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Slovenia Debt Rating Cut by Fitch, Joining Moody’s, S&P

Slovenia’s debt rating was cut to the fourth-lowest investment grade by Fitch Ratings, which said the country’s banks need more capital as it followed other credit evaluators that downgraded the country in the past week.

The rating was lowered to A- from A with a negative outlook, the rating company said today in a statement. That’s the seventh-highest investment grade and on a par with Poland, Italy and Malaysia.

The downgrade follows cuts by Moody’s Investors Service and Standard & Poor’s last week as Slovenia risks becoming the sixth euro-region member after Greece, Ireland, Portugal, Spain and Cyprus to require a rescue. The nation’s biggest banks -- Nova Ljubljanska Banka d.d., Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. -- rely on the European Central Bank for liquidity.

“The lack of a timely and credible bank recapitalisation plan continues to put pressure on the rating,” Fitch said. “The sovereign’s funding conditions have also deteriorated, and could make it difficult for the government to finance fiscal and bank recapitalisation requirements.”

Slovenia’s government will probably need to inject 2.8 billion euros ($3.5 billion) of capital into the country’s banks this year and next, raising state debt to 63 percent of gross domestic product by 2014 from 47.6 percent in 2011, Fitch estimates. The government risks further rating downgrades if it’s unable to provide the financing, Fitch said.

Slovenia’s export-driven economy is on the brink of a second recession in three years as demand for its goods in Europe fades amid a sovereign-debt and banking crisis. The economy will probably contract 1.1 percent in 2012, Fitch said.

Moody’s lowered the rating three levels to Baa2, the second-lowest investment grade, and maintained its negative outlook. S&P cut the rating to A, five steps below the top investment grade, from A+, on Aug. 3.

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