Slovenia: The End of a Success Story? When a Partial Reform Equilibrium Turns Bad

During the Great Recession, Slovenia recorded one of the worst economic performances within the EU. Such a decline is surprising as the country was the most stable among the post-socialist states. The article individuates the root cause for the downfall in protracted reform gradualism, which resulted in an inefficient privatisation process. This locked the country into a partial reform equilibrium' where economic elites extracted rents. Following accession to the EU, the unsustainable lending practices of state-owned banks to corporate organisations and the gridlock in policymaking pushed the country into an economic and political bad equilibrium'. Even though the Slovenian export sector proved to be surprisingly resilient, a massive debt overhang and a huge reform backlog are still weighing down on a healthy recovery.