Euro zone to push Slovenia for more to avoid bailout -sources

BRUSSELS Mon May 13, 2013 11:54am EDT

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BRUSSELS May 13 (Reuters) - Euro zone policymakers will press Slovenia on Monday to toughen measures presented last week to tackle its banking and fiscal problems and so avoid becoming the sixth member of the currency bloc to require a bailout.

Slovenia pledged last week to sell 15 state firms and raise value-added tax in a bid to avoid seeking international aid, but gave little detail and delayed the spending cuts investors say are needed to stabilise its finances.

Its largely state-owned banks are choking on 7 billion euros ($9.08 billion) in bad loans and need to be recapitalised.

German Finance Minister Wolfgang Schaeuble said on Monday the former Yugoslav state may get by without help, but European Union officials said privately that the measures outlined by Ljubljana last week were not enough.

"Slovenia says ... they need no programme. I think they are right but they need to put in place the right measures," Schaeuble told reporters as he arrived for a regular meeting of euro zone finance ministers.

"That isn't easy, not for any country."

Ministers were not expected to reach a decision about Slovenia's prospects on Monday.

"We will have to push them on it," said one EU official, speaking on condition of anonymity. "It's not enough yet."

"It is still not a consistent and forceful programme," another official said.

With Slovenia's economy among the fastest-growing in the euro zone, which it joined in 2007, successive governments shied away from unpopular sale of state assets, including the banks, and reform of the welfare system and rigid labour market.

But rising bad loans following the global financial crisis exposed a culture of cronyism and corruption in which state banks made risky loans to politically connected businessmen.

The government's reform plans include the transfer of 3.3 billion euros of bad loans held by its three biggest banks - NLB, Nova KBM and Abanka Vipa, which are all state-controlled - to a newly established "bad bank".

The banks, which hold the lion's share of the bad loans burdening the sector, will receive in return state-guaranteed bonds with a total value of 1.1 billion euros. ($1 = 0.7709 euros) (Reporting by Jan Strupczewski, additional reporting by Annika Breidthardt and Robert-Jan Bartunek; Writing by Jan Strupczewski and Annika Breidthardt; Editing by Catherine Evans)

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