Slovenian finance officials said they would issue new Treasury bills and then retire as much as €855 million in outstanding debt, moves that will reflect the country's ability to avoid an international bailout.
Slovenian Prime Minister Alenka Bratusek and other leaders insist the country isn't going to follow the same path as Cyprus, which required a bailout from the European Union and International Monetary Fund after being dragged down by its own sickly financial sector. The government is working to create a bank-debt resolution agency, or bad bank, to take over non-performing loans from struggling lenders. It is also moving to deal with public-debt obligations—more than €1 billion of which comes due in June.
Since Cyprus's traumatic rescue—one that involved an extended bank holiday, capital controls and will impose large losses on uninsured bank depositors—investors have cast a wary eye on Slovenia, helping drive up yields on the country's sovereign debt as well as the cost of insuring it.
Successful transactions could ease some of the pressure, analysts said. But even so, the country faces steep challenges. The costs of the bank sector clean-up are seen running between €3 billion and €4 billion, or around 10 per cent of the country's total annual economic output.
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