Political novice bids to lead Slovenia recovery

By Marja Novak LJUBLJANA (Reuters) - Slovenians look likely to hand power on Sunday to a center-left political novice hostile to the big-ticket privatizations that the country's European partners see as central to fixing its finances long term. If his party wins the election, Miro Cerar will form Slovenia's fourth government since the 2008 onset of a crisis that has torn up the country's reputation as the best-performing new European Union members. The former communist state narrowly avoided having to seek an international bailout for its banks late last year, but investors are nervous over the fate of a package of measures agreed by the outgoing government and Brussels, particularly the sale of big state enterprises. Cerar created his Party of Miro Cerar (SMC) barely six weeks ago and has shot to the top of opinion polls among voters looking for someone new and untarnished by the corruption scandals that have dogged the mainstream parties. The 50-year-old law professor, who worked as an adviser to parliament, owes much of his celebrity to his Olympian gymnast father, one of the greatest sportsmen this country of 2 million people has ever produced, and his late mother, a prominent state prosecutor, politician and cabinet minister. If the polls are correct, Cerar will defeat the main opposition party, the center-right Slovenian Democratic Party (SDS), whose leader, Janez Jansa, was jailed last month for two years for graft. Cerar is expected to turn to at least two smaller parties to form a coalition government - the Social Democrats (SD) and the Desus pensioners' party, both part of the outgoing center-left coalition of Prime Minister Alenka Bratusek. Both those parties were reluctant recruits to the toughest of Bratusek's crisis measures, particularly privatization. Bratusek faces a fight to cross the 4-percent threshold to enter parliament, testimony to the hostility her proposed spending cuts and state sell-offs stirred among traditional leftist Slovenians. Bratusek resigned in May, having lost the leadership of her party, and called a halt last week to all privatizations pending the formation of a new government, which is unlikely before mid-September. "MUDDLE THROUGH" Cerar says he supports a plan to cut Slovenia's budget deficit to three percent of national output by the end of next year, to cut red tape, liberalize the economy and reduce the state's roughly 50-percent stake in the economy. But he has told Reuters he will oppose the sale of companies deemed strategic to the country, among them telecoms operator Telekom Slovenia and airport Aerodrom Ljubljana. He says he will support the sale of No. 2 bank Nova KBM, due later this year. "Given that the most likely electoral outcome will involve a coalition comprised of leftist parties ... the next government will continue to muddle through without dealing with the true underlying problems facing the Slovenian economy," said Egon Zakrajsek, a Slovenian economist at the U.S. Federal Reserve System, stressing that he was speaking on his own behalf. State meddling in the economy, particularly through big state banks, was at the heart of a crisis triggered when Slovenia's vital exports hit a wall with the onset of the global economic downturn. Bad loans soared, exposing years of reckless lending and an economic model that had largely avoided the kind of mass privatization pursued by others in Eastern Europe with the end of the Cold War. In December 2013, Bratusek's government poured 3.3 billion euros into the banking system to keep it afloat and avoided becoming the latest member of the 17-nation euro zone to seek a bailout from the European Union and International Monetary Fund. The 35-billion euro economy has already covered its financial needs for this year and part of 2015 by issuing bonds in the total value of 4.5 billion euros earlier in 2014. But a long-term fix is far from assured. The political uncertainty has seen Slovenia's 10-year borrowing costs tick up to six-week highs. Bank worker Alenka Premc, 51, said she would vote for Cerar: "Though there are no guarantees it will change things for the better, at least that party, for now, is not corrupt like the others." (Editing by Matt Robinson and Louise Heavens)