Slovenian Prime Minister Alenka Bratusek said the government needs more time to repair public finances as an asset-sale plan failed to quell concern that the euro-area nation will be next to seek a rescue.
Bratusek called fiscal-consolidation plans drawn up by the previous government “ridiculous” and said assumptions in this year’s budget were too optimistic. Slovenia’s default risk rose to a six-month high before a planned debt sale tomorrow and bond yields advanced toward records even after the premier announced plans to sell shares in state-owned companies.
“The situation in the budget is more serious than I thought” when in opposition, Bratusek said last night in a television interview in Ljubljana. “The situation is not good, but we will take measures to improve it.”
Slovenia, the fourth-smallest economy in the euro area, is trying to avoid becoming the sixth euro-area state to seek a bailout after international lenders agreed to help Cyprus. The month-old Cabinet will sell 500 million euros ($652 million) in 18-month Treasury bills as it tries to raise confidence it can recapitalize its ailing banks without seeking outside aid.
The cost of protecting Slovenian debt against non-payment using credit-default swaps fell two basis points to 376 from yesterday’s six-month high, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
The yield on Slovenia’s dollar-denominated benchmark bond maturing in 2022 is close to record levels after the Finance Ministry missed its target in last week’s auction of Treasury bills by almost half. It was little changed at 6.27 percent as of 6:19 p.m. in the capital, Ljubljana, compared with a March 27 high of 6.38 percent.
Unemployment held at 13.6 percent in February, matching the highest rate since 1999 and more than double a low of 6.3 percent in September 2008, the statistics office in Slovenia said today in a report.
Slovenia will need more than two years, as envisioned by the previous government, to narrow a budget deficit that reached 3.7 percent of gross domestic product in 2012, according to Bratusek. This year’s gap will widen to 5.1 percent, the European Commission predicts.
“It’s important though to keep the problems of Slovenia in perspective,” Jorg Decressin, deputy director of the IMF’s research department, said at a press conference today.
“The problems that Slovenia is experiencing in the banking system can be addressed through support from the government for recapitalization and restructuring,” Decressin said. “Then the country can move forward, but it’s important that this is done expeditiously.”
To help trim the shortfall, the government is considering measures including raising the value-added tax, Bratusek said. To protect the economy, the planned bank-recapitalization plans are “the No. 1 priority for the government,” she said.
Funds for the bank rescue may come from the sale of state assets announced by Bratusek on April 12. Details will be submitted to lawmakers in two weeks.
The government plans to sell “one of the bigger companies,” though it hasn’t yet decided which, Bratusek said yesterday. It doesn’t plan to sell the Luka Koper (LKPG) port operator or energy assets, which should be developed as strategic holdings, she said.
The asset-sale plan, which includes a bank, may be an attempt to stall rather than to obtain financing, according to Milan Smiljanic, head of trading at Perspektiva d.d.
“There is skepticism that they are only buying time and will try to fix debt problems, avoiding privatization,” Smiljanic said yesterday by e-mail from Ljubljana. “There are no bank bidders at the moment.”
The government sold 56 million euros of six-month and one- year Treasury bills on April 9, falling short of its target and reigniting concern that it will need international assistance. It’s seeking to buy back early as much as 855 million euros of 18-month notes due June 6, the Finance Ministry said in a statement on its website last week.
Slovenia holds stakes in Nova Ljubljanska Banka d.d. and Kreditna Banka Maribor d.d., the country’s two biggest lenders. Insurer Zavarovalnica Triglav (ZVTG) d.d. -- itself a possible privatization target -- is the single largest shareholder in No. 3 bank, Abanka Vipa d.d.
Bratusek, Slovenia’s first female prime minster, is viewed negatively by 42 percent of the nation, according to an April 8-11 survey of 610 people conducted by the Delo Stik agency and published yesterday in the Delo newspaper. No margin of error was given.
Even if the government manages to draft a plan in the time frame it set, credible implementation won’t be quick, according to James Howat, an analyst at Capital Economics Ltd. in London.
“Slovenia will also need to move toward politically unpopular privatizations given that poorly managed state-owned banks are at the heart of the current crisis,” Howat said yesterday in a note to clients. “The government has pledged to retain blocking stakes in any privatized bank, which may discourage potential buyers.”