Slovenia needs up to 5 billion euro to clean up troubled banks: sources

BRUSSELS Wed Dec 4, 2013 1:47pm EST

Slovenia's Prime Minister Alenka Bratusek speaks after parliamentary voting session over budget in Ljubljana November 15, 2013. REUTERS/Srdjan Zivulovic

Slovenia's Prime Minister Alenka Bratusek speaks after parliamentary voting session over budget in Ljubljana November 15, 2013.

Credit: Reuters/Srdjan Zivulovic

BRUSSELS (Reuters) - Slovenia is expected to need as much as 5 billion euros ($6.8 billion) to recapitalize its banks, sources familiar with the matter told Reuters, a figure some officials say would not require an international bailout.

Slovenia's government is determined not to seek international aid and one government official recently said that even were the bill for repair to reach 4.6 billion euros it would not trigger a request for help.

The banks are nursing some 8 billion euros in bad loans, equivalent to almost one quarter of economic output, raising speculation that Slovenia, with a population of just 2 million, might become the sixth euro zone economy to need outside help.

On December 13, the government will receive the results of an external audit of the banks, which will say how much cash the government must inject to keep them afloat.

"The latest figure we have for Slovenia is 5 billion euros," a senior euro zone official familiar with the situation told Reuters.

A second official said that 5 billion euros was likely to be the upper limit and that it could be as low as 4 billion euros. He said it was unlikely this range would require an international bailout for the ex-Yugoslav republic.

A source close to the government of Prime Minister Alenka Bratusek told Reuters last week that the country was able to cope with a gap of 4.6 billion euros.

Slovenia's stock market suspended trade in its banks' shares and junior bonds on Monday, until the publication of results of bank stress tests next week.

Credit-rating agency Fitch has said that under the worst-case scenario, Ljubljana will have to recapitalize its mostly state-owned banks with 4.6 billion euros - far more than the 1.2 billion euros it has set aside.

Despite the uncertainty, investors' interest in Slovenia is increasing, with one single unnamed buyer snapping up a 1.5 billion euro bond issue in November.

But Slovenia could yet follow Greece, Ireland, Portugal and Cyprus in seeking a national bailout from the euro zone, European Central Bank and the International Monetary Fund.

Slovenia's economy was badly hit by the global financial crisis and relapsed into recession in 2012 due to a slide in exports, a credit crunch and a fall in consumer spending after budget cuts.

The government has embarked on a program of reform including tax hikes, spending cuts and privatizations.

It is considering selling a number of state companies including Telekom. Germany's Deutsche Telekom (DTEGn.DE) is a potential bidder.

($1 = 0.7377 euros)

(Reporting by Martin Santa; Additional reporting by Zoran Radosavljevic; Editing by Ruth Pitchford)

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