Is Slovenia the Next Cyprus? Another failed socialist state? We shall see.

It appears now that Slovenia is yet another EU nation in financial crisis. Another one out of the blue it seems. The “Organisation for Economic Co-operation and Development (OECD) warned that Slovenia was about to experience a “severe banking crisis” and a very deep recession.” earlier this month. They also said that although it’s government was implementing financial reforms, the country’s position was “not yet sustainable.”

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Slovenian officials insist that no one should panic and that they are not the next to fall. “We are absolutely no Cyprus,” says new Slovenian Prime Minister Alenka Bratusek. “We don’t need help. All we need is time.”

At the core of this crisis are the state-run banks which control about 60% of the nation’s banking sector. Apparently, these banks have been on a lending spree for years, making unprofitable loans. Many of its loans have been to businesses that have now collapsed or have huge debts.

However, if one reads between the lines and looks a bit more closely, there are some other factors not being highlighted. As the Yahoo article pointed out:

“Bank officials say that despite fears of a financial sector collapse, there has been no rush on banks to pull out cash from private saving accounts. That is primarily because Slovenes — despite a recent spate of anti-government protests — traditionally trust their state, which has provided them in the past with good welfare and standards of living.”

Hmmm…..sounds like a bit of a socialist model going on there now doesn’t it? Their state has provided them with a good welfare and standards of living? How did they do that I wonder?

There are only 2 ways I can think of:

1. Using taxes

2. Generating money from nothing through the use of a central bank which fuels inflation, generates economic bubbles and hides the tax which is the depreciation of the currency through inflation.

My guess is that the 2nd way being the less obvious is the choice. The fact that state run banks comprise the majority of the banking sector would additionally point to technique number 2 as the better choice.

We shall see what happens next but this looks like it might be shaping up to be yet another case of the failure of socialism.

The bigger questions are however, if this continues in the EU, and it appears that it will, how does that bode for the United States? If the EU falls, what kind of impact will that series of events have here? Don’t think it could be anything but bad. Time will tell.

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