Sept. 30 (Bloomberg) -- Slovenia’s outgoing government proposed limiting state-guaranteed loans to 20 percent of gross domestic product, excluding its contribution to the European Union rescue fund, as the nation seeks to cut public spending.
The government, which was ousted on Sept. 20, also proposed capping public debt at 48 percent of total output, the Cabinet said on its website. That compares with a previous proposal of 45 percent, which was surpassed in the first three months and stood at 45.2 percent. The euro-region stability pact foresees a limit of 60 percent of public debt versus GDP.
“We are on track to cut spending, although some of the one-time measures like capital boosts for a bank, state railways and the national air carrier have somewhat worsened the picture this year,” Finance Minister Franc Krizanic said in Ljubljana.
Slovenia, which joined the euro region in 2007, had its credit rating cut one level by Fitch Ratings and Moody’s in the past week on weaknesses in its banking industry, a poor economic outlook and concern that political uncertainty may undermine cuts in public spending. Fitch also reduced the credit score of seven Slovenian banks, including the two largest, Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d., in which the state keeps a majority.
The government keeps 3.5 billion euros ($4.7 billion) of its cash from the sale bonds as deposits with Slovenian banks to ensure the stability of the system, Finance newspaper said today, citing the Finance Ministry. The Ljubljana-based newspaper said Slovenia may need to sell more government debt by the year’s end, without saying where it obtained the information.
Problems with liquidity can be solved by resorting to financing by the European Central Bank, Nova Ljubljana Chief Executive Officer Bozo Jasovic said yesterday at a business forum in Portoroz, Slovenia.
Lawmakers approved the nation’s guarantees of 3.66 billion euros to the European Financial Stability Facility on Sept. 27 after the collapse of the government raised concern about a possible delay.
Fitch ratings said the banking industry may need as much as 3.1 billion euros of fresh capital. Nova Ljubljanska, the country’s biggest lender, is seeking to raise 400 million euros by the end of the year.
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