EU to Consider Bailout of Slovenia

As pointed out in the previous post, it is almost impossible to predict which country that will be the victim of the economic crisis. But right now the alarm is sounding in Slovenia.  According to the German business daily Handelsblatt the Eurogroup is due to discuss the country at its next meeting on Friday to determine whether Slovenia may need outside aid save its banking system.

“The country is at risk of a prolonged downturn and constrained access to financial markets.”

OECD

Slovenian bank

Slovenian Finance Minister Uros Cufer is expected to report to his euro-zone counterparts on the country’s financial situation, which has been deteriorating over the past several months, SPIEGELOnline, reports.

EI-CA029_SLOVEN_NS_20130402123904The country is in recession, and is still struggling to bring its budget deficit in line with the EU mandated maximum of 3 percent of gross domestic product.

Slovenia was the first former Yugoslav republic to join NATO and the EU, and was once hailed as a model for other former socialist European democracies seeking to establish competitive economies. But its rising standard of living appears to have been built-in part on bad credit.

Concerns that Ljubljana might soon request emergency aid were intensified on Tuesday by a report issued by the Organization for Economic Cooperation and Development (OECD). Noting the country’s economic struggles, rising sovereign debt and deeply troubled banking industry, the report noted that the country is at risk of a “prolonged downturn and constrained access to financial markets.”

Slovenia-bank-Figure-1

In other words, Slovenia might soon be unable to borrow the money from the markets it needs to remain solvent.

The Slovenian government last week announced it would liquidate two small private banks, Factor Banka and Probanka, and would put up €1.3 billion to guarantee the banks’ liabilities.

The central bank governor said the measures were to help avoid a run on the country’s other banks.

MORE@SPIEGELOnline.com

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