IMF urges Slovenia to recapitalise banks

Bank recapitalisation is an urgent issue that must be addressed immediately, IMF says

Slovenia must immediately address the issue of recapitalising its banks, the head of the International Monetary Fund’s mission to the country said .

Slovenia is struggling to avoid becoming the next eurozone state to take an international bailout under the weight of 7.9 billion euros ($10.9bn) of bad loans in the mostly state-owned banking sector.

“Bank recapitalisation is an urgent issue that has to be addressed immediately,” Antonio Spilimbergo told a news conference in Ljubljana.

Bank of Slovenia’s governor, Bostjan Jazbec, who also sits on the European Central Bank’s governing board, said it was unclear whether Slovenia will recapitalise its banks later this year or next year.

“We have to wait for the results [of external stress tests of Slovenian banks] … which are due at the end of November and then decisions regarding recapitalisations will be made,” Jazbec told the same news conference.

The government has reserved 1.2 bn euros for recapitalisation of its main banks, but analysts believe the tests may show significantly higher capital needs.

Spilimbergo said that Slovenian authorities were determined to solve the country’s financial crisis by themselves and added that they were taking “strong action” in that direction.

When asked, Jazbec said he was “confident” Slovenia would be able to avert a bailout.

Spilimbergo also said Slovenia cannot afford its present pension system and that reform of management at public-sector companies is needed, adding: “We strongly believe that privatisation is important in Slovenia right now.”

The government hopes to avert a bailout by raising taxes, cutting spending and through privatisations including telecoms provider Telekom Slovenia.

Slovenia was the fastest-growing eurozone member in 2007, but was badly hit by the global crisis due to its dependence on exports.

Since 2012 it has been in a recession caused by lower demand for its exports, a credit crunch and falling domestic consumption. Reuters © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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