The Slovenia Times

Who will downgrade the Moody's rating?


While Moody's highlighted the Slovenian banking system's need for further recapitalisation and the ensuing risks for the state debt, the Finance Ministry said that macroeconomic data does not allow a comparison of Slovenia with Spain, Italy or Greece.

Also, the problems of the banking sector are not as serious as for instance in Spain, the ministry added in its press release

"The government has adopted a number of measures for the consolidation of public finances and the act on the balancing of public finances and the supplementary budget for this year were vital steps towards balancing public finances this year as well in the mid-term."

While the public budget deficit was at 6.4% of GDP at the end of 2011, it is being reduced to close to 3.5% this year and to below the EU-prescribed 3% threshold next year.

The ministry repeated that Slovenia presently has no need for aid from European mechanisms and that is also not exposed to refinancing risks. Funds available allow the budget for this year to be executed smoothly even in the event of tougher conditions on financial markets.

The ministry stressed efforts to secure a stable banking and financial system, pointing to the recapitalisation of the state-owned NLB bank and plans to continue to attract private investors.

By the autumn, legislative solutions will be drawn up for the management of bad claims, which will contribute to ending the credit crunch and stimulate the economy.

Also highlighted were ongoing efforts to improve the management of state assets and the possibility of setting up a company that would take over bad claims.

According to the ministry, the government will continue with intensive efforts for structural reform and the balancing of public finances also in the future. Also continuing are talks on entering the golden rule on zero deficits into the Constitution.

The Institute of Macroeconomic Analysis and Development (IMAD), a government think-tank, said the downgrade was mostly the result of a continuing deterioration of the financial situation in Slovenia, while forecasts for the eurozone as a whole have also seen a downward correction.

Moreover, the last month brought a drop in exports and imports in Slovenia, in industrial output and the value of construction work executed.

As regards the maintained negative outlook, IMAD said that the future depends on the measures that will be adopted in the autumn.


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