The country is grappling with a credible strategy to enable it to raise funds to remain solvent. Slovenia needs to present a suitable economic reform programme to the European Commission later this week. By selling state-owned bank Nova KBM and telecoms firm Telekom the government hopes it will be able to avoid an international bailout.
The Bank of Slovenia has urged the government to speed up privatisations in sectors where “the market is more effective than state ownership,” but gave no further details. Due to the €7bn total of bad loans amalgamated by the mostly state-owned Slovenian banks, it is likely they will have to be separated into a standalone entity before the sector can be privatised. It also stressed the importance of the government helping financially troubled companies with good prospects, as the future ventures could result in a healthy pay-back to the banks.
The financially troubled NKBM, which is 80 percent owned by the state, has a market capitalisation of €90m if the government follows through on plans to move bad loans to another bank in order to ease a credit crunch. In selling the 74 percent state-owned Telekom, the government hopes to raise hundreds of millions thanks to its market capitalisation of €624m.
EU Economic and Monetary Affairs Commissioner Olli Rehn said Slovenia would not need a bailout if it reacted quickly to bring down its budget deficit. The country successfully raised $3.5bn via a bond sale which should stave off the need for a bailout until next April, when it will have to repay a five year €1.5bn bond.
Despite reducing its deficit to four percent of GDP in 2012, from 6.4 percent in 2011, Slovenia has not done enough to meet its budget deficit target of three percent. The European Commission has forecast this year’s deficit at 5.3 percent.