Slovenia May Use Deposits, Sell Bonds, to Repay Debt in 2012
Ljubljana Mayor Zoran Jankovic, whose party won Dec. 4 snap elections, would repay debt maturing next year by using deposits from state-owned banks and selling new bonds should he succeed in forming a new government.
Slovenia, whose borrowing costs breached 7 percent in November, may raise as much as 4 billion euros ($5.37 billion) next year, according to the Finance Ministry in Ljubljana. The sum includes 907 million euros from yesterday’s sale of 18-month Treasury bills.
“It’s paramount to lower the yields on our securities, which can be done by revising 2012 budget spending and freezing wages and spending,” Jankovic said in an e-mailed response to questions. “This will be a first signal to the markets that Slovenia can control its public spending.”
Slovenia, whose credit rating may be cut by Standard & Poor’s along with 14 other euro-region nations, will need to trim spending and spur the faltering economy as German Chancellor Angela Merkel and French President Nicolas Sarkozy push European leaders to accept new rules to restore investors’ trust in the single currency. Slovenia adopted the euro in 2007.
The government holds 3.5 billion euros of cash in the form of deposits at state-owned banks to ensure the stability of the system, the Finance Ministry said in September.
The yield on Slovenia’s 10-year bonds dropped last week after five central banks moved to ease dollar liquidity. The yield rose to a record 7.77 percent on Nov. 11. The notes were trading at 6.57 percent in Ljubljana, compared with yesterday’s 6.70 percent, according to Bloomberg data.
Slovenia’s rating was lowered one level by S&P, Moody’s Investor Service and Fitch Ratings beginning in September. They cited fiscal concerns, a weak domestic banking industry and a poor outlook for the export-driven economy. It’s now rated AA- at Fitch and S&P, the fourth highest investment grade, and Aa3 at Moody’s.
The former Yugoslav republic needs to repay 1.17 billion euros in bond principal next year, according to Bloomberg data. Gyula Toth, the chief strategist for central and eastern Europe at UniCredit SpA in Vienna, estimates the country may need to raise 3 billion euros in 2012 to repay debt and finance the budget.
Jankovic’s party Positive Slovenia is seeking partners to form a coalition government after a surprise victory. Former Premier Janez Jansa, who led Slovenia into the euro region, came in second place.
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