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Slovenia Hoping for Soon Recovery

Published: May 21, 2013; 11:20 · (Vindobona)

Crisis-struck Slovenia intends to make more room financially by starting to privatize its state-owned banks. Experts regard the process to be carried out too slowly.

Slovenia Hoping for Soon Recovery / Picture: ©

Finance Minister Uros Cufer announced a respective program starting in September. The country plans for further earnings so an EU bail-out package can be avoided. According to Cufer it will take two or three quarters until the program can be realized. The Slovenian Finance Minister did not disclose which companies will be privatized first.

Recently, the government named 15 enterprises which are ready to be sold. Among them are Nova KBM, the second biggest bank of the country, the leading telecommunication corporation, the airport in Ljubljana and the airline Adria Airways. According to analysts, the privatization measures could gain up to € 750m. However, the government’s plans are controversial. Slovenia has borrowed almost € 3bn by the selling of two bonds at the capital market. Therefore, the pressure has decreased to act very quickly.

At the end of May, a statement by the EU Commission to the Slovenian reform package is expected. Among experts, the package is controversial and it has been noticed that the reforming zeal has decreased remarkably after the state bonds were sucessfully sold. Furthermore, among the state-owned enterprises the government tries to sell there are hardly any “treats”. Only the selling of Telekom Slovenije is considered attractive for potential buyers, according to experts. Morgan Stanley estimates that a privatization on a large scale would be helpful for the Slovenian budget restructuring. Other than in most Eastern European countries, the majority of the econmy is still in state hands, which led to the fact that Slovenia is lagging behind in foreign direct investments in CESEE. The high quota of state-owned enterprises has caused the problems in the banking sector, according to the analysis by Morgan Stanley. The non-performing loans in state banks are estimated at 20 to 35 percent. Only when the part of private banks is included, the share of non-performing loans in Slovenia comes at 15 percent. Only Greece, Ireland and Hungary show a higher figure, among OECD countries.

Non-performing loans in the amount of € 3.3bn are supposed to be deposited at a bad bank starting from June. In return, banks are supposed to receive state bonds as high as € 1.1bn. According to the plan, the share of non-performing loans is supposed to decrease to 8.8 percent of the credit volume in the banks’ financial accounts. However, the bail-out of banks would cost the Slovenian budget dear. Finance Minister Cufer estimates that the budget deficit would surge from currently 51 percent to 71 percent of GDP, which is still below the Eurozone average (90.6 percent). However, since 2008 the state deficit has tripled in Slovenia. Furthermore, Slovenia holds state guarantees in the amount of 25 percent of GDP.

Morgan Stanley considers Slovenia as a boom-and-bust economy. Construction activity above average and a high incrase of credits have enhanced GDP growth in the decade of the 2000s. The bubble burst in 2009. Among CESEE countries, only Hungary has been performing worse. Moreover, Slovenia has to fight poor demand in exports and a weak domestic consumption. The EU Commission estimates a decrease of GDP of two percent for 2013.