The Republic ofSlovenia believes that The Financial and Economic Crisis finds its origins inthe third financial quarter of 2007 within the United States. The Euro Bankattributes it to the aggregate recklessness of Wall Street in its lack ofregulation in the classification of risk affinitive items in what was presumedto be safely bundled CDO’s – especially to those concerning housing, Alt-A andsubprime mortgages. This created fundamentally misleading data with margins oferrors of 30% atleast that was saturated on all financial modelling platforms- generating myriad fallacies that directed investments in what were perceivedto be ‘potentially profitable’ zones, whilst actually fueling a repercussion inthe form of the subprime mortgage crisis of 2007. Policies of CommunityReinvestment Acts (CRA), Low Interest Rates and Predatory Lending – to increaseloan-extraction-affordability to subprime-income earners were accentuated bypre-existing credit-default swaps that were intended as insurance for mortgage-backedsecurities, spurring the expansion of the housing bubble, until the’bubble-burst’ of the entire financial basket in the global financial tradingsectors. The burstcreated a chain of events (which still propagates today) where several internationalbanks that domineer the Global Banking System – declared bankruptcy, and thesurviving banks continue to circulate toxic financial instruments to theircounterparts in the Eurozone and East Asia, who had been purchasing illiquidand insolvent mortgages from American and British Banks – essentially dumpingworthless and toxic equities – in the values of billions that possessed noconsumer confidence – into their national reserves creating a banking crisis.
This began with the nationalization of Freddie Mac and Fannie May, followed bythe declaration of Bankruptcy of Lehman Brothers. The bankingcrisis catalyzed the widespread, abrupt and systematic supply-side collapse inthe global economy (excluding countries that dealt in exports backed by other countriesas third parties, ex. Australia, Canada – which were unscathed by the crisis,etc.) as investment-based consumer confidence shattered. The imminent crash ofthe Global Financial system is exemplified in the systemic banking collapse ofIceland – causing a record shattering depreciation in the value of the Kronaand bankrupting the three different commercial banks. So far, Policies ofinjecting financial capital and purchasing toxic assets from banks (In theTroubled Asset Relief Program-2008 (TARP) policy) in a currently seeminglyambiguous effort to liquidize and stimulate national economic activity, hasshown no signs of recovery beyond the absolute absorption of toxic assets frombanks, though more empirical evidence is needed to show that the policy issuccessful. The data should indicate an increasing potential correlation withthe variables of consumer confidence and level of injected finance. All affectedcountries are finding themselves lost in a deflationary spiral ofcapital-poisoning; the wages decrease with employment rates, creating aself-reinforcing decline as global consumption drastically decreases.
Banks areusing their injected capital to pay off existing debts rather than taking onnew debts, causing new problems. The Global Financial System now stands on the’brink of a precipice’ and The Republic of Slovenia believes that aninternationally synchronous and decisive action should be taken. The Republic OfSlovenia is a new player to the financial world. Having attained its recentnational identity in the balkanization of Yugoslavia, its constitution spentthe latter two years prior to the 2007 (The Year of the Financial and EconomicCrisis) creating legislatures to increase the employment rate and participationof the labor force, as well as securing itself on a more potent trade point onthe free trade system.
Within the intervals of the culmination and peak of thecrisis, Slovenia’s unemployment rate rose from 6.5% to 9%, and its GDP growthrate decreased by 5%. Considering that it was still in the process ofestablishing trading links and had not begun the process of mortgageacquisition, it still saw witnessed an increase in GDP throughout the Crisis.However, Slovenia suffered from the export-driven commodities Crude Oil andSilver depression, which lashed against the economy’s export revenue.Nevertheless, as the tertiary sector had grown into a larger financial asset,Slovenia did not face repercussions as economically restrictive as othernations in the Eurozone. Prior to 2007,Slovenia’s management of risk relied primarily on monetary policy measuresregulated by the Bank of Slovenia, and on fiscal policy and macroeconomicpolicy measures.
When Slovenia joined the Eurozone area adopted the Euro, theBank of Slovenia lost its independence to pursue a monetary policy, beingforced to conform to policies on regulating the Euro. The Bank of Sloveniaadopted measures to mitigate the effects of the financial crisis in by amendingthe Regulation on the assessment of credit risk losses of banks, abolishing theeffects of the prudential filter when creating provisions (which had beenintroduced due to the implementation of the IFRS Policy, which was created toprovide more stable data on Global financial sheets). The Republic ofSlovenia is the only country in the pool of affected economies within theEurozone that did not require bailouts or experience bankruptcy.
However, itstill faces a negative value in its Balance of Payments due to its currentaccount deficit that is predicted to self-correct within 6 years whichreinforces a macroeconomic balance. Slovenia’s potential growth was stunted bythe imposition of restrictions towards the hedging and approval of financialderivatives for new businesses and strategic industries which raisedunemployment rates and caused the Aggregate Demand and Supply to dropnoticeably. The breakdown of the Global Financial System affected Slovenia,primarily since the revenue of exports and expenditure of imports decreased dueto cost-push inflation.
Investments further fell as banks and the public wereunwilling to put confidence in loans to create start-ups or invest in equities.In addition, the fall in the value of commodities had a negative impact onSlovenia as the primary sector made up 20% of the Gross Domestic Productionwithin the country during 2007. Sloveniaexpresses its interest in engaging in collaborative efforts with countries thatare currently combating the crisis single-handedly. Given its national policiesand interests, and wish to sustain its trading partners and military allies,The Republic of Slovenia seeks to contribute mainly in the search for solutionsto Retain Confidence in FinancialInstitutions, Alleviate the DebtCrisis and Promote Healthy Trade. Stable Banking Investments will help inaccentuating supply-side policies to promote deflation, allowing internationaltrade to stabilize in all countries. The return of consumer confidence is animportant topic as without it, post-recovery growth will be an extremely slowprocess due to a lack in economic activity. The unregulated nature of theShadow banking system is also topic of concern due to its potential to causeeconomic instability.
Slovenia believes that it needs to be addressedeffectively. Alleviating the Debt Crisis will servewell in reducing the aggregate Sovereign Debt and reducing the risk ofdefaulting on NDO’s (National Debt Obligations). The financial crisis has oftenbeen metaphorically referred to as a chain reaction. If a country thatmonopolizes export value fails to meet its debt obligation, it will cause its tradingpartners to declare bankruptcy – spreading and contaminating until theInternational Financial System becomes a ticking time bomb that is on the vergeof insolvency.
Slovenia worries that it may face its own evitable debt crisisif countries in the (EECCU) Eurasian Economic Community Customs Union start toget impacted, creating a vacuum for a potential million dollar worth ofSlovenian Assets to be lost in fragments divided throughout the continent. The Republic ofSlovenia also chooses to recognize the importance of strategic industries andthe competitive nature of countries – desperate for survival – to seekunconventional and unethical measures. It is never more imperative thatconsistency should be followed through the erection of international laws tofollow the MFN laws of Tariff equality, of ethical pricing and respect of thevalues of free trade – especially through anti-dumping measures. In addition, rectifying the Trading system should beamongst key set priorities.
Slovenia fears a potential trade war that willcreate trade-distortions, reducing the standard of living for the generalpopulation. In addition, there is a palpable tension that a trade war (ifstarted) will create diplomatic irrational, ceasing mutual collaboration thatwould otherwise benefit the global economy. The Republic ofSlovenia believes that the approach to healing the International FinancialSystem should not be in the implementation of a radical, quick-fix solution. Itis at times like this when the international community needs to step back andre-examine the consequences of political, financial and economic decisions.Slovenia recognizes the importance of implementing solutions which willguarantee a smooth transition away from the crisis in a manner that will notcause further instability to investors and demolish the embers of what theglobal financial system has transformed into. Thus, It is in accordance withits National Policy, The Eurozone andthe Transatlantic Economic Council (TEC) that any policy implemented will workfrom the very base of the status quo, forcing the set of problems out of theirCDO ‘boxes’ and tackling them independently from there, with an ultimate aim oferadicating anything potentially potent to the system, whilst simultaneouslycreating a set of aims that will create preventative measures to ensure that arepeat of the crisis for the same ensuing set of reasons will not follow. Theworld is in a dire need of a set of risk-preventative regulations. The Republic ofSlovenia stresses on the crucial necessity of every affected countryimplementing measures of Austerity by cutting down on government spending andincreasing rates of general taxation, to contribute an increase in the centralbudget of the government, which in turns could place a self-correcting pressurethat reduces the current account deficit within a country.
Austerity measuresare especially important as they illustrate a government’s fiscal discipline tocreditors and credit rating agencies which will help in recovering The NationalBalance Of Payments in countries where the scenario has heightened so much thatit is crucial for governments to bail-out banks or inject capital into thesystem (such as in the Toxic Asset Relief Programme). The Republic ofSlovenia would also urge every country to create regulations where banks have asolemn obligation to secure a sub-illiquid collateral from a party applying fora mortgage such as personal assets, so that even if mortgages/subprimemortgages are defaulted, Banks will still receive a true measure of its liquidassets, which would prevent defaulting from being a consequence, as well aspreventing another rise in the Housing Bubble in the future. This should – inaddition – ideally stop defaulting from being a consequence-free action. As perthe zeitgeist, Slovenia will want to discuss possible strategies that differentgovernments should raise – with other countries in the European Union, theAsian Continent, Africa and Americas – in order to synchronize variousregulations and strategies that will create an aggregate positive change to thesystem, generating the most economic, optimum, effective and positive change.Considering that this will involve every country, Slovenia predicts that therewill be a natural predicted potential area of conflict with countries seekingto prioritize other aspects of their national policy in accordance; which is adrawback from the governing dynamics of such situations; derived from the NashEquilibrium. The Republic ofSlovenia further recommends the creation of a Third party sub-organizationwithin the WTO (World Trade Organization) that receives annual installments offinancing from Eurozone Countries and stores it in pseudo-private reserves, tobe extracted in the event that a country files bankruptcy and requires adebt-based bailout. Slovenia believes that such an organization is importantsince each country needs mutual credit/debit based transactions, centralizedaround global alliances – to help restore the international economy. Thisemphasizes the need for trade blocs to remain cooperative.
The Republic ofSlovenia proposes that the International Monetary Fund (IMF) will be in chargeof setting up regulations in regards to this resolution, but representativesfrom continental blocs will patrol the process, adjust key changes (the rate ofinterest of lending/borrowing, etc.) to the process to help satisfy the needsof the global population. To ensure the viability of the organization, Sloveniaproposes to provide it with additional functionality – so that it generatesenough profitability to maintain itself, whilst maintaining the cash flow ofcountries that are near bankrupt.
Slovenia is anation that looks at the world with two open minded eyes; one looks at what ishappening, and the other looks at what will happen. As a nation, its mindset isrigid. Politically and economically, everything has a cause and nothing happensbeyond reason. With its political power hinged upon a constitution that isfundamentally composed of left-wing liberalists even though the country isdemocratic looking for the good of the global society, and as per its moralstance: Slovenia will keep an open mind if needed in the compromise of itsbenefits, for the greater good of the global society – insofar to the limitwhen it starts to incur negative consequences on the Slovenian people.
President Danilo Turk, the President of Slovenia urges faith in the UnitedNations. “My vision for the UnitedNations begins with the world’s peoples – and the duty of the Organization toaddress their needs fairly and effectively.” Hence, Slovenia will enterthis conference with the candid aim of prospecting solutions to the crisis,analyzing their reliability and voting for resolutions that it believes willmake a positive change to the Global Society.