Eurogroup encouraged by Slovenian reforms, but stresses urgency

By bne IntelliNews May 14, 2013

bne -

Slovenia must take "swift and decisive" action to address its economic imbalances, Eurozone finance ministers warned on May 13 in Brussels, while agreeing to new aid tranches for bailout recipients Greece and Portugal.

Slovenia is looking to avoid becoming the next Eurozone country to join that pair in needing a rescue. To that end, Finance Minister Uros Cufer updated his counterparts on the new government's reform programme, which was unveiled on May 9 and aims to restructure the country's ailing banks, sell state-controlled companies - including a bank, an airline and the country's main telecommunications company - cut spending by €716.5m, and raise extra revenue to the tune of €650m.

The Eurogroup - the moniker given to the finance minister meeting - said it is encouraged by the plans, but added that Slovenia needs to take "very decisive policy action without delay" to stabilise its struggling banking sector in particular. The mostly state-owned banks have bad debts worth about 20% of GDP.

EU Economics and Monetary Affairs Commissioner Olli Rehn said that the European Commission is also "encouraged" by Ljubljana's plans to repair its banks and restore its public finances, but warned that it is "too early to say whether the proposed programme will be a sufficiently strong response ... There is absolutely no time to waste."

"We agreed that the Slovenian government has to take swift and decisive action to address the country's imbalances and implement a comprehensive reform strategy," Jeroen Dijsselbloem, head of Eurogroup reported. "First and foremost, Slovenia needs to restore trust in the resilience of its banking sector."

No official assessment of Slovenia's economic situation is expected until May 29, when the European Commission releases its country-by-country recommendations. However, unnamed officials were cited behind the scenes as saying that the measures outlined by Ljubljana last week are not enough.

"We will have to push them on it," one EU official told Reuters. "It's not enough yet." A colleague backed that view up. "It is still not a consistent and forceful programme," he said.

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