SLOVENIA: COM LUNCH WITH PM JANSA - THE REST OF

C O N F I D E N T I A L LJUBLJANA 000449

SIPDIS


DEPT FOR EUR/NCE, EB/CBA, EUR/ERA, INL

E.O. 12958: DECL: 06/29/2015
TAGS: PREL PGOV ECON SI
SUBJECT: SLOVENIA: COM LUNCH WITH PM JANSA - THE REST OF
THE STORY

REF: A. LJUBLJANA 438(NOTAL)


B. LJUBLJANA 439 (NOTAL)

Classified By: COM Thomas B. Robertson for Reasons 1.4 (b) and (d)


1. (C) Summary. COM met with Prime Minister Janez Jansa June

28. In addition to Slovenia's support for the NATO training
mission in Iraq (Ref A),they discussed a range of bilateral
issues including denationalization, which is moving more
slowly than hoped, but the current log jam should be broken
with some new legislation; privatization, also seemingly
going slower than expected, but Jansa made clear his
government is continuing to move forward; foreign direct
investment (FDI) which Jansa thought might improve with new
tax legislation to be introduced this Fall; corruption and
Jansa's plans to become more aggressive on the prosecution of
white-collar crime; the European Union and how to keep hope
alive for the potential Balkan members; commercial issues;
and Jansa's interest in an official visit to Washington. End
Summary.

--------------
MOVING ITEMS OFF THE AGENDA
--------------


2. (C) Pleased to finally be moving this issue off the
bilateral agenda, COM let Jansa know of his appreciation for
all the help MFA State Secretary Bozo Cerar and the Finance
Ministry lent to the Portal Monitor project and getting the
bilateral agreement signed and implementation underway. Jansa
acknowledged there were those in the MFA who had thought
Slovenia had to go to Brussels to seek permission, which he
said was the wrong thing to do if you thought you might get a
negative answer. Jansa stressed this was as much in
Slovenia's national interest as it was in any other
country's. (Comment: We have learned that the EC apparently
- and finally - recognized the limits of its influence and
capitulated by giving its blessing after the fact. This was
an excellent exercise for Slovenia in how to manage Brussels
when national security interests are at stake. We may
expect, if Jansa and his team exercise leadership, to see
more of this firm promotion of Slovenia's own interests in
Brussels. End Comment)


3. (C) COM also thanked Jansa for his support for improving
Embassy perimeter security. He emphasized (again) the key
role of MFA State Secretary Cerar and Minister of Interior
Dragan Mate in finally bringing this to closure. Jansa said
it had taken too long a time, and that they had had serious
problems with the City of Ljubljana in this regard,
commenting that the city government was weak, with lots of
disputes, and people focused on upcoming elections.

--------------
STILL ON THE AGENDA
--------------


4. (U) DENATIONALIZATION: Jansa acknowledged the
denationalization process was moving too slowly, quoting that
only 65% of the US cases had been solved while over 90% of
others were done. He said that the newly established
interagency group on denationalization had made changes that
should improve the situation (Ref B). Jansa indicated,
however, that the real problem was with the State Defender,
who was always circumventing the process and impeding cases
from reaching resolution. Jansa noted that GOS had proposed
new legislation to change the functioning of the State
Defender so that he could no longer be an obstacle, and said
he believed this legislation might even be passed in the
remaining summer session.

--------------
THE ECONOMY
--------------


5. (C) PRIVATIZATION: Jansa repeated that his government was
determined to cut back on the current 50% state ownership of
the economy, which he agreed was totally unacceptable. He
said he met resistance, however, from his coalition partner
the Slovene People's Party (SLS) to speeding up
privatization. He noted that supervisory board members
currently being replaced in state-run companies were those
whose terms had come to an end, and those selected to replace
them were competed, that is to say, appointments were not
based on political interests. As an example, he mentioned
major insurer Triglav, saying that they had replaced a
politician, a member of parliament, with a businessman who
had been selected because he was best qualified, and whom


Jansa didn't even know.


6. (C) Jansa commented that there was no denying that
politics had traditionally played a big part in business. As
an example, he said during the Mala Gora (WWII commemoration)
event in April, Petrol chairman Lotric had approached him and
asked what he should do about a number of his staff. Jansa
said he told him that it was his company and he should make
his own decisions about the staff. But, Jansa stressed, this
was clearly how it had always been done in the past.


7. (C) Interestingly, Jansa said that two years ago, the
LDS-led GOS had developed a list of companies to be
privatized but that it had taken no steps to create
implementing legislation or regulations, something this
government was now in the process of doing.


8. (SBU) FDI: COM repeated his interest in seeing more US
FDI in Slovenia, noting Sava Goodyear as a good model. COM
also noted that a US insurance company recently had been in
town to explore entering the market, and that while
regulators and other interlocutors had been polite and
helpful, there seemed to be no particular interest in seeing
a US company enter the market. Jansa noted that both Triglav
and Zavarovalnica Maribor (Slovene insurance companies) were
state owned companies, and state regulators had no interest
in outside competition. He added that while the market was
pretty well covered, the State would be selling minority
interest in both companies over time.

9, (SBU) FDI AND TAX LEGISLATION: Jansa said he believed that
foreign investors would be most responsive to changes in the
tax laws, and that his government is serious about
introducing new tax legislation this fall. It would have to
be budget neutral, and the first stage would probably be a
reduction of the number of different tax brackets. While he
did not think the flat tax was where Slovenia would go, he
said the Government was still talking to other governments
which have implemented the flat tax. If it appeared that
flat-tax was the right solution, the GOS might still do it.
He also emphasized the strong opposition of the unions and
other groups that meant that the flat tax would probably,
ultimately not survive politically.


10. (C) VEGA: On Western Wireless/Vega, Jansa said that the
dispute was now in the courts and would have to work its way
through. He said this was, as he had told COM before, not
what they had wanted to do. He stressed opposition from the
SLS (again) to moving on this. He said his team had thought
they might be able to split the difference between the
Mobitel and Vega bids, but to do that they would have to wait
until current Mobitel board members departed and were
replaced, and that if this were done in connection with a
"new deal" for VEGA, the GOS would suffer politically. COM
asked if the competition board came out with a ruling that
Mobitel had in fact been guilty of monopolistic price fixing,
whether that would provide an opening for the GOS to solve
the issue. Jansa said it would not.

--------------
CORRUPTION AND HOW BEST TO FIGHT IT
--------------


11. (U) Corruption and the GOS intention to go after more
white-collar crime has been in the news lately. A new
Supreme State Prosecutor, Barbara Brezigar (also a 2002
Presidential candidate) has recently been appointed with a
mandate to fight corruption. Jansa remarked that Slovenia is
a small country, and everyone knows everyone else, especially
among the elites. He said there is serious corruption in
Slovenia, but no prosecutor has ever brought a corruption
case to trial. Jansa believed that his pick for prosecutor
was the right person for the job.


12. (C) Slovenia also has a Commission for the Prevention of
Corruption which is headed by Drago Kos, an appointee of the
previous government and long-time nemesis of Jansa's. Kos
has recently been very vocal about fears that the Commission
might be shut down or unfunded - and he has taken his case to
the press. He has also appealed to the Embassy to weigh in
with the government. Jansa raised the issue of the
corruption Commission first with COM, saying he thought COM
would raise it otherwise. He made clear that he had real
problems with the Commission and its chairman Kos, especially
with his request for serious increases in budget allocations,
which were simply not possible. Jansa asked rhetorically why
Kos needed extra bodies for the Commission, when in fact the
Government felt that all asset disclosures should be made


public, and people could see them on the Internet. Jansa
complained that Kos was not pursuing the potentially big
cases, neither in his own government, since he was trying to
get funding from this government, nor in the past government.
Instead, Jansa claimed, Kos was focusing on small town
mayors and other small fry. At one point Jansa suggested the
Commission might be folded into the Parliament commission on
corruption (something we know Kos fears).


13. (C) COM explained the USG relationship with the
Commission through the Office of Government Ethics and
emphasized that we had played an important role in providing
the Commission with models for asset reporting and other
practices. COM additionally noted that the OECD and EU
groups concerned with corruption had been impressed by
Slovenia's leadership in this area. COM stressed the
important role of prevention that asset reporting and other
activities promoted by the Commission provided, and warned
that whatever steps the GOS might take, it should not "throw
the baby out with the bath water." As if to illustrate just
how deeply rooted the animosity between Jansa and Kos is,
Jansa asked if COM knew Kos's history. (Kos had been
intimately involved in the affair that forced Jansa to resign
as Defense Minister several years ago. All charges were
eventually dropped and Jansa exonerated a year later, but the
damage was done.) Jansa added that Kos had been a strong
opponent of NATO, and he handed COM a stack of articles
written by Kos opposing NATO and Slovenia's membership, and
making less than flattering comments about the United States.


14. (SBU) Comment: COM was left feeling that Jansa would be
looking to Barbara Brezigar for guidance on a general
approach to fighting corruption. COM also told Jansa he
would look for opportunities to provide prosecutors with
anti-corruption training. Jansa was grateful, saying
prosecutors really had no experience or training in this
field. End Comment.

--------------
THE EU - WHERE SLOVENIA FITS IN
--------------


15. (C) In responding to a question concerning the split
between concepts of Europe (France vs UK),Jansa said he felt
that there was a natural coalition between Great Britain and
the Scandinavian countries, suggesting that Slovenia found
its spot in that group. He mentioned discussions he had had
with the Hungarian Foreign Minister that day on ideas central
European countries may push within the EU, such as a shorter,
three year budget. COM asked whether they had discussed this
with the British and Jansa they had had discussions with
Blair's deputy for EU matters. Jansa said there would be a
Visegrad plus 2 (Slovenia and Austria) meeting of Prime
Ministers at the end of next week (week of July 4) where they
would try to gain support for this approach. Jansa mentioned
that it was critical for the EU budget to be settled in order
for the GOS to meet its own budget targets. He suggested
Luxembourg PM Juncker's penultimate plan was one that
appeared to match the GOS approach and needs. Jansa
expressed concern with inflation, and hence EURO
introduction, due to high oil prices. He said Slovenia would
likely have to build a new nuclear reactor. (Note: Twenty
percent of Slovene energy needs are currently met with
nuclear power. Any new reactor, Jansa indicated, would likely
be attached to current one in Krsko. End Note.)

-------------- -
RECONCILIATION AND JANSA/DRNOVSEK RELATIONSHIP
-------------- -


16. (C) When COM asked about Jansa's relationship with
President Drnovsek, Jansa said they had a "correct"
relationship, and that they met every week. COM complimented
Jansa on his speech at Mala Gora (WWII commemoration) in
April, and Drnovsek's at Teharje Memorial Park, June 11,
saying both seemed a serious attempt to work for
reconciliation amongst Slovenians. Jansa said that this was
something that needed to be done, that there never had been
any true reconciliation, and that it would take a long time.
COM noted that Stanovnik, president of the League of
Combatants (and former President of Slovenia 1988-90) and
former President Kucan had expressed reservations about his
speech; Jansa responded that a week later Stanovnik had
apologized when he saw how positive the general public
reaction had been to the speech.

--------------
VISIT TO WASHINGTON


--------------


17. (C) COM raised the Iraq issue (REF A) in the context of
preparing for an eventual Jansa visit to Washington. He said
it was very hard scheduling such a trip to which Jansa
responded with a modest chuckle saying he understood fully,
knowing how difficult it must be to find time in the
President's schedule, especially for a small country like
Slovenia. COM noted that we were looking at dates towards
the end of the year, and if a visit were to occur, we would
want to look for opportunities for him to speak while in
Washington, and perhaps to take a trip outside of Washington
to Cleveland or another Slovene-American stronghold. Jansa
said he regretted he had never been to Cleveland and made
clear he would like to do that. Jansa also commented that
he was considering a trip to Washington in mid-July for the
International Democratic Union meeting July 17-18. He said
that if he went, it would be as SDS party leader and not as
Prime Minister. He said he understood President Bush would
address the group.

--------------
COMMENT
--------------


18. (C) As in previous meetings, Jansa was very relaxed and
confident in his quiet way. Again, he had clearly studied
his brief. On Kos, he was not defensive, but clearly felt
that the anti-corruption fight had to be fought differently.
He clearly doesn't think Kos is the right guy for the job,
and this is certainly tied up in the history between the two.
While the Prime Minister was not big on the corruption
Commission, he was clearly taken with the need to go after
real corruption, and Brezigar seems to be his ace to pursue
that.
ROBERTSON


NNNN

2005LJUBLJ00449 - Classification: CONFIDENTIAL



v1.6.2