Slovenia should work on fixing its banks and overhauling the pension system and labor market before requesting aid, said Angel Gurria, the secretary general of the Organization for Economic Cooperation and Development.
“Why don’t we spend some time trying to go for the pension reform in Slovenia, labor market reform, the banking reform, the budget adjustment process, the state-owned enterprise changes,” Gurria told reporters on the sidelines of a business forum in the Alpine resort of Bled, Slovenia today. When these changes are passed “and the markets are still attacking, then I would say, yes let’s ask the family to help. Are we there yet? Certainly not,” he said.
Slovenia may be on course to become the sixth euro-region member to ask for international assistance for its banking industry, which is relying on European Central Bank loans for liquidity. The export-oriented economy shrank an annual 3.2 percent in the second quarter, adding to concern the government of Prime Minister Janez Jansa will struggle to lower the budget gap, which swelled to 6.4 percent of total output last year.
Moody’s Investors Service, Standard & Poor’s and Fitch Ratings downgraded the former Yugoslav nation last month as the need for additional capital at state-owned lenders such as Nova Ljubljanska Banka d.d. is likely to further burden state finances. All three rating companies kept a negative outlook on the sovereign.
Slovenia’s borrowing costs surged to over 7 percent last month, a level that forced Ireland and Portugal to ask for a bailout.
The government in the capital Ljubljana has repeatedly said it will not ask for aid.