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Slovenia and the Green Parrot

Posted on the 12 April 2013 by Charlescrawford @charlescrawford

Back in Belgrade in communist Yugoslavia in 1984 or thereabouts, the then Ambassador and an unusually smart Ist Sec Econ pored over a diplomatic despatch that sought to draw attention to the dismal state of the state's finances.

The basic problem was that Yugoslavia did not have Honest Money. Yes, dinars sloshed through the economy and you could buy things with dinars. But the intellectual underpinning of a successful currency was not there.

One particularly big problem was that under the so-called Yugoslav socialist self-management system responsibility for anything in particular was dispersed to the point of vanishing completely. This meant that what looked like normal banks were 'really' extensions of the enterprises that had parked their money in these organisations. So when a bank lent an enterprise a lump of dinars to (say) build a new factory, in effect the enterprise was lending money to itself on its own terms.

This in turn meant that there was no real business distance between a bank and the borrower to check how far a new investment might or might not be commercially viable. So loans could accumulate to finance stupid projects for the aggrandisement of enterprise bosses and their political sponsors backed by ... not much.

Add to all this intrigue the untransparent and corrupt ethno-political machinations between the different republic leaders, and there was everything needed for a complete fiasco. As duly occurred.

Thus the Ambassador finally sent his long and of course prescient report back to London. He warned that accelerating economic crises in Yugoslavia might lead to dangerous political tensions in this plucky post-Tito country that presented itself to a naive FCO as 'a pillar of stability in the Balkans' haha. To make it readable he made a reference in the title and text to the Green Parrot game (where you look at a complicated picture and try to find a green parrot hidden in it). The idea was that there was a lot more to the Yugo-banking scene than met the immediate eye.

This droll drafting duly amused the FCO mandarins, but did nothing  to change their complacency about the prospects for Yugoslavia. What could go seriously wrong there? Nothing! Everyone knew that the place was a "pillar of stability in the Balkans"! Gad, sir, the FCO's own briefing said so!

Multifarious ruinously expensive catastrophes later, we know just how wrong they were.

Meanwhile back in 2013 Slovenia (now a full EU member and general EU goody-twoshoes) we see the Financial Times scrutinising the unfolding Slovenian banking crisis in terms that seem oddly familiar (my emphasis - link may be paywalled):

Just as in the Cypriot case, Slovenia’s troubles originate in its wobbling banking sector. The former communist country never fully privatised its lenders. These took excessive risks and gave preferential treatment to other state-owned companies. The recession exposed the limits of the cosy ties between politics and banking. Non-performing loans have jumped to 14 per cent of the banks’ portfolios, or about €7bn.

That pesky Yugoslav/Commy Green Parrot. It just never flies away.

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