Slovenian Premier Battles to Keep Post After Losing Majority
Slovenia’s Prime Minister Janez Jansa battled to keep his post and push on with an economic overhaul as the country lurched toward early elections and a bailout after his coalition split over graft allegations.
Jansa was left short of the 46 votes needed to pass laws after the Citizens List party decided to abandon the coalition following a report by the anti-graft agency which accused him of failing to properly account for his private assets. Other coalition partners have also said they will quit, increasing the risk of early elections for the second time in a year.
Slovenia, on the brink of becoming the sixth euro-area member to ask for international assistance last year, pushed ahead with an overhaul of the economy, including a 4 billion-euro ($5.4 billion) bank recapitalization plan, amid its second recession in three years.
Early elections “would stall the reform agenda and even the implementation of the bad-bank plan will hang in the balance,” Abbas Ameli-Renani, an emerging-markets strategist at Royal Bank of Scotland Group Plc in London, said in a report to clients today. “The government will likely be shut out of international markets and may struggle to finance itself, bringing the possibility of a bailout back to the fore.”
Slovenia may sell as much as 3 billion euros of debt this year to repay maturing credits as yields fall, finance the budget and recapitalize the banking industry, Deputy Finance Minister Dejan Krusec told reporters in Vienna Jan. 15.
The former Yugoslav republic sold $2.25 billion of 10-year bonds in October with a yield of 5.7 percent on increased demand on the U.S. debt market. The yield on the notes was 4.902 percent at 3:51 p.m. in Ljubljana, down 0.03 percentage point from yesterday, according to data compiled by Bloomberg.
“The best option for a bond sale for Slovenia would be to retap the existing bond that we successfully sold on the U.S. market in October,” outgoing Finance Minister Janez Sustersic told reporters in Ljubljana today. The country should have no problems in financing its budget until June when “a large chunk” of maturing debt is due, he said.
Sustersic, who stepped down yesterday when his Citizens List party left the Cabinet, had helped pass legislation to create the so-called bad bank that will take non-performing loans from lenders such as Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor. In exchange, the institutions would receive government-guaranteed bonds.
The Pensioners’ Party and the People’s Party, also members of the five-way coalition, have said they may quit in the coming weeks after the anti-graft agency found Jansa failed to declare more than 200,000 euros in private assets. The premier has called the omission an accident.
“The economic situation in the country is serious,” Jansa told reporters in Ljubljana yesterday. Early elections would mean “a stalemate for several months” and there would be no guarantee they would produce “a more stable government,” he said in explaining in part why his Cabinet will continue to push forward with its agenda.
The cost of insuring the debt with five-year credit-default swaps, which rise as perceptions of creditworthiness worsen, increased 3 points from yesterday to 270 by 3:56 p.m. in Ljubljana, according to data compiled by Bloomberg.
An early vote also “wouldn’t be helpful” in efforts to approve neighboring Croatia’s European Union accession treaty as Slovenia needs a two-thirds majority to do that, Jansa said yesterday. The former Yugoslav republics are locked in a legal dispute over a banking dispute. Croatia wants to become the bloc’s 28th member in July.
“There are intensive talks going on to solve the ratification of Croatia’s EU accession treaty and I think it’s my duty to do this in February,” Karl Erjavec, Slovenia’s Foreign Minister and leader of the Pensioners Party said in an interview with public broadcaster TV Slovenija late yesterday.
The Pensioners Party will decide Feb. 5 on whether to leave the government by Feb. 22.
Gross domestic product fell 3.3 percent from a year earlier in the third quarter, the third-biggest drop in the euro region after Greece and Portugal, as consumption slumped and exports to Europe eased.
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