The cabinet established the risk related to the Croatian lawsuits over Yugoslav-era savings deposits prevented a successful sale of the bank."In its capacity as the general meeting of the Slovenian Sovereign Holding, the government decided it disagreed with the minimum offer price at 55 euros per NLB share and the offer price range of between 55 and 71 euros per share," said the press release issued after the cabinet session.

The government tasked Finance Minister Mateja Vraničar Erman to notify the European Commission of the decision and to examine together with the stakeholders the possibilities of alternative compensation measures.

"The government's key job is to find better solutions in cooperation with the European Commission," Prime Minister Miro Cerar told reporters after the government session.

Slovenia committed to sell 75% of NLB minus one share by the end of 2017 in exchange for the European Commission approving state aid for the bank in late 2013.

The country reached an agreement with the commission earlier this year to sell at least 50% of the bank by the end of this year and the rest by the end of 2018.

The Commission's decision approving state aid for NLB in 2013, which was released in its entirety by the business daily Finance today shows that unless the state signed a binding agreement to sell the bank by the end of 2017, NLB Balkan subsidiaries would be sold off.

The sale would in such a case be conducted by a special administrator, independently of the state asset manager, follows from the document published by Finance.

In a brief message today the European Commission said only it was in constructive discussion with the Slovenian authorities, adding it could not speculate further at this stage.

The cabinet discussed the reasons for and against the sale today with Sovereign Holding (SSH) chairman Lidia Glavina and SSH board member Nada Drobne Popovič, who explained the NLB share price proposal.

Cerar said the cabinet also raised the issue of alleged money laundering at the NLB bank in 2009-2010, brought up last week by the chair of the parliamentary Intelligence Oversight Commission Branko Grims. To provide explanations NLB chairman Blaž Brodnjak was invited to join the session.

Cerar also pointed to the potential risks stemming from deposits held by Croatian savers in the Zagreb subsidiary of Ljubljanska banka (LB), the defunct bank from which NLB originates.

NLB is being sued in Croatian courts along with LB over pre-1991 deposits that were returned to Croatian savers by the Croatian state, which then authorised Croatian commercial banks to recover them in court.

The liabilities are estimated at up to between EUR 350m and EUR 400m. Cerar said the lawsuits represented such a risk as to prevent a successful sale of the bank.

Echoing his position, Foreign Minister Karl Erjavec, the leader of the junior coalition Pensioners' Party (DeSUS), said the deposits were a matter of succession to the former Yugoslavia so they could not be a subject of the sale process.

However, he said that the sale process suggested some prospective buyers would want to use the issue as a circumstance that could affect the price share range.

Erjavec was also baffled "that the money laundering allegation appeared at the moment".

As a third factor influencing the government's decision, aside from the Croatian lawsuits and money laundering allegations, Erjavec identified the debate in parliament over the 2013 bailout.

"The Slovenian taxpayers have invested a lot of money in the NLB so it's the expectations are justified that this effort would be repaid," said Agriculture Minister Dejan Židan, the Social Democrat leader.

Commenting on the decision, Matej Šimnic of brokerage Alta Invest and Primož Cencelj of asset manager KD Skladi said the step undermined Slovenia's credibility in the financial markets and would dampen potential investors' interest in future privatisations in the country.

Šimnic said it was very hard for politicians to take such decisions at the moment, as no party would benefit by advocating privatisation.

Primož Cencelj of asset manager KD Skladi said that the sale of state-owned enterprises and banks was an opportunity for "populist point scoring". "If there's no desire to sell, it would have been better not to start the sale process in the first place."

The procedure to sell NLB was launched in the spring of 2016 when the government picked Deutsche Bank as the financial advisor for the sale.

Based on Deutsche Bank's study, SSH decided to sell 75% of NLB minus one share through an initial public offering (IPO), but the uncertainty following Brexit postponed the sale to this spring with first roadshows held in European and US financial capitals in March.

In May SSH launched the procedure for an IPO with quotations on the Ljubljana and London Stock Exchanges.

The book value of NLB share as in the end of March was EUR 65.50, which values the bank's share capital at EUR 1.31bn. Under the proposal rejected by the government today, the state would get between EUR 360m and EUR 465m for 50% of the 20 million NLB shares.

The 75% minus one share would net between roughly EUR 540m and EUR 698m, while such share price range values the whole bank at between EUR 720m and EUR 930m.

The state injected EUR 1.55bn in the bank at the end of 2013.