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European Court deals Slovenia's fragile finances a fresh blow
July 17, 2014 / 2:26 PM / 3 years ago

European Court deals Slovenia's fragile finances a fresh blow

* Court orders Slovenia to reimburse savers in defunct bank

* Ruling marks end of 20-year dispute

* Reports suggest cost may run to 500 mln euros

By Marja Novak and Maja Zuvela

LJUBLJANA/SARAJEVO, July 17 (Reuters) - Slovenia said on Thursday it would comply with the European Court of Human Rights’ order that it reimburse clients of a now-defunct bank who lost their savings when Yugoslavia collapsed, in another blow to the country’s fragile finances.

Estimates of Slovenia’s liability range from 300 million to 500 million euros ($406 million-$676 million).

“It’s always easy to be a general after the battle,” said central bank governor Bostjan Jazbec. “The decisions of the 1990s were probably well-considered, rational and the best possible at the time,” he told reporters.

“Thinking about them now would be a waste of time. We have to accept the decisions of the court and hope that we can repay our obligations as soon as possible.”

Wednesday’s ruling, the climax of 20 years of litigation over lost savings in Ljubljanska Banka, comes at a bad time for Slovenia, which is trying to claw its way out of a banking crisis having narrowly avoided taking an international bailout late last year.

Ljubljanska Banka was one of the leading banks in socialist Yugoslavia, attracting depositors from across the federation.

But thousands of its depositors lost their savings in 1991 when Slovenia became the first republic to break away from Yugoslavia, which then tumbled into civil war. The bank closed its doors in 1991, without paying out savings to those outside of the new state.

The ruling from the court in Strasbourg now gives European Union and euro zone member Slovenia a year to find a way to reimburse those depositors.

“HISTORIC”

The country of 2 million people has just poured 3.3 billion euros into its teetering banks after more and more loans soured in the wake of the collapse of its export sector. It now needs to sell off a raft of state firms and cut spending to bring down its budget deficit.

Slovenia had long argued that the matter of Ljubljanska Banka should be settled as part of succession talks between the former Yugoslav republics.

The court also ordered Serbia to reimburse Bosnian depositors of an estimated 60 million euros in a unit of Serbian Investbanka.

Monika Mijic, a Bosnian lawyer in the Strasbourg-based court, said the verdict was “historic, and will mean the closure of two decades of agony.”

In a statement to Reuters, Slovenia’s finance ministry said: “We have to examine the verdict in detail before we can comment on possible ways of executing the verdict. We cannot speak of concrete figures at this moment.”

The central bank’s vice-governor, Stanka Zadravec Caprirolo, suggested negotiations may follow.

“The effects will not be such that it would endanger Slovenia’s financial stability but the sums are not small... They have to be paid,” Caprirolo told reporters.

“I expect it will be possible to reduce the fiscal effects in interstate talks.” ($1 = 0.7392 Euros) (Additional reporting by Zoran Radosavljevic in Zagreb; Editing by Matt Robinson and Hugh Lawson)

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