Slovenia can manage bank strains without outside help
(BRUSSELS) - Slovenia, where troubled banks need about 4.8 billion euros ($6.6 billion) in fresh capital, can solve the problem on its own and does not need an international bailout, the EU said on Thursday.
Having taken remedial action, it is now "clear that Slovenia can proceed with the repair of its financial sector without turning to her European partners for financial assistance," EU Economic Affairs Commissioner Olli Rehn said.
There had been concerns that Slovenia might follow Spain in seeking help for badly over-extended banks which threatened to bring the whole economy down.
The EU, helped by the International Monetary Fund, has so far bailed out Greece twice at the cost of about 230 billion euros in direct aid, and rescued Ireland, Portugal and Cyprus.
The huge cost of the bailouts and the economic slump have tested the bloc to the limit but also prompted a huge reform effort, including new measures to police the banking system.
"When the Commission concluded eight months ago that the Slovenian economy was suffering from excessive imbalances, I stated that the situation was still manageable provided swift and decisive policy action was taken," Rehn said in a statement.
"While significant challenges remain, I am pleased to say that this has so far been the case," he said.
That Slovenia does not need help "is good news and demonstrates both the paramount importance of decisive action ... and the fact that the overall economic recovery of the eurozone is now solidly underway," he added.
Slovenia central bank governor Bostjan Jazbec said earlier that "after this recapitalisation, Slovenian banks will be the best capitalised in Europe".
Slovenia is also setting up a 'bad bank' to hold the soured loans and other bad assets of the rescued lenders so that the banking system can get back on track in an economy which has been in recession since 2011.
Rehn said that with the banks covered, it was "also critical that Slovenia moves forward with the broader economic reform agenda".
"Swift and decisive progress ... will be essential to restore confidence, boost investment and create the conditions for sustainable growth and higher employment," he added.
Jeroen Dijsselbloem, the Dutch finance minister who heads the eurozone finance ministers group, echoed Rehn.
"I welcome the transparent communication of the results and was reassured by the Slovenian authorities that they will use their own sovereign capacity to adequately cover the final capital needs of the banking sector," Dijsselbloem said.
The stress tests, to see if the banks had adequate capital to cope in crisis conditions, covered 70 percent of the Slovenian banking sector, he added.