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06 May 2013

FT: Brussels trains its sights on Slovenia


The European Commission is being pushed to take a tougher line with Slovenia, amid mounting concerns that infighting is hampering the country's ability to overhaul its banking sector and avoid becoming the next rescue target in the eurozone crisis.

The finance ministry said Slovenia was “aware of its obligations set by the European Commission” and did not believe any extra measures from Brussels were needed.

After last month’s botched Cypriot bailout, Slovenia emerged as the most likely candidate for the eurozone’s next rescue because of the fragility of its banks and the government’s difficulty in raising funds on the bond market. Slovenia’s largest banks are saddled with an increasing number of non-performing loans issued in pre-crisis boom years. A severe recession has exacerbated losses, making it necessary for the government to recapitalise them.

One of the most intrusive options would be to censure Slovenia for failing to correct economic imbalances – a move that would allow Brussels to fine the EU member if it did not quickly implement banking reforms. The option has been advocated by the European Central Bank.

Olli Rehn, the Commission’s economic chief, must decide whether to put Slovenia into a so-called “excessive imbalances procedure” by the end of the month. “The stock of problems is not as vast as for many other countries, but the trend is very negative”, Mr Rehn said. “Slovenia’s economic situation is still manageable provided decisive action is taken without delay.”

Full article (FT subscription required)



© Financial Times


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