it back in 2018.
The auditor said Adria had actually never really lost control of its brand, so its sale was in fact presented in its books inappropriately.
The financial statement, which Adria had failed to release within the set deadline, was supposed to serve as the basis for Slovenia's Civil Aviation Agency to decide on whether the airline should keep its operating licence.
However, before the expiration of the deadline to submit it to the agency, Adria filed for receivership on 30 September, thus automatically losing the operating licence.
All our stories on Adria are here
STA, 7 October 2019 The official receiver of Adria Airways started serving notices of job termination to the airline's employees on Monday while pilots and cabin staff are reported to be interviewed with potential new employers.
The official receiver, Janez Pustatičnik told the STA on Monday that he started serving notices today, but he could not say when all of the 558 airline's employees would receive them.
Some of the staff are currently abroad, these will get termination notices by post, said Pustatičnik, who held first meetings with the employees on Wednesday, as the Kranj District Court ordered receivership for the company.
Those of the redundant workers who would like to claim unemployment benefit, need to register with the Employment Service and ask for the benefit within 30 days.
Those who register within three days after the expiry of the notice period, will be eligible for an allowance equalling 80% of the average of their salaries and the others to 60% of the average.
The receiver expects to be able to assess the scope and the duration of the receivership procedure by the time he compiles an opening report when the amount of registered claims, the size of the bankruptcy estate and a detailed state of the company's finances are clear.
The receivership was started at the request of the management of the German-owned carrier due to insolvency after the government declined its calls for aid. Unofficially, the company ran up EUR 90 million in debt.
Citing unofficial sources, the newspaper Finance reports that the Polish flag carrier LOT has conducted job interviews with Adria pilots, while cabin staff have received offers for jobs from Wizz Air, the Hungarian low-cost carrier.
According to Finance, LOT is looking for at least ten pilots for smaller aircraft, which suits Adria pilots well-being that they are licensed to fly Canadair aircraft, now rarely used planes worldwide.
Some of Adria Airways' major links have been taken over by foreign airlines, while the government has proposed legislative amendments that would make it possible to subsidise commercially unpopular links.
Speculation is also rife about potential incorporation of a new air carrier. Some media have been reporting that a foreign airline might step in and employ at least part of Adria staff.
All our stories on Adria are here
Local media are reporting that the government is considering setting up Air Slovenia, a new national carrier. This would take the place of Adria Airways, the former national airline that was sold to a Luxembourg-based investment company, “4k Invest”, in 2016, and is now in the early stages of bankruptcy proceedings, with all flights cancelled.
Air Slovenia was proposed by Zdravko Počivalšek, the Minister for Economic Development and Technology, as establishing a new company would enable the government to provide subsidies for the carrier. While nothing is certain yet, the Minister claimed that the new national airline could launch services at the end of February 2020, with a ten to twelve aircraft and a schedule serving fifteen destinations.
All our stories on Adria are here
STA, 3 October 2019 - Local and global companies are becoming increasingly intertwined and interdependent, which brings many benefits to both, heard a debate on day two of the Slovenia Business Bridge investment and development conference, hosted by AmCham Slovenia to mark its 20th anniversary.
Collaboration with local companies enables multinationals to better identify the wishes and needs of their clients, agreed the participants of Why Are Multinationals also Local Companies? discussion.
Biljana Weber from Microsoft said that smallness could bring flexibility, responsiveness and agility.
"If you come from a small country, you're more open to learn new things and you find it easier to create a social network," she said, adding that ever more large companies would like to present themselves as local businesses.
Gregor Pilgram from Generali CEE Holding said the insurance industry was a sector which could not do without integrating the multinational and local sectors.
"Regardless of an insurance company being part of global networks, insurance business is always a local business," he stressed.
The key to every business is understanding clients. "And who would understand them better than somebody who lives with them," said Pilgram.
Similarly, John Denhof, chairman of the NKBM bank board, said a way to success was a good team.
"We took an important step towards being more successful by giving more focus on understanding the needs of clients in drawing up our business strategy.
"Of course, it was crucial to find the right staff who knew how to get immersed into the needs and expectations of clients and adjust our services to them," he said.
The debate also revolved around small companies having trouble arousing the interest of large companies.
Weber said part of the problem was how to present a good solution to an investor in a simple manner so that everybody would understand it.
Panagiotis Alekos, director general of Bayer Slovenija, said small companies could be interesting to large ones for their talents.
Another focus of the debate was the need not to be afraid of mistakes, but to take take them as part of a way to find a solution.
"The problem is not the lack of innovation but the fear of mistakes. Mistakes used to be a taboo, but today we must understand them as part of the way to success," said Alekos.
Denhof added that it sometimes took testing ten ideas before finding the right one. "There's nothing wrong with this. We should not be afraid of failure," he said.
All our stories on AmCham Slovenia are here
STA, 3 October 2019 - The government has endorsed changes to the aviation act that create a legal basis for the state to subsidise crucial air links with the country following the collapse of flag carrier Adria Airways, if this proves necessary.
In line with the proposed changes, the state could subsidise flight connections with Ljubljana if other airlines did not set up commercial flights.
The changes had been drawn up by the Infrastructure Ministry as Adria was heading for receivership.
This is one of the two possible steps the state can take in the aftermath of Adria's collapse. The other is to found a new air carrier.
Finance Minister Andrej Bertoncelj said after Thursday's session that Slovenian Sovereign Holding and the Bank Asset Management Company had been tasked with calculating the potential costs of each solution.
The option of setting up a new company was not discussed by the cabinet today.
In line with the proposed changes, subsidies would be possible for connections that are of vital importance for the country in terms of economic and social development. State intervention in such cases is also allowed under the EU legislation.
But Betroncelj added the legislative proposal was yet to be coordinated with the European Commission. A decree will need to be passed and a call for applications published to create equal opportunities for all, he noted.
The Infrastructure Ministry would be able to launch a procedure to set up an "obligatory public service" if no air carrier with a licence of an EU member state offered connections that are important for Slovenia for economic reasons.
The necessary funds would be provided by the government. The ministry could not provide an estimation of potential costs of this service yet. "We have no way of knowing which routes will not be covered by the market itself," Infrastructure Minister Alenka Bratušek told the press.
She would like the legislative motion to be pushed through parliament, so that the state can act if necessary. Bratušek said she had also proposed to coalition partners to consider supporting connections with Maribor, Slovenia's second largest city.
For now it seems that the Ljubljana airport operator, Fraport Slovenija, will manage to restore some of the crucial connections with Ljubljana.
The German Lufthansa and its subsidiary Swiss International Airlines, both of which are members of the Star Alliance, will be offering flights connecting Ljubljana to Frankfurt, Munich and Zurich, in the winter season.
The Belgian air carrier Brussels Airlines, also part of Lufthansa Group, is introducing six Brussels-Ljubljana flights a week.
Bratušek welcomed these solutions, saying she would be particularly pleased if the ticket prices will indeed be lower than Adria's.
Receivership proceedings for Adria Airways was officially launched yesterday, with unofficial information indicating the company's debt amounts to EUR 90 million.
Adria has not published its 2018 business report yet, but a document obtained by the newspaper Finance suggests that at the end of last year its long- and short-term liabilities reached EUR 21.5 million and EUR 54.6 million, respectively.
In the nine months of this year, the liabilities allegedly rose by another EUR 20 million to EUR 90 million.
Receiver Janez Pustatičnik said today that contracts for Adria's hired planes had already been cancelled. "If any real opportunity arose for continuing any potentially profitable segment, so that this would increase bankruptcy estate, we will look into it and act in line with the law."
He expects the situation to be assessed in the coming weeks. The amount of claims, which creditors can file within the next three months, will be revealed in the opening report, he said.
All our stories on Adria are here
STA, 3 October 2019 - The government confirmed on Thursday a package of tax tweaks that are meant to reduce taxes on labour to increase competitiveness. The list includes increased general tax credit and changes to the income tax brackets to reduce the tax burden on the middle class. On the other hand, the taxation of capital gains and rental income is to rise slightly.
The changes, which the government wants passed in fast-track procedure so they can enter into force with the start of 2020, affect laws on personal income tax, corporate income tax and on tax on profit from disposal of derivatives.
Speaking of a "new step towards tax optimisation", the government said that the "proposed measure will additionally reduce the burdens on labour, whereby we are strengthening competitiveness, preserving a stable economy and contributing to sustainable economic growth".
In general, the changes are designed to increase take-home pay, which will be achieved with a higher general tax credit that all taxpayers are entitled to, by EUR 200 to EUR 3,500.
In an effort to reduce the tax burden on the middle class, the tax rate will fall by one percentage point both in the second and third brackets, to 26% and 33%, respectively.
STA, 3 October 2019 - The new custom duties the US is set to impose on products from the EU on 18 October will not affect Slovenia, neither directly nor indirectly, according to the analytical department of the Chamber of Commerce and Industry (GZS).
What is more, because some of the duties will apply only to some member states, cheese, olives and pork from Slovenia might become more attractive for the US, the GZS said in a commentary on Thursday. Duties on these products will be imposed for Germany, Spain and the UK.
The GZS said the move was expected but added it was surprised by the swiftness with which the duties were being introduced.
In total, the products subjected to the increase in customs are valued at EUR 7.5 billion. The move was expected after the World Trade Organisation (WTO) found that Airbus received unjustified state subsidies.
Europe is likely to impose counter-measures and the WTO is likely to find that Boeing, as well, received unjustified subsidies from the US.
STA, 2 October 2019 - The outright stake in the operator of the Izola Marina (Marina v Izoli) has been put on sale, with the official receiver of its owner setting the asking price at EUR 5.96 million and accepting bids until 4 December.
The announcement by Maura Chiarot, the receiver in the company Universe Service, which controls Marina Izola through the subsidiaries Porting and Marinves, was publishes on Wednesday in the newspapers Finance and Primorske Novice.
Bids will be accepted until 4 December, and the potential selection of the best bidder will take place on the following day in Italy's Pordenone, where the receivership proceedings for Universe Service are being conducted.
The Izola Marina, which has a total of 700 berths and is mostly used by sailors paying the annual fee, has been on sale for some time.
Primorske Novice recently reported that the interested buyers include the Polič family from nearby Lucija and Ante Guberac, the chairman of the Koper-based construction company Grafist.
Either way, in addition to the asking price, the buyer will also need to pay an approximate amount to the Italian bank Intesa Sanpaolo to pay back a loan dating back from the construction of the marina and other liabilities.
The marina's website is here
STA, 2 October 2019 - The Constitutional Court has ruled in a close vote that the retirement and disability pension act is not unconstitutional in the part that prevents sole proprietors from receiving full pension if they decide to continue working after reaching retirement age.
The top court, which received the review request from the Ljubljana Labour and Social Court, said on Wednesday that intergenerational fairness, equality and financial sustainability took precedence over the interests of sole proprietors.
It ruled that the constitutional right to pension does not ensure that individuals receive old-age pension when they do not give up working. The Constitution guarantees the right to a pension to individuals who have paid their contributions if they also meet all other reasonable conditions.
It is reasonable to make full pension conditional on giving up work, considering the benefits pursued, said the court, which decided in a 4 to 5 vote that the act was not in violation of the constitutional right to social security. Two judges also submitted dissenting opinions.
Meanwhile, the court was unanimous in its decision that the act was not in contradiction of the constitutional principle of equality, comparing other groups who may also continue working after reaching retirement age.
It also said that the act followed the principle of protection of legitimate expectations and was not in conflict with the right to free economic incentive.
The court also said that there are a number of reasons why sole proprietors decide to either continue work or retire, adding that it was not the legislature's intention to encourage sole proprietors to stop working and also could not have foreseen such decisions being made.
Sole proprietors, who continue working have to give up up to 80% of their pension. Meanwhile, legislative changes are in the pipelines that would decrease this figure to 50%.
The Chamber of Crafts and Small Business (OZS) responded by stressing the decision had been made in a close vote and that dissenting opinions showed that the existing rules were neither appropriate nor just.
The OZS has been striving for Slovenia to introduce double status of pensioners who want to continue working, a solution that would enable them to receive full pension.
The chamber agrees with judge Etelka Korpič Horvat, who said in her dissenting opinion that double status would be beneficial for everybody. Retired proprietors would be able to continue working and would also contribute to the pension and health insurance purses.
"It is also far from insignificant that double status eliminates the poverty of those with low pensions. Double status strengthens the value of labour without preventing the young generations from working," the OZS quotes Korpič-Horvat's opinion.
The chamber also expressed the belief that the decision and the dissenting opinions would convey to the National Assembly that it could introduce a double system that would be much fairer and more reasonable than the existing provisions.