Slovenia’s prime minister has said her country will not need an international bailout to avoid going bankrupt.
Alenka Bratusek made the statement during a visit to Brussels, after a damning report from the Organisation for Economic Cooperation and Development on the country’s economy and particularly its banks.
Bratusek said it will not be easy but her government is moving ahead with a cleanup of the mostly state-owned banks: “We are aware that the banking system and its challenges are the number one problem in Slovenia. My assessment is that we can deal with most of these toxic bank loans by moving them to a so-called bad bank which we will be doing in June.”
Slovenia, which was the first country to break away from the former Yugoslavia in the 1990s, was the only ex-communist European Union state that did not privatise most of its banking sector.
With so many loans on their books that are not going to be paid back, the country’s banks are loath to make new loans, which is pushing the economy deeper into recession.
However Brussels dismissed the idea that Slovenia was the new Cyprus.
European Commission President Jose Manuel Barroso said: “Slovenia is indeed the country – of all the member states of the European Union – where the relative dimension of the financial sector is smaller compared to the overall GDP, so it’s at least abusive to make a comparison on that ground with Cyprus.”
The scale of Slovenia’s problem is much smaller, but it faces a difficult time raising cash to recapitalise the banks.
Adding to the pressure Slovenia’s borrowing costs continue to rise ..
with investors reluctant to buy government bonds particularly after the OECD report.
And Prime Minister Bratusek admitted it is too optimistic to expect the country to reach a balanced budget by 2015.