Thursday, February 28, 2013

Slovenia can avoid bailout, new PM says

By Zoran Radosavljevic

LJUBLJANA (Reuters) - Slovenia's prime minister-designate promised on Thursday she would be able to heal its banks and avoid an international bailout after a banking crisis that dethroned her conservative predecessor just a year into office.

Positive Slovenia (PS) leader Alenka Bratusek speaks during a news conference after the parliament dismissed Slovenia's Prime Minister Janez Jansa's ruling coalition in Ljubljana February 27, 2013. Slovenia dismissed its conservative-led government on Wednesday and offered Bratusek, a centre-left finance expert, the task of halting the Alpine country's fall from post-communist star to euro zone bailout candidate. Bratusek will become the country's first female prime minister if she manages to build a coalition around a platform to stabilise its finances and avoid going cap-in-hand to the European Union. REUTERS/Srdjan Zivulovic

Legislators dismissed Janez Jansa's cabinet on Wednesday night and handed the baton to Alenka Bratusek, a centre-left finance expert tasked with preventing the fourth financial rescue of a euro zone member country since 2008.

"Considering that Slovenia is still under the EU average in terms of public debt, I still believe that with the steps we will take Slovenia will solve the position of its public finances on its own," Bratusek, leader of Positive Slovenia, told Reuters in an interview on Thursday.

Slovenia's public debt is well below the EU-tolerated ceiling of 60 percent of GDP, at 46.9 percent at the end of 2011, but its banks are heaving under 7 billion euros of bad loans, equivalent to 20 percent of GDP.

Jansa stepped down after failing to navigate through the former Yugoslav republic's worst economic and political crisis in 22 years of independence.

A member of the EU since 2004, the country of 2 million people has gone from economic trailblazer for the rest of eastern Europe when it joined the euro zone in 2007 to the latest ailing member of the 17-nation currency bloc.

With unemployment at a 14-year high and banks strangled by bad loans, speculation is rife that without urgent reform Slovenia may be unable to find affordable financing and repay some 2 billion euros of outstanding debt due in mid-2013.

Bratusek said her actions should appease investors.

"Considering that our programme envisages agreement on three key things: overhaul of banks, consolidation of public finances in a way that will not curb growth, and better management of state assets, I believe we will reassure the financial markets," she said.

Parliament will probably vote in late March on Bratusek's proposed cabinet, which will also comprise the Social Democrats and two of Jansa's former allies.

If confirmed, she will be Slovenia's first female premier and could remain at the helm until an election due in 2015.

BANKS THE PRIORITY

Spending cuts and allegations of government corruption have fuelled street protests of a kind not seen since Slovenia split from federal Yugoslavia in 1991 and escaped the bloodshed that would tear apart the rest of the region over the next decade.

The downturn in Europe has ravaged many of its biggest export markets, while soaring bad loans, the result of political meddling and bad management, made fresh lending virtually impossible.

Slovenia's 35-billion-euro economy is estimated to have shrunk 2 percent last year and unemployment is more than 12 percent.

Jansa, embroiled in a property scandal, had been gradually abandoned by his coalition partners since the turn of the year, further shaking market confidence that Slovenia can do what it takes to steady the ship. He denies any wrongdoing.

But given the policy differences in the new coalition - which would pair the centre-left camp with the centre-right Civic List and pensioners' party Desus from the previous cabinet - Bratusek is unlikely to have an easy ride.

The parties already differ on the need for a "bad bank", which Bratusek earlier opposed, as a place to park bad loans and unburden local lenders to be recapitalised and sold. Bratusek said overhauling the banks was her number one priority.

"This must be solved as soon as possible, in the least costly way that is good for banks and for the economy. It is not a yes or no to the bad bank, we need a combination of recapitalising the banks and cleaning up the bad loans," Bratusek said.

Estimates suggest a bailout for Slovenia could run to 5 billion euros, mostly for shoring up its banks. Although small by the standards of Greece or Ireland, a bailout would be politically awkward when the euro zone is also wrestling with financial woes in Spain, Italy, Portugal and Cyprus.

News

Thursday, February 28, 2013

Slovenia can avoid bailout, new PM says

By Zoran Radosavljevic