The Transition Report 2011, which was presented by EBRD regional economist Alexander Lehmann in Ljubljana on Thursday, identifies three key priorities for Slovenia this year: the government should build a broader consensus on the need for pension reform, while a restructuring and potential privatisation of state-owned companies is also necessary.

But the key risk factor at the time of slow economic growth and the unpredictable situation on the European banking markets is the banking sector. The report says the state should reduce its direct involvement in decision-making at banks, withdraw guarantees and plan privatisation of the state-owned banks.

Discussing the difficulties of banks in transition economies at the Ljubljana Faculty of Economics, Lehmann pointed out that the banks were trying to reduce their exposure to other countries, which could take years and would definitely lead to less loans. A credit crunch is the biggest risk in the new phase of crisis.

The economist voiced his belief that there were appropriate investors that could be interested in Slovenian banks, but which he said should be apprised appropriately. He added that tie-ups between banks often followed trade flows among countries.

The Transition Report, which was released in November 2011, is mainly concerned with support for democracy and market economy in transition countries in light of the crisis.

The support has substantially declined in the new EU member countries since 2006. The more people felt the impact of the crisis, the more they turned against democracy and free market. A substantial drop in support was also recorded in Slovenia.