Article Tools

Slovenia in a Vicious Circle

Published: August 31, 2012; 22:51 · (Vindobona)

Slovenia´s Prime Minister Janez Jansa warns that his country may has to announce its national bankruptcy in October.

Slovenia in a Vicious Circle / Picture: ©

Slovenia needs help from the EU, economists say. “In October, a national bankruptcy may come if we cannot sell sovereign bonds.” Prime Minister Jansa said. At the moment, taking up loans is almost impossible, he says.

Experts think that Slovenia will not manage the crisis on its own. According to the Slovenian economist Joze Damijan, Slovenia will have to ask for bank aids from the EU. The other alternative is that Slovenia must be bailed-out by the safety net.

Slovenia already is in a recession. Against the first quarter, Slovenia´s GDP decreased by 1.0%. Compared to the second quarter in 2011, GDP fell by 2.2%.

In 2012, the country´s economy will shrink by 3.2%, the Slovenian Statistical Office announced. Exports were down by 0.5%. As Slovenia exports about 70% of its industrial production, a shrinking exporting industry would hit the economy hard. Moreover, domestic consumption fell by 6.8%. Public expenditures went down by 2.0% and private consumption decreased by 3.0%.

In the last weeks, Slovenia´s creditworthiness was downgraded by the three big rating agencies. Also the banking industry suffers from worse ratings.

In total, bad loans in the Slovenian banking sector may come at € 8.0bn. At the moment, the Slovenian government tries to establish a bad bank holding for NLB, NKBM and Abanka Vipa. However, the Slovenian budget deficit would explode. With an expected deficit of up to 28%, Slovenia would not be able to take up capital anymore.

Prime Minister Jansa intends to pursue a strict austerity policy now. However, the Slovenian opposition rejects to resolve a debt brake.

Fast News Search