By Jure Stojan

This is a case study of political attacks against central bank independence in Slovenia. There is a history of attempts to curtail the Bank of Slovenia’s (Banka Slovenije’s) freedom from political interference. Granted, it is a central bank of a small country. But it is of much wider interest since it is also a member of the Eurosystem, where Slovenia’s monetary policymaking – the core function of central banking and the ostensible rationale for central bank independence – was transferred to the ECB (in the case of Slovenia, in 2007). Because of the binding constraints of European treaties and EU law, it also means there are few remaining lines of attack against the Bank of Slovenia’s independence. This article places these developments within the normative and positive contexts of free markets.

At first sight, there is little to be said about central banks from this perspective – other than expressing a long-run preference for their abolition, thereby creating the necessary space in monetary policy so that market forces can work their magic. The libertarian view of central bank independence appears aptly summarized by Murray Rothbard: ‘The Federal Reserve, virtually in total control of the nation’s vital monetary system, is accountable to nobody—and this strange situation, if acknowledged at all, is invariably trumpeted as a virtue.’[1]

While many dislike the core idea of central banking – succinctly if uncharitably characterised as unaccountable technocrats yielding discretionary power over the purchasing-power of money – there is a diversity of views regarding central banks as they appear and operate in the real-world. What follows is an analysis of the attacks on the Bank of Slovenia and a discussion of free-market-based conceptualisations of central banking.

Slovenia vs. the Bank of Slovenia

July the 6^th, 2016, was no ordinary Thursday morning for Boštjan Jazbec, the dapper Governor of Slovenia’s central bank. When he entered his corner office on the first floor of the Central Ljubljana headquarters, it was already teeming with criminal investigators. There were members of the elite Special State Prosecution forces – the National Investigation Office (Nacionalni preiskovalni urad). Jazbec was put ‘under investigation for possible “criminal abuse of office” in a 2013 bank overhaul,’ reported Reuters.[2] In other words, the raid on Bank of Slovenia was due to its activities as the country’s bank regulator and macroprudential authority.

As the Police explained in a press release, the ‘pre-trial procedure’ had been initiated already in December 2014 based on ‘written complaints.’ Interestingly, the authors of the text were careful not to name either the Bank of Slovenia or its Governor. The public was nevertheless informed that the ‘operational activities’ were ‘focused on the gathering of information and evidence to justify the suspicion of a criminal offense of abuse of office or official duties.’ Moreover, the ‘preliminary conclusions of the investigation’gave ‘rise to reasonable grounds for suspecting’ that four unnamed central bank officials had indeed committed the said offense. While overseeing the bail-in of NLB’s creditors, the central bankers had ‘unjustifiably implemented the extraordinary measure of terminating the bank’s [sic.] qualified liabilities. The investigators further alleged that because of the bail-in, an unnamed bank (immediately revealed by the Slovene media to be NLB) ‘had incurred the significant financial benefits of 257 million euro.’[3]

But the overzealous investigators had also taken documents pertaining to the European Central Bank (ECB), which immediately earned them a sharp rebuke by the ECB President Mario Draghi. ‘I formally protest against such unlawful seizure of ECB information and call upon the Slovenian authorities to remedy this infringement. In addition, the ECB will also explore possible appropriate legal remedies under Slovenian law,’ Draghi wrote – only hours after the raid had begun – to Zvonko Fišer, State Prosecutor General of the Republic of Slovenia. Another letter of protest was addressed to the European Commission President Jean-Claude Juncker.[4]

Speaking on a hastily-convened press conference, Fišer subsequently dismissed Draghi’s protests, stating that the ‘house search at the Bank of Slovenia was conducted based on available information in accordance with the relevant order. Any request will thus be rejected. The prosecutor’s office says that no house searches would have been conducted if the Bank of Slovenia had handed over the requested documentation.’[5] On its part, the Bank of Slovenia strongly denied it had ever ‘refused to deliver any documents requested by the police.’[6]

The act of solidarity from the ECB did not change the basic message of the raid, which was firmly anchored in the local Slovene context. It was meant to be a very public snub and it was surprising for the amount of humiliation it sought to inflict. But it was hardly unexpected that the Governor would have to endure some type or another of public challenge. In late 2013, the Slovene central bank managed one of the Eurozone’s first bail-ins, wiping out private shareholders and subordinated bondholders of the (predominantly) state-owned banks Nova Ljubljanska Banka (NLB), Nova Mariborska Banka (NKBM), and Abanka, as well as the smaller, privately-owned Probanka and Factor Banka. The latter two were also put into liquidation, while in late 2014, the bail-in was extended to Banka Celje (until then co-owned by NLB).[7] In total, 581.5 million euro of subordinated debt was wiped out, in addition to the 1,509.2 million in equity (i.e. the value of bank shares, prior to what turned out to be the respective banks’ ultimate loan write-down). To put these figures into perspective, Slovenia’s GDP was 35,917 million euro in 2013 and 37,332 in 2014.[8]

The investors did not go gentle into that good night. Their legal challenges gained support of both the State Council (the upper chamber of the Slovene Parliament) and the Human Rights Ombudsman of the Republic of Slovenia, finally reaching the Constitutional Court (Slovenia’s highest legal instance). Subsequently, the latter itself requested further guidance on some finer points of European law. The Court of Justice of the EU handed down its decision just weeks after the raid on the Bank of Slovenia, on July the 18^th.[9] At the time of writing, the Slovene Constitutional Court has yet to remove legal uncertainty. In the summer of 2016, therefore, the Slovene public still did not know whether the 2013 bail-in had been legal, or rather more significantly, whether the investors could recover damages.

More worryingly for the Bank of Slovenia, the summer police raid on its palatial headquarters in Ljubljana was only the latest – if most embarrassing – unintended consequence of its past efforts to save the Slovene banking system. Not only was the Governor under criminal investigation, in the preceding months he had lost some of his closest colleagues of the ‘2013 bank overhaul’ – Vice-Governors Janez Fabijan, Darko Bohnec, and Stanislava Zadravec Caprirolo.

Fabijan’s 6-year mandate expired in September 2015 after an unsuccessful bid to win re-election in July of the same year. His nomination had been refused in Parliament despite the endorsement of both the central bank and the President of the Republic, Borut Pahor (in Slovenia, members of the Bank of Slovenia’s Governing Council are elected by a simple majority vote in the National Assembly (Državni Zbor, Slovenia’s Parliament) but it is the President who draws up a short-list of candidates and decides on the final nominee).[10] Bohnec and Zadravec Caprirolo, whose terms ended in March 2016, did not even make it onto the shortlist, even though their candidacy had been officially proposed by Governor Jazbec.[11]

From the central bank’s perspective, the nomination of two incumbent Vice-Governors was a signalling device – the Bank of Slovenia was in effect saying something along the lines of ‘we did nothing wrong’ and ‘we have superb staff’. But the nomination was also testing the boundaries of political support – and of presidential policy. In July 2015, the Office of the President Pahor went as far as stating, in a press release, that ‘The President of the Republic has understood the recent dismissal of dr. Janez Fabijan’s candidature in parliament in a way that in making his new proposal, he will try to abide by the condition that the new candidate did not directly participate in the Bank of Slovenia’s crucial decisions relating to the rehabilitation of the banking system.’[12]

In effect, President Pahor decided to prejudge an on-going litigation about the remits of the Bank of Slovenia’s mandate. He was probably well aware of it. The previous summer, speaking on the national television, he had emphasized:

If we insist on the courts of law being independent, on the Commission for the Prevention of Corruption being independent, on the Court of Audit being independent, on the Governor of the Bank of Slovenia being independent, then we must – as much as possible – refrain from making comments on their work, especially as politicians in power […]. It could be understood as an intervention into their work. I follow this, all the while being aware of my frequent responsibility to nominate holders of high offices of the State.[13]

By President Pahor’s own definition, his nomination policy of 2015 could be understood as an intervention into Bank of Slovenia policy. He was not only voicing an opinion on the 2013 bank rehabilitation, he was acting on it by barring key policy makers from re-appointment. The president was thus breaching central bank independence, which is, according to the New Pelgrave definition, ‘the freedom of monetary policymakers from direct political or governmental influence in the conduct of policy’.[14]

Furthermore, it is clear that the Office of the President saw the appointment of central bank Governor and Vice-Governors in a broader context of the role and functions of the President within the Slovene constitutional order. The political calculus behind an individual nomination included variables that are unrelated to the central bank. In other words, the President was not maximising central bank independence; he was maximising his personal chances of re-election, which necessarily involves maximising the prestige of his own office.

This implied scant regard even for the independency of presidency. President Pahor derived utility from having the maximum number of his nominees confirmed in Parliament. He was remarkably frank about it – presenting it even as a virtue, a step on the way towards ‘national reconciliation’. As he put it in his first end-of-year interview, in December 2013: ‘My greatest accomplishment, I think, is having succeeded in these turbulent times to propose seven candidates for the most important offices to the National Assembly, which accepted them smoothly.’[15]

This, of course, was in stark contrast with Pahor’s two immediate predecessors, demonstrating the importance of an individual office holder even in a structural political economy. As Christopher Adolph concludes within a global context, ‘Only institutions make agency matter, but when we ignore the role agents play within institutions, we write the story of political economy in the passive voice.’[16] In 2007, the newly-sworn-in President Danilo Türk felt that ‘This is [just] the way it is in a democracy; it is not necessary that already the first candidate [for Governer of the Bank of Slovenia] receive sufficient support [in the National Assembly].’[17] Earlier that year, the previous President Janez Drnovšek had refused to consult the heads of parliamentary party groups, or to nominate the candidate supported by then coalition government: ‘I will not nominate a candidate who is being imposed on me and I think who would not be an independent Governor of Slovenia’s central bank.’[18]

While the effects of such presidential policy on the central bank are clear, it is less clear what motivated them. It is time to move beyond simple narrative – more structure is needed, and structure comes through measurement.

Measuring the economic wars of central bank independence

‘Independence is a continuous, not dichotomous, variable. In other words, there are degrees of central bank independence,’ cautions a political scientist, John Goodman.[19] Even though several measures of central bank independence have been proposed, the one developed in the early 1990s by Alex Cukierman, Steven B. Webb, and Bilin Neyapti still remains the most widely used.[20] In effect, they offer not one but three ‘indicators of actual independence’ – the rate of turnover of central bank governors, an index based on expert opinion elicited through a questionnaire, and an aggregation of the legal index and the rate of turnover.[21]

The focus here is on the most objective, the legal index. It consists of 16 different legal variables, sorted into four broad clusters. By definition, the aggregate score totals 1 but the variables do not have the same weighting: (1) the appointment, dismissal, and term of office of the governor; (2) the resolution of conflicts between the government and the central bank over monetary policy (as well as the participation of central bankers in drafting the government budget); (3) the objectives of the central bank; and (4) restrictions on the monetary financing of the public sector.[22]

This measure offers new insights into the case of Slovenia. It shows along which legal dimensions the independence of Banka Slovenije is vulnerable to attack – and where it remains impervious. Namely, Slovenia’s Eurozone membership severely limits the scope for attacks against legal independence of the Bank of Slovenia – the entire fourth cluster of the Cukierman-Webb-Neyapti legal index is off-limits to Slovene politicians. This implies that no matter the attacks, Slovenia is guaranteed a legal independence score of 0.50 (i.e. the total contribution of the various limitations on lending to the government, multiplied by their weights).

Since the Governor is appointed in Parliament (rather than by the Bank of Slovenia’s own Governing Council), for a mandate of 6 rather than 8 years, and with possibility of dismissal, the Slovene central bank loses 0.23 × 0.20 = 0.046 point on the legal independence scale (1 minus the average numerical coding of the subvariables, multiplied by their category weight – the Cukierman-Webb-Neyapti index relies on rather clumsy aggregation). And since it is the notoriously slow Slovene judicial system that has the final say in resolution of conflict over central bank policies, the Bank of Slovenia loses another 0.6 × 0.5× 0.15 = 0.045 point (1 minus coding times category and subcategory weights). Another 0.4 × 0.15 = 0.06 point is lost because the Bank of Slovenia also oversees financial system stability (rather than some separate regulatory authority).

In short, because of the Slovene constitutional and legislative framework, central bank independence is decreased (in comparison with a theoretical ideal of total independence) by a total of 0.151 point – or 15%. This is a rough quantification of the scope left for attacking central bank independence despite Slovenia’s Eurozone membership, that is, even without changing Slovenia’s current legal system.

It should be noted, however, that Slovene politicians are still testing these limits. For example, in October 2015, the largest opposition party, the Slovene Democratic Party (Slovenska demokratska stranka, SDS), introduced a bill proposing severe limits on central bank independence. Amongst others, it proposed that the Governor should immediately notify Parliament of all regulatory measures over state-owned banks (expressly without recourse to bank secrecy), that central bank employees be barred from running for governorship (or vice-governorship), and that central bank employee remuneration be set by government.[23] In accordance with Slovene parliamentary procedure, the government was required to submit its position on the bill. It duly rejected this legislative proposal, noting that the bill ran counter all four kinds of central bank independence as set out under EU law – the functional, institutional, personal and financial independence.[24] So, which position was more justifiable?

Between Scylla and Charybdis

Unfortunately, libertarian and classical liberal thought is far from unified regarding the issue of central banking (or even of money in general). The dilemma is easier summarized than resolved – Are central banks the protectors or destroyers of economic freedom? The answer should guide libertarian policy on central banking. Milton Friedman’s 1962 eloquent exposition of this dilemma is hard to surpass:

Our task […] is to steer a course between two views, neither of which is acceptable though both are have their attractions. The Scylla is the belief that a purely automatic gold standard is both feasible and desirable and would resolve all the problems of fostering economic co-operation among individuals and nations in a stable environment. The Charybdis is the belief that the need to adapt to unforeseen circumstances requires the assignment of wide discretionary powers to a group of technicians, gathered together in an “independent” central bank, or in some bureaucratic body. Neither has proved a satisfactory solution in the past; and neither is likely to in the future.[25]

Friedman makes it clear that both positions are extreme and undesirable – we neither should abolish central banks nor grant them special privileges. This might come as a surprise to those who classify Friedman based on his well-known quote – ‘I’ve always been in favor of abolishing the Federal Reserve and substituting a machine program that would keep the quantity of money going up at a steady rate.’[26] As for his opposition to any commodity standard – in Brian Doherty’s words, it is ‘another aspect of Friedman that pisses off Austrian libertarians, who think that only gold prevents government from manipulating the money supply easily to its own advantage.’[27]

Friedman’s call to dismantle central banks should be understood in a limited sense – he was only opposing central bankers yielding discretionary powers. Instead, he advocated a rule-based central bank, where the monetary policy-makers are replaced by a computer predictably following rules. However, this in itself does not yet imply the abolition of central banks – presumably even monetary machines require flesh-and-blood technicians to look after them (even if these mechanics and programmers were no longer called ‘central bankers’). Moreover, such automatic rules might appear to be anathema to central bank independence (would not the institution be but a slave to its rules?) but in reality, rule-based policy requires complete central-bank freedom – not only freedom from central bankers’ discretion but also freedom from any attempt by politicians to block or alter the automatic exercise of these rules.

Through his insistence on rules, Friedman’s work bears close resemblance to the later work by John B. Taylor, a figure of undisputed influence in modern central banking theory – and practice. The main difference was that Friedman favoured a constant money growth rule while Taylor calls for an activist interest rate rule. Although ‘the names of Taylor and Friedman are associated with different monetary policy rules, the difference between Taylor and Friedman on how the economy works is not great,’ writes Edward Nelson. ‘Where they differed was on the extent to which structural models should enter the monetary policy decision-making process. This difference helps account for the differences in their preferred monetary policy rules.’[28]

A house divided

If the free-market response can be classified into two camps (one opposing the mere existence of central banks, the other calling for the greater importance and independence of central banks), Taylor could be clearly assigned into the latter. But if we are to search for a figurehead, it would be Alan Greenspan, who presided over the US Federal Reserve from 1987 to 2006. Greenspan was not only the towering central banker of his era but also an avid follower of Ayn Rand’s objectivism, ‘one of only two of the original group Rand never kicked out of her life.[29]

The libertarian opposition to central banking has been traditionally spearheaded by the Austrian school, itself far removed from being a monolith. Murray Rothbard was clear: ‘There is only one way to eliminate chronic inflation, as well as the booms and busts brought by that system of inflationary credit: and that is to eliminate the counterfeiting that constitutes and creates that inflation. And the only way to do that is to abolish legalized counterfeiting: that is, to abolish the Federal Reserve System, and return to the gold standard, to a monetary system where a market-produced metal, such as gold, serves as the standard money, and not paper tickets printed by the Federal Reserve.’[30]

Friedrich Hayek shared the sentiment but opposed the specifics: ‘Though gold is an anchor—and any anchor is better than a money left to the discretion of government—it is a very wobbly anchor. It certainly could not bear the strain if the majority of countries tried to run their own gold standard.’[31] In its place, Hayek was advocating the establishment of free-market in competing currencies, each tied to a specific basket of commodities. The precise composition of the basket, then, was to be a source of monetary stability – and of competitive advantage of the issuers, so to speak. This approach is as far removed from Milton Friedman’s opposition to the Fed (which, as already noted, was really only a disguised plea for a powerful, rule-bound central bank) as it is from professional central bankers who confess libertarian ideals (as Greenspan did).

Hayek himself took great care to emphasis his differences from the rule based approach. ‘Milton Friedman, and recently many others, have urged a monetary rule, embedded where possible in a “monetary constitution”, so that the growth of money is steady and predictable,’ Hayek wrote in his ground-breaking plea for the abolition of the central bank monopoly on the issuance of currency. ‘There can be no doubt that such a rule would end the grosser failures of monetary management. But why do we need to regulate our suppliers of money? Here competition comes in.’[32]

In other words, no monetary rules are needed if the central bank no longer enjoys the legal privileges of being the sole issuer of money in a given territory. This point requires further elucidation – in light of the plethora of competing online payment platforms (from credit cards to PayPal) as well as of the Bank of England’s recent explanation that ‘the majority of money in the modern economy is created by commercial banks making loans.’[33] In other words, central banks no longer enjoy a monopoly over money creation. But this is distinctly not the type of monetary competition Hayek had in mind, since money created by today’s commercial banks is still denominated in an underlying, monopolist-issued currency like the US dollar or the euro. Also, contemporary commercial banks create money as a store of value by issuing loans; credit cards offer competing media of exchange. Hayekian money, by contrast, is private in all its functions.

The Hayekian perspective leads to an interesting dilemma. Should libertarians support every effort to curtail or destroy the central bank, even though the other and key part of their proposition – namely, concurrent private currencies – is absent?

Hayek’s own answer appeared to be no. His roadmap towards fully-private money explicitly provides for a transition in which central banks achieve full independence rather than outright abolition. For Hayek, central banks disappearing was an organic – not a revolutionary – process. In the transitional period, a government’s ‘chief task would be to guard against a rapid displacement and consequent accelerating depreciation of the currency issued by the existing central bank. This could probably be achieved only by instantly giving it complete freedom and independence, putting it thus on the same footing with all other issue banks, foreign or newly created at home, coupled with a simultaneous return to a policy of balanced budgets, limited only by the possibility of borrowing on an open loan market which they could not manipulate.’[34]

While both currents of libertarian thought oppose central banking in the long-run, they suggest opposing policies for the intermediate period of monetary transition. Even Hayek called for central bank independence from political influence, while Friedman called for an independence even more radical than that – he wished that central banks were free not only from politicians but from central bankers as well.

This yields two insights for the political economy of central bank independence. First, political context is key, and the utility-maximisation behaviour of individual office-holders may matter as much as the institutional framework they are embedded in. Second, discretionary policy by politicians is not a valid alternative to discretionary policy by central bankers. These insights are applied to the Slovene case study in the following section.

Towards a political economy of central bank independence

The discussion of the Slovene central banking has, so far, shown that those attacks on central bank independence that require a change in the legal framework are effectively curtailed by Eurozone membership. But there is a range of other institutionalised channels of restricting central bank independence, above all through the recruitment of Governors and Vice-Governors.

This is true throughout Slovene independence. Marko Kranjc, who ran the Bank of Slovenia between 2007 and 2013, was the only Governor that did not see his re-election thwarted by politicians – because he did not seek it.

In 2001, Milan Kučan, the then President of the Republic, passed over the first Governor France Arhar in favour of Mitja Gaspari, a former Minister of Finance. The President explained his choice with the consultations he had had with heads of parliamentary party groups:

These consultations […] did not in any way deny the current Governor’s, dr. France Arhar’s, great contribution to the establishment of the [Slovene] monetary system, the introduction of the currency [the tolar], the stability of the tolar, the convertibility of the tolar and later in the negotiations about the Slovene share of the Yugoslav [public] debt. That [Arhar’s] expertise had never been questioned was, for me, the most gratifying aspect [of this affair]. As already said, eventually the [greatest] interest won out, the one I had to count on, and it was about whom the parliamentary parties offered the greater support.[35]

Mitja Gaspari, in turn, was refused re-election by the National Assembly in 2007 despite having enjoyed the support of the then President Janez Drnovšek. Given the precedent of Gaspari’s own predecessor, the President made an apparently ironic statement: ‘It would be almost difficult to find a similar case elsewhere in the world, that of a Governor – who had successfully completed his mandate, after having already served two or even more terms already as a finance minister, who had always been in the centre of construction this system of ours, which proved to be stable – who, after all this, would not have been re-elected for another term.’[36]

Conclusion

The article pursued a comparative, political-economy analysis of the recent wave of political attacks on central bank independence in Slovenia. In July 2016, Ljubljana was stage to an unprecedented police raid of an acting Governor’s office. This came after months of humiliating defeats of the then deputy governors to secure re-election by Parliament. The underlying issue of central bank independence, i.e. the freedom of central banks from political interference, was explored in both the normative and positive contexts of free markets. Unfortunately, libertarian and classical liberal thought is far from unified regarding the issue of central banking (or even of money in general), while two broadly defined schools vie for intellectual supremacy. For lack of a better name, these factions – and their controversies – are labelled after two of the protagonists: it is Hayek vs. Greenspan and their respective intellectual kinfolk.

Early attacks on central bank independence in Slovenia were motivated by a broader struggle between the ruling coalition government and the presidency. Later on, with the financial crisis bringing the banking system into the limelight, the central bank became a target in its own right because of the attraction of newly-noted discretionary powers. These attacks were further motivated by interest groups representing investors affected by the bail-ins of late 2013 and early 2014. For example, after Janez Fabijan’s re-election had successfully passed the committee stage in Parliament (only to be thwarted in the floor vote), the PanSlovenian Shareholders’ Association (one of the two interest groups competing to represent small investors in Slovenia) went public by decrying the ‘shocking support for a Vice-Governor who is under criminal investigation.’[37]

In Slovenia, therefore, the struggle for central bank independence is as much a function of presidential politics as it is of central banking. In other words, to understand the political economy of Slovene central banking, it is necessary to look beyond a technical analysis of monetary phenomena.

Without speculating about the outcome of pending litigation, two points stand out about the bail-in affair that inspired the fiercest attacks so far on Slovene central bank independence. First, the Bank of Slovenia incurred wrath because of its roles as bank supervisor and macroprudential regulator, not because of its authority over monetary matters in Slovenia. Second, it is a symptom of deeper social ills, namely the vast extent of state ownership throughout the Slovene banking sector.

This creates a conflict of interest where there ought to be none – the state as a bank owner is pitted against itself as a bank regulator. Further conflicts arise if, as in the case of Slovenia, bank supervision is carried out by the central bank rather than an independent agency. Different functions imply divergent interests. For example, the department for financial stability would like to see bank profitability rise, the supervisory department steers commercial banks away from risky deals, all the while the monetary policy department is acting out ECB policy of low, lately even negative, interest rates.

Eliminating these conflicts of interest will go a long way towards preventing political attacks on Slovene central bank independence. Bank privatisation is an obvious avenue. Crucially, however, supervisory duties of the Bank of Slovenia should be transferred to a new agency, which may also improve efficiency. Barry Eichengreen and Nergiz Dincer’s findings are instructive – ‘supervisory responsibility tends to be assigned to the central bank in low-income countries where that institution is one of few public-sector agencies with the requisite administrative capacity. It is more likely to be undertaken by a non-independent agency of the government in countries ranked high in terms of government efficiency and regulatory quality.’[38] Slovenia might well heed this lesson.

* The author is Senior Fellow at the Visio Institute in Slovenia. Dr. Jure Stojan holds a doctorate in economic history from St Antony’s College, University of Oxford.

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[1] Murray N Rothbard, The Case Against the Fed (Ludwig von Mises Institute, 1994) at 3.

[2] Reuters, ‘UPDATE 4-Slovenia investigates central bank chief, rebuffs ECB’, <http://www.reuters.com/article/slovenia-cenbank-idUSL8N19T3W1>, accessed 14 Aug. 2016

[3] Policija [Slovene Police’s Public Relations Office], ‘[Press Release] Preiskovalci NPU za dokazi zlorabe v bančnem sektorju [National Investigation Office investigators seeking evidence of abuse in the banking sector]’, <http://www.policija.si/index.php/novinarsko-sredie/index.php?option=com_content&view=article&id=84883>, accessed 14 Aug. 2016

[4] Mario Draghi, ‘Seizure of ECB information on 6 July 2016 [letter to the Slovene State Prosecutor General]’, (updated 6 Jul. 2016) <https://www.ecb.europa.eu/pub/pdf/other/160706letter_fiser.en.pdf>, accessed 14 Aug. 2016

[5] Report by the Slovenian Press Agency, quoted and translated into English in a press release by Banka Slovenije, ‘Bank of Slovenia’s response to publication of the answer sent by the State Prosecutor General to the President of the ECB’, (updated 13 Jul. 2016) <http://www.bsi.si/iskalniki/sporocila-za-javnost-en.asp?VsebinaId=19172&MapaId=202#19172>, accessed 31 Aug. 2016.

[6] Ibid.

[7] Banka Slovenije, ‘Report of the Bank of Slovenia on the causes of the capital shortfalls of banks and the role of the Bank of Slovenia as the banking regulator in relation thereto […]’, (updated March 2015) <www.bsi.si/library/includes/datoteka.asp?DatotekaId=6209>, accessed 14 Aug. 2016. In 2015, Abanka and Banka Celje merged while NKBM was sold to the American private equity fund Apollo. In accordance with commitments given by the then Government of Slovenia to the European Commission in 2013, NLB needs to be privatized by the end of 2017.

[8] Statistical Offiice of the Republic of Slovenia, ‘SI-Stat Data Portal’, (updated 31 Aug. 2016) <http://pxweb.stat.si/pxweb/Database/Economy/03_national_accounts/05_03019_GDP_annual/05_03019_GDP_annual.asp>

[9] Banka Slovenije, ‘Press release – The Court of Justice of the EU – Bank of Slovenia positions confirmed’, (updated 18 Jul. 2016) <https://www.bsi.si/iskalniki/sporocila-za-javnost-en.asp?VsebinaId=19176&MapaId=202#19176>, accessed 14 Aug. 2016

[10] Office of the President of the Republic of Slovenia, ‘Predsednik Pahor in predsednik državnega zbora Brglez na delovnem pogovoru tudi o postopkih za izvolitev viceguvernerja BS [Press release about a consultation with the Speaker of the National Assembly]’, (updated 16 Jul. 2015) < http://www.predsednik.si/up-rs/uprs.nsf/objave/2447F8DCDE3404CBC1257E84003F2BC4?OpenDocument>, accessed 14 Aug. 2016

[11] The President of the Republic of Slovenia, ‘[Letter to the President of the National Assembly nominating Primož Dolenc for Vice-Governor, 15 Jan. 2016]’, <http://www.up-rs.si/up-rs/uprs.nsf/cc1b0c2e0c8f0e70c1257aef00442bbd/69c354a06e6cdb81c1257f3b0051bfa4/$FILE/Predlog%20PRS_kandidat%20za%20viceguvernerja%20BS_Dolenc.pdf>, accessed 14 Aug. 2016

[12] Office of the President of the Republic of Slovenia, ‘Predsednik Pahor in predsednik državnega zbora Brglez na delovnem pogovoru tudi o postopkih za izvolitev viceguvernerja BS [Press release about a consultation with the Speaker of the National Assembly]’.

[13] Office of the President of the Republic of Slovenia, ‘Intervju predsednika republike za Televizijo Slovenija [interview with the national television]’, (updated 16 Jul. 2015) <http://www.predsednik.si/up-rs/uprs.nsf/objave/902D2ABF4D3FD48BC1257F24003B7745?OpenDocument>, accessed 14 Aug. 2016

[14] Carl E Walsh, ‘Central bank independence’, in S. N. Durlauf and Et Al. (eds.), Monetary Economics (Palgrave Macmillan,, 2010), 21–26.

[15] Tanja Starič, ‘[Interview with the President of the Republic of Slovenia] Politika mora prenesti tudi udarce z bičem [Politics must also endure lashes with a whip]’, Sobotna priloga Dela, 28 Dec. 2013.

[16] Christopher Adolph, Bankers, bureaucrats, and central bank politics: The myth of neutrality (Cambridge University Press, 2013) at 318.

[17] Grega Repovž, ‘Dr. Danilo Türk [Interview with the President of the Republic of Slovenia]’, Mladina, 28 Dec. 2007.

[18] Office of the President of the Republic of Slovenia, ‘Predsednikove izjave v zvezi s predlaganim guvernerjem [The President’s statement on the nominated Governor]’, (updated 13. Feb. 2007) <http://www2.gov.si/up-rs/2002-2007/jd.nsf/dokumentiweb/B8CCBE1CD3E654EAC12572810076A403?OpenDocument>, accessed 14 Aug. 2016

[19] John B Goodman, ‘The politics of central bank independence’, Comparative Politics, 23/3 (1991), 329–49.

[20] Cf. Walsh, ‘Central bank independence’.

[21] Alex Cukierman, Steven B Web, and Bilin Neyapti, ‘Measuring the independence of central banks and its effect on policy outcomes’, The World Bank Economic Review, 6/3 (1992), 353–98.

[22] Ibid.

[23] Jože Tanko [first signatory], ‘Predlog zakona o spremembah in dopolnitvah Zakona o Banki Slovenije [Draft bill ammending the central banking law]’, (updated 21 Oct. 2015) <http://imss.dz-rs.si/imis/caa38d3d9e6621ba76f1.pdf>, accessed 14 Aug. 2016

[24] The Government of the Republic of Slovenia, ‘Mnenje o Predlogu zakona o spremembah in dopolnitvah Zakona o Banki Slovenije [Opinion on the draft bill ammending the Central Banking Law]’, (updated 18 Nov. 2015) <http://imss.dz-rs.si/imis/1ee3f684d860890fea21.pdf>, accessed 14 Aug. 2016

[25] Milton Friedman, Capitalism and Freedom: Fortieth Anniversary Edition (University of Chicago Press, 2002) at 38–39.

[26] Russel Roberts, ‘An Interview with Milton Friedman’, EconTalk <http://www.econlib.org/library/Columns/y2006/Friedmantranscript.html>, accessed 14 Aug. 2016

[27] Brian Doherty, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement (PublicAffairs, 2009) at 303.

[28] Edward Nelson, ‘Friedman and Taylor on monetary policy rules: a comparison’, Federal Reserve Bank of St. Louis Review, 90 (2008), 95–116.

[29] Doherty, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement  at 232.

[30] Rothbard, The Case Against the Fed  at 146.

[31] Friedrich August Hayek, Denationalisation of money: the argument refined (London: Institute of Economic Affair, 1990) at 110.

[32] Ibid., at 21.

[33] Michael McLeay, Amar Radia, and Ryland Thomas, ‘Money creation in the modern economy’, Bank of England Quarterly Bulletin,  (2014), 1–14.

[34] Hayek, Denationalisation of money: the argument refined  at 121–22.

[35] Office of the President of the Republic of Slovenia, ‘Oporekanj strokovnosti ni bilo [There was no disputing of expertise; transcript of an interview broadcast by the Slovene National Radio]’, (updated 14 Mar. 2001) <www2.gov.si/up-rs/1992-2002/mk.nsf/77e9b93bfaf10bc0c1256785002196ab/c4455ddbfb8c0945c1256a10004c0d54?OpenDocument>, accessed 14 Aug. 2016

[36] Office of the President of the Republic of Slovenia, ‘O kandidatu za ustavnega sodnika, guvernerja BS in LDS [Statement on the candidates for Consitutional Court Justice and the central bank Governor as well as on a major political party] ’, (updated 22 Jan. 2007) <www2.gov.si/up-rs/1992-2002/mk.nsf/77e9b93bfaf10bc0c1256785002196ab/c4455ddbfb8c0945c1256a10004c0d54?OpenDocument>, accessed 14 Aug. 2016

[37] VZMD [PanSlovenian Shareholders’ Association], ‘DRŽAVNI ZBOR – ogorčenje nad podporo novemu 6-letnemu mandatu [The National Assembly – outrage over support for a new 6-year mandate]’, (updated 2 Jul. 2015) <http://www.vzmd.si/novice/drzavni-zbor-ogorcenje-nad-podporo-novemu-6-letnemu-mandatu-dosedanjemu-kazensko-ovadenemu-viceguvernerju-banke-slovenije-fabijanu-vzmd-opozarja-na-njegovo-vodilno-vlogo-pri-sporni-sanaciji-bank-ki-naj-bi-jo-drzavni-zbor-rs-preiskova>, accessed 14 Aug. 2016

[38] Barry Eichengreen and Nergiz Dincer, ‘Who Should Supervise? The Structure of Bank Supervision and the Performance of the Financial System’, National Bureau of Economic Research Working Paper Series, No. 17401 (2011).

The paper was published in The Visio Journal No. 1. Cite the paper: Stojan, J. (2016). Economic Freedom in Light of Central Bank Independence: The case of Slovenia in a free-market context. The Visio Journal 1 (November 2016): 89–102.