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Slovenia PM says aid for banks a possibility
September 26, 2013 / 11:45 AM / in 4 years

Slovenia PM says aid for banks a possibility

LJUBLJANA, Sept 26 (Reuters) - Slovenia’s prime minister for the first time said she had discussed the “possibility” of international help for its banks on Thursday, adding to signs the country may be inching closer to an aid request later this year or in early 2014.

Central bank and other officials have been saying for weeks that it would be a tight call whether the small euro zone member would be able to recapitalise its struggling lenders on its own once it sees the results of stress tests, now expected in November.

With financial markets watching keenly for signs of another euro zone rescue in the works, Prime Minister Alenka Bratusek said nothing could be decided until the stress tests were completed.

But she had always publicly denied previously that a bailout was even a possibility.

“We are talking with the Bank of Slovenia also about that possibility, about what it would mean to get help for the banking sector ... but there is no need to speculate from that that Slovenia would actually need help,” she told a news conference after a regular government session.

All euro zone members have the option of asking for financial aid from the European Stability Mechanism, established in 2012 to provide financial assistance to member states in difficulty.

Slovenian banks, mostly state-owned, are struggling with some 7.5 billion euros ($101.31 billion) of bad loans which equals 21.5 percent of GDP and are at the heart of speculation that the country could ask for a bailout in the coming months.

Slovenia has until Oct 1 to present its reform programme to the European Commission, revealing steps that should reduce budget deficit to 3 percent in 2015 from 7.9 percent seen this year.

On Monday Eurogroup head Jeroen Dijsselbloem will visit Ljubljana for talks on reforms.

Slovenia was the fastest growing euro zone member in 2007 but was badly hit by the global crisis due to its dependency on exports.

It fell into a new recession in 2012 amid lower export demand, credit crunch and a fall of domestic spending caused by budget cuts. ($1 = 0.7403 euros) (Reporting by Marja Novak; editing by Patrick Graham)

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