'Soft Landing' in the Erm2 : Lessons from Slovenia

In the paper, we explain the logic and implementation of policy making in the last (landing) phase of the process of entering the EU and ERM2 in Slovenia. Basic characteristics of the performance of the economy at the start of the landing phase are described; special focus is given to the deteriorating fiscal stance and inadequate non-tradable sector market structure. It is emphasized that entering the landing phase presented significant shock for the performance of the economy, as a consequence of the needed change in the goals and horizon of the policy makers. We show that specific macroeconomic strategy of not allowing equilibrium in one segment to be achieved by causing or allowing disequilibrium in other segments, was as in previous transition phases used also in the landing phase. We conclude that this strategy was the core of the successful "landing", as is documented by the behavior of all relevant nominal and real macroeconomic variables