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Slovenia central banker warns debt is weighing down economy
June 23, 2014 / 3:35 PM / 3 years ago

Slovenia central banker warns debt is weighing down economy

LJUBLJANA, June 23 (Reuters) - Slovenian banks have enough capital to last until the start of 2016, but they could run into trouble after that if an incoming government does not clean up the debt weighing on the economy, the head of the central bank said on Monday.

Slovenia will hold a snap election in July, and the new government will need to act quickly, Bank of Slovenia Governor Bostjan Jazbec said at a news conference.

“The government will have to start working immediately and continue following the European Commission’s recommendations and ensuring further de-leveraging of Slovenian companies,” Jazbec said.

“Slovenian banks have enough capital till the start of the year 2016 ... but problems can emerge (after that) if there will be no serious moves regarding the de-leveraging of the real sector of the economy,” he said.

Slovenia narrowly avoided an international bailout in December by pumping some 3.3 billion euros of its own funds in local banks. The banks had amassed a huge number of bad loans through years of unchecked lending to highly indebted local companies.

The country will hold its second snap election in a row on July 13. Polls suggest that a new centre-left SMC party, led by a professor of law and a political newcomer Miro Cerar, could win the most votes, ahead of the opposition Slovenian Democratic Party.

The European Commission has demanded that Slovenia reduce its budget deficit, reform the public sector and pursue privatisation. It also said the country should sell its second- largest bank, Nova KBM, this year.

The outgoing government of Alenka Bratusek expects the economy to expand by 0.5 percent this year as exports picked up, two consecutive years of recession. (Reporting By Marja Novak, Editing by Zoran Radosavljevic and)

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