Slovenia, which hasn’t sold any benchmark debt this year, is doing “all it can” to ensure its return to borrowing markets, Finance Minister Janez Sustersic said in Ljubljana today.
“We are not talking about bonds only, but the whole package of reforms that are on course to be implemented,” Sustersic told reporters after the International Monetary Fund completed its visit to the country. “Details on when, on which markets and in which currency cannot be disclosed.”
Slovenia plans to sell its first dollar-denominated debt, a $1.5 billion 10-year issue, by December to minimize the impact of the European debt crisis on its own borrowing costs, Sustersic said last month.
The Adriatic nation scrapped a planned bond sale in April after borrowing costs for Spain surged to a record amid investor concern the government may struggle to manage its debt. The yield on Slovenia’s benchmark bond hovered above the 7 percent mark for most of August, a threshold that forced Ireland and Portugal to ask for an international aid package.
“I have no information that Spain is on course to ask for a bailout,” Marko Kranjec, member of the Governing Council of the European Central Bank said at the same event.
Slovenia is working on stabilizing its ailing banking industry and overhauling the labor market and pension system to avoid asking its euro peers for assistance.
“If Slovenia implements all reforms there will be no need for a bailout,” Antonio Spilimbergo, an official at the International Monetary Fund told reporters at the same event. “The IMF is always ready to help, but the decision for an aid request must come from the Slovenian government.”
The Washington-based lender is forecasting Slovenia’s export-driven economy will shrink 2.2 percent this year and continue to be in recession next year until a modest recovery in 2014, Spilimbergo said. That compares with a central bank estimate of a 1.8 percent contraction for 2012 and a 2 percent drop in gross domestic product by the government’s economic institute.
The government of Prime Minister Janez Jansa proposed legislation to create a so-called bad bank that would take non-performing loans from lenders in exchange for government-guaranteed bonds of as much as 4 billion euros ($5.2 billion), according to Finance Minister Sustersic.
“Privatization is a fundamental way to solve banks’ problems and lower the debt burden of the corporate sector,” Spilimbergo said today in Ljubljana. “The biggest risk with the creation of a ‘‘bad bank’’ is that it may take too long to dispose of assets.”