Slovenia Wants to Borrow $5.4 Billion as Aid Risk Grows

Slovenia plans to borrow as much as 4 billion euros ($5.4 billion) next year to repay maturing debt and finance the budget as talk of a possible bailout for the nation’s ailing banks intensifies.

The government approved a two-year budget spending program, which includes a plan to narrow the budget deficit to 3.3 percent of gross domestic product in 2014 from this year’s estimate of 4 percent excluding aid for banks, Finance Minister Uros Cufer said in the capital Ljubljana today. The country doesn’t need a bailout immediately, Cufer said, rejecting a call from opposition politicians to speed up request for assistance.

“We plan to borrow as much as 4 billion in 2014,” Cufer told reporters. “At the moment we don’t see the need to consider a bailout as we first have to deal with the budget and then the results of bank stress tests and asset quality reviews.”

The Adriatic nation has been the focus of a possible bailout since March after the European Union and the International Monetary Fund devised a rescue plan for Cyprus that triggered a sell-off in weaker euro-region economies and exposed Slovenia’s ailing bank industry. The country’s non-performing loans equal more than a fifth of its economic output.

Prime Minister Alenka Bratusek has pledged to fix the banks by raising their capital and shifting non-performing loans to a bad bank, a move delayed by a dispute with the EU over the lenders’ capital needs and the value of their bad assets.

Jansa, Delay

Slovenia should ask for financial assistance from its European partners as any delay drives the cost of the rescue plan higher “by the day,” former premier Janez Jansa, leader of the Slovenian Democratic Party, the biggest opposition group, said today in Ljubljana at a separate event.

Slovenia has enough cash reserves to finance the budget and aid banks without seeking more funds on the international debt market this year, Cufer reiterated today. The government has set aside 1.2 billion euros to recapitalize the largest banks including Nova Ljubljanska Banka d.d., he said.

Jansa’s statement “underscores increased talk of seeking foreign assistance across different layers of Slovenia’s political landscape,” Abbas Ameli-Renani, an emerging-markets strategist at Royal Bank of Scotland Group in London said in an e-mail. “The taboo is broken and it implies that if the government does decide to seek foreign assistance, it can do so without much domestic political resistance.”

Bratusek first mentioned last week that the government and the nation’s central bank are discussing the option of aiding banks via the European Stability Mechanism, the euro-region’s rescue fund. She said that is just an option for the country, not a done deal.

Talk of a bailout “is positive in the sense that the sovereign credit should be able to get away without too much domestic political noise should the ESM come to the fore,” Ameli-Renani said.

The yield on the nation’s dollar-denominated bonds maturing in 2022 advanced 5 basis points from Friday’s close, or 0.05 percent, to 6.53 percent at 2:46 p.m. in Ljubljana, according to data compiled by Bloomberg.

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