We live in times that are as difficult for an individual as they are for a company. Less than a year ago we were hard pressed to decide which opportunity to follow up and which challenge to accept, and to what extent development and trade cycle would benefit from global conjunction. We didn‘t give much thought to the trappings of globalism, since everybody‘s standard of living was more or less improving.Then everything changed overnight.
Globalism overtook us by surprise. Manipulators had legally abused the financial system and the global idea to their utmost limits to generate unprecedented losses. Now the often state-subsidised survivors in the banking system seem to fear their own shadows.
In the real sector the problems emerged with some delay. After September 2008 the mutual distrust among banking institutions had shut down short- term lending between banks. The previously fast, daily, short- and long-term lending of surplus monies had created a frantic financial market with incredible turnovers. Then the reality of the economic crisis changed the factors that define the amount of monetary reserves a bank must have in relation to the loans it is able to grant.These factors have grown considerably.
As an entrepreneur I can intellectually follow the triggers and causes that led to the current situation. But as an individual I cannot and will not emotionally accept it, since in most companies the situation seems unchanged. In the real sector nobody has done anything that would warrant drastic measures! Still businesses are failing, people are getting laid off and tragedies are taking place.
Slovenia had a similar yet different banking problem in 1991. After our secession from Yugoslavia, in times of transitional depression, our banks had to be financially restored. It was a difficult yet manageable task. Due to global conjunction it was possible to replace the lost markets of Yugoslavia by western markets.
This time a financial restoration of Slovenian banks will not be necessary, since the Slovenian banking system is considered to be relatively stable. In contrast to foreign banking institutions the crisis did not hit our banks because of their risky stock market investments; the amount of “toxic papers“ in their portfolios was negligible. The problems of our banks appeared when the crisis spread from the financial to the real sector. Reduced production, sales, employment and the deterioration of the quality of credit-based bank claims have weakened Slovenian banks. These have turned to conservative credit policies to protect the interest of their capital, thus contributing to the global “credit cramp“. The consequences of this abrupt change in the financial system in the investment field are clear: builders cannot sell the apartments they had financed with loans which they are now unable to service.The costs of the loans are increasing with the interest rates; the exposure of the investors spreads to the banks. The former Slovenian Minister of Finance and ex governor of the Bank of Slovenia Mitja Gaspari believes that Slovenia, like all other countries that have faced the crisis, will not “break down“ under its consequences.
The situation is not rosy but it is certainly manageable, the first European signs of economic revival and growth are being reported in Germany and France. Looking at iC group and our company Elea iC d.o.o. I can say with pride and joy that we currently have enough orders to ensure job security for all our employees.
Still, continuous economic growth cannot bring a long-term solution, while corporate profits are being generated on financial markets and not in the real economy. Monetary interventions cannot work without reform of the banking and financial system. We do not need additional products, we need more jobs, co-natural production and consumption, a social state and a just distribution of wealth.