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Slovenia Must Scramble to Solve Impending Debt Crisis

“Slovenian political leaders face mounting pressure to solve the nation’s banking woes and avert a fiscal crisis after the European Union’s sternest warning yet that action is needed.

Parliament in the capital, Ljubljana, may debate a plan to place a legal limit on debt as early as today, while a vote may be hastened in the coming days. Prime Minister Alenka Bratusek pledged to continue talks with party leaders to reach a consensus after failing to cobble together a plan last night.

Slovenia’s ailing banks have made it a target for financial markets, with shrinking demand at a debt auction this week signaling investor expectations that the country may be the next domino to fall in the 17-nation euro area. Cyprus became the region’s fifth bailout victim last month when it agreed to a 10 billion-euro ($13.1 billion) rescue.

“It’s time to act in order to break a current devastating cycle,” Saso Stanovnik and Matej Simnic, economists at Alta Invest d.d. in Ljubljana, wrote in a report today. “It’s the new government’s turn to regain confidence by proposing its own scheme to salvage Slovenia, but it has to be concrete and credible and since time for refinancing is short, it also has to be efficient and quickly implemented.”

Bad Loans

Slovenia, whose 35 billion-euro economy is the fourth smallest in the euro area, fell into the crossfire after European creditors and the International Monetary Fund forced losses on bank depositors in the aid package for Cyprus….”

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