The Slovenian Parliament has approved a bill allowing the government to use up to €4.7 billion for a rapid recapitalisation of the main banks in difficulty, owned predominantly by the Slovenian State.
Finance Ministry State Secretary Mateja Vraničar told the Finance and Monetary Policy Committee shortly before the plenary vote at the extraordinary session that the bill would allow for much faster recapitalisations than possible through the Bank Asset Management Corporation (BAMC).
Under the changes, the recapitalisation would be financed with loans (capped at €1 billion in 2013 under the budget implementation act) and existing liquid assets in the budget. The liquid assets encompass the state's deposits in total of €3.5 billion, which includes €1.2 billion earmarked for bank recapitalisation in the 2013 budget, and some €200 million intended for company recapitalisation that could be transferred from the budget B-balance sheet.
The coalition Social Democrats (SD) MP Matevž Frangež said at the plenary that "extraordinary times called for extraordinary measures".
President of opposition People's Party (SLS) Franc Bogovič was very critical, saying that the changes strip the National Assembly of its powers, leaving the government free to decide about which toxic loans to transfer to BAMC and how big the taxpayers' burden would be.
The opposition Democrats (SDS) MP Andrej Šircelj pointed out that it was parliament rather than the government that was in charge of public finance, while New Slovenia's (NSi) Jožef Horvat labelled the move a "crude violation of parliamentary democracy or even its end".
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Meanwhile Reuters reports that Slovenia is expected to need as much as €5 billion to recapitalise its banks, a figure some officials say would not require an international bailout. The banks are nursing some €8 billion in bad loans, equivalent to almost one quarter of economic output, raising speculation that Slovenia, with a population of just 2 million, might become the sixth eurozone economy to need outside help.
On December 13, the government will receive the results of an external audit of the banks, which will say how much cash the government must inject to keep them afloat. A source close to the government of Prime Minister Alenka Bratusek told Reuters last week that the country was able to cope with a gap of €4.6 billion.
Slovenia's stock market suspended trade in its banks' shares and junior bonds on Monday, until the publication of results of bank stress tests next week. Credit-rating agency Fitch has said that under the worst-case scenario, Ljubljana will have to recapitalize its mostly state-owned banks with €4.6 billion euros - far more than the €1.2 billion it has set aside.
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© Slovenia Times
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