Slovenia

The Slovenian economy continued to shrink in the first quarter this year as the small euro-zone nation battled slumping demand for its exports of cars, pharmaceuticals and household appliances, caused by the ongoing economic downturn in Europe’s common currency bloc, The Wall Street Journal Emerging Europe blog reported. First-quarter gross domestic product contracted 3.3% from the final three months of last year, and slipped 0.7% on the year, the national statistics bureau said Friday.

Slovenia needs at least €900m ($1.15bn) by July to refloat one of its struggling banks. This is a large sum of money for a country with a GDP of only €35bn. The question is where to find the funds, The Guardian reported. The public deficit is deepening and investors are beginning to question the country's solvency, to such an extent that it can no longer borrow on the money markets. On 30 April Moody's, the credit-rating agency, downgraded Slovenian bonds to junk status. Both Brussels and the OECD are urging the government to take action. But why is there such a hurry?

Slovenian lawmakers approved changes to the country’s insolvency legislation designed to accelerate corporate restructuring and aid the ailing banking industry, Bloomberg reported. Lawmakers voted for changes the government said will lower the debt burden at companies and spur an economic recovery, according to a live broadcast on public broadcaster TV Slovenija in the capital Ljubljana.

The bailouts of the weakest banks in Slovenia should begin next month, the country's finance minister told CNBC on Tuesday, but he insisted that he is not concerned with the time-frame of the process. Uros Cufer said the first assets would be transferred to the nation's so-called bad bank by the end of June, with the exercise due to be completed by the third quarter. Slovenia plans to move 3.3 billion euros of bad loans from its three largest banks, NLB, Nova KBM and Abanka Vipa, to the bad bank in return for state guaranteed bonds worth 1.1 billion euros.

Slovenia pledged to sell 15 state firms and raise VAT on Thursday in a desperate bid to avoid an international bailout, but gave little detail and delayed the spending cuts investors say are needed to stabilise its finances, Reuters reported. The much-anticipated package offered no timeframe for the sell-off of state firms including the country's second largest bank, its biggest telecoms operator and the national airline. Nor did it say how much they were worth. It also said cuts to the public sector wage bill would have to await the outcome of negotiations with unions.

For years, Slovenia cruised along unchallenged as a eurozone member before bond markets smelled trouble and started speculating that it could be the next bailout candidate, the Financial Times reported. With very low levels of sovereign and personal debt, and a boom in 2006-07 before the financial crisis, this picture postcard country of 2m people built a gleaming new road network and adopted the trappings of a well-to-do central European state.

Financially troubled Slovenia bought itself some breathing room Wednesday by raising more than $1.3 billion with a bond sale, easing fears that near-term funding problems could force it into an international bailout, The Wall Street Journal reported. But the former Yugoslav republic that for years was seen as post-communist success story still faces serious challenges as it tries to shore up an ailing banking sector and revive growth in its flagging economy.

The cost of fixing Slovenia's banking sector could be significantly higher than estimated, the Organization for Economic Cooperation and Development said Tuesday, The Wall Street Journal reported. Slovenia's government may exceed its estimate of the €1 billion ($1.3 billion) needed to boost the capital of the country's ailing banks because it has based its cost estimates on a "most likely already outdated" analysis, the OECD said.

Slovenia's creditworthiness is deteriorating at the fastest pace in the world after Cyprus as investors speculate a banking crisis will force it to follow the island nation and become the sixth euro country to need aid, the Irish Times reported. Credit-default swaps insuring Slovenian debt for five years soared as much as 66 percent to a six-month high of 414 basis points on March 28th from 250 on March 15th, the last trading day before Cyprus announced plans for its rescue.

For years, Slovenia was on the fast track. It was the first former socialist country to adopt the euro. Construction boomed. The economy grew an average of 4.4% annually from 1997 to 2008. These days, however, the euro crisis has shattered Slovenia's highflying dreams. After three years of recession, frustration is mounting among a populace angry at lost opportunities, cuts to once-generous state benefits and government corruption scandals, The Wall Street Journal reported.