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Once Star Of EU Newcomers, Slovenia Falters

On the outside, Slovenia's economy appeared to be a picture of health. Living standards grew steadily, and most people enjoyed social benefits such as free medical costs, all without having to go through the painful transition to free markets that the rest of the former communist countries underwent.

But the seemingly perfect system showed cracks with the financial global downturn in 2008.

Slovenia, with a gross domestic product of about euro 35 billion, suffered severe recession in 2009 with the economy shrinking by more than 8 percent in one year, and continuing to decline. The result was a sharp drop in exports and living standards, and a surge in unemployment, now at about 12 percent ⿿ almost double the rate in 2008. Bad bank loans surged to some ⿬6 billion ($7.76 billion), or about 17 percent of the country's gross domestic product.

It was a legacy of decades of Slovene success under the state-run model.

In communist times, Slovenia was known as the "Switzerland of the Balkans." The country of 2 million people was the richest of the six republics that made up Yugoslavia, and boasted export brands such as Gorenje home appliances and Elan winter sporting goods.

Slovenia also was liberal communist Yugoslavia's gateway to western Europe. Its leadership was the most progressive and its way of life the closest to that of the wealthy neighbors Austria and Italy, at a time when the rest of Eastern Europe was tightly in the Soviet grip.

Eight years after joining the EU, Slovenia still looks as neat and picturesque as ever. Slovenes love their outdoor life-style, tourists flock to the resorts in the Alps or the coast. In the capital of Ljubljana, open-air cafes are full at the renovated downtown Presern square, surrounded by ornate 17th century churches and curving stone bridges over the Ljubljanica river.

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