Brussels, 07/10/2013 (Agence Europe) - On Monday 7 October, a member of the Slovenian government told reporters that European Stability Mechanism aid could be the cheapest way to overhaul local banks, three of which are nursing an estimated 7.9 billion euros ($10.7 billion) of bad loans.
Slovenian minister of the interior, Gregor Virant, said it would be sensible for the country to seek aid from the ESM bailout fund if its banking system needs more new capital than estimated, a news agency (STA) reported.
No official talks have yet begun between Brussels and the Slovenian government over aid, the least intrusive form of which would be similar to that granted to Spanish banks, but this would not be possible until the outcome of an audit of Slovenian bank capital requirements are known, an analysis which is currently under way and the results of which are expected in November. Three banks dominate the financial sector in Slovenia, namely Nova Ljubljanska Banka D.D., Nova Kreditna Banka Maribor D.D. and Abanka Vipa D.D., which between them have nearly €8 billion of toxic debt.
In Luxembourg on Monday 14 October, Eurogroup will discuss Slovenia and a European source said that clarification was needed, along with an assessment of the Slovenian government's ability to absorb bank losses and restructure its financial sector itself. Ljubljana has set up a bad bank with €1.2 billion to this end, but the markets speculate that the toxic debts are much higher and have raised the yield on Slovenian bonds to 6.8% on ten-year bonds on Monday 7 October, aware that the country's financing needs are covered until next spring.
The draft budget for 2014 that Slovenia has to submit to the European Commission in the first half of 2013 will be discussed in detail. It is expected to announce a cleaning up of the financial sector and a boosting of the economy. The Commission's Spring Economic Forecasts suggest that Slovenian GDP will shrink by 2% in 2013 and 0.1% in 2014 under current policies.
At the end of September, Slovenian prime minister Alenka Bratusek admitted that her government was talking with the Slovenian Central Bank about requesting aid from the eurozone (see EUROPE 10931). (MB/transl.fl)