Slovenia May Fail to Cut Budget Deficit Below 3%, Kranjec Says

Slovenia will probably fail to cut its budget deficit to below 3 percent of gross domestic product by 2013 as mandated by the euro region’s stability pact, central bank Governor Marko Kranjec said in an interview with Demokracija.

“Current trends show this will be very difficult to achieve since our budget gap is still around 6 percent,” Kranjec was quoted as saying by the Ljubljana-based magazine in a preview of an interview to be published tomorrow. “The problem is the primary deficit, which is the difference between expenditures and receipts excluding interest payments. If we don’t cut the primary deficit we will still be on ratings companies’ watch lists.”

The Slovenian banking system’s liquidity has improved since December, when the European Central Bank offered three-year loans to lenders, Kranjec said.

“Refinancing with three-year loans through the ECB is a good measure, which will enable the government to borrow money, but probably at a higher cost,” Kranjec, who’s also a member of the ECB governing council, said.

Slovenian banks will set aside about 900 million euros ($1.16 billion) for 2011 to cover bad loans and asset writedowns, according to Kranjec.

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