Bailout Nr. 5? Euro Zone Eyes Slovenia'sáTroubled Banks
The euro crisis has been on the back burner lately, but the problems facing banks in Slovenia are coming to a head. Billions of euros in bad loans make the country a candidate for the next bailout.
Euro zone finance ministers are reportedly considering whether Slovenia may need outside aid to shore up its banking system. The German business daily Handelsblatt reports on Thursday that the Eurogroup is due to discuss the country at its next meeting on Friday.
Slovenia was the first former Yugoslav republic to join NATO and the EU, and was once hailed as a model for other former socialist European democracies seeking to establish competitive economies. But its rising standard of living appears to have been built in part on bad credit.
The Slovenian government last week announced it would liquidate two small private banks, Factor Banka and Probanka, and would put up 1.3 billion to guarantee the banks' liabilities. The central bank governor said the measures were to help avoid a run on the country's other banks.
Handelsblatt also cited unnamed sources in the euro zone as saying the European Central Bank would likely have to grant Slovenian banks "emergency liquidity assistance" (ELA) -- something Cypriot banks received in great quantities in the run-up to that country's sovereign bailout announced in March.
The government in Ljubljana desperately wants to avoid becoming the fifth euro-zone country to accept an international bailout of state finances. The four countries that have already done so -- Greece, Ireland, Portugal and Cyprus -- have been forced to push through draconian budget cuts and tax hikes that have faced fierce resistance from voters. Spain also received emergency loans from the EU for its banking system, but avoided a full government bailout.
acb -- with wires
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