LJUBLJANA (Reuters) - Slovenia expects stress test results for most of its banks in November and it is still unclear if it will have to seek international aid, central bank Governor Bostjan Jazbec said on Wednesday.
Speaking at Reuters’ Eastern European Investment Summit, Jazbec said Slovenia was in daily contact with the European Commission and the European Central Bank, finetuning banking stress tests, the government’s reform plans and next year’s budget as the small euro zone member seeks to avoid a bailout.
Its banks, struggling with at least 7.5 billion euros ($10.12 billion) of bad loans worth some 21.5 percent of GDP, are at the heart of speculation that the country could be the latest to need international aid within months.
“The government has a projection that there is enough money to run the economy without any additional financing until spring 2014,” Jazbec said, speaking in English.
“This gives us some (room), I would not say (it is) a comfortable position, but at least we do not have to panic.”
Jazbec, a member of the European Central Bank’s governing council, repeatedly refused to be drawn on the timing of any decision on seeking aid or on whether the country could find the money needed for an expected recapitalization of the banks.
He said the country would consider asking for assistance from Europe if it had no other means available to finance itself but expressed hope budget and broader economic reforms and a parliamentary confidence vote to back them would restore market confidence.
“If all three measures come together in a credible way that will convince international investors that Slovenia is able to go to international markets at rates that are sustainable..., then we can do it ourselves. If not, we will have to ask for assistance,” Jazbec said.
The next key steps would be the adoption by the end of September of the 2014 budget, and meetings with Eurogroup head Jeroen Dijsselbloem in Ljubljana next week, where Prime Minister Alenka Bratusek’s government will present its reform package.
Also vital were the central bank’s efforts to keep the banking system stable, after ordering a controlled liquidation of two troubled small banks earlier this month, and stability in the ruling coalition, made up of Bratusek’s center-left Positive Slovenia, the Social Democrats, the business oriented Civic List and the pensioners’ party.
Jazbec acknowledged that the transfer of bad loans to a state-sponsored “bad bank”, originally planned for June, appeared to be moving slowly, possibly unnerving investors but said that having a quality screening of the troubled lenders was more important than deadlines.
“Timing is not that important...We can never jeopardize quality only for the matter of timing. The decisions are too crucial to follow only the deadlines,” he said
Slovenia might also have to redo the stress tests next year, as part of European-wide banking tests, he said.
Slovenia has long suffered from political meddling in the economy and public companies, but the government’s efforts to kickstart the long delayed sale of state-owned firms could soon bear fruit, Jazbec said.
“I strongly believe in the next couple of months we will definitely see the first major investments coming in and after that everybody will follow,” he said. “But it’s always the question of who will be the first.”
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Writing by Zoran Radosavljevic; editing by Patrick Graham