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