The Slovenia Times

Slovenia Welcomes Cyprus Bailout Deal

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Slovenia's share of the EUR 10bn rescue package is about EUR 50m, according to EU diplomatic sources.

This is in accordance with its 0.42% participation in the capital of the European Stability Mechanism (ESM), from which the aid will be drawn.

The Cyprus bailout has put renewed spotlight on Slovenia, which is being mentioned once again as the next candidate for a bailout due to its ailing banking system.

Prime Minister Alenka Bratušek rejected the comparisons as "unnecessary and inappropriate". Slovenia can resolve its problems, including fiscal issues, itself, she said at a reception hosted by President Borut Pahor.

Her comments come after the Washington Post ran a story on its blog today describing Slovenia as "the new tiny country you should worry about".

Financial broadcaster CNBC meanwhile featured Harry Wilson, former advisor to the US Treasury, saying that banking on Slovenia having to ask for a bailout was misguided.

However, if Slovenia does not take key measures in the next two months, in particular finish setting up a bad bank, the probability of it having to ask for a bailout will increase, EU diplomats warned today.

In the event that Slovenia would have to seek EU assistance, it is unlikely that a rescue package would be framed the same way as for Cyprus.

Žiga Gregorinčič, an analyst with the asset management firm Alta Invest, told the STA the haircut on deposits in Cyprus was a part of the crackdown on the island as a tax heaven.

"The EU cannot afford repeating this solution in other countries such as Italy or Spain...I see Cyprus as an isolated case that is not relevant to Slovenia," he said.

However, economist Jože Damijan of the Ljubljana Faculty of Economics noted that the Cyprus deal showed what conditions other bailout candidates, including Slovenia, can expect.

The more stubborn the countries are in negotiating the terms of bailouts, the harsher the EU-ECB-IMF troika will be, he told the STA.

The lesson for Slovenia is obvious: if it does not succeed in convincing financial markets until mid-May to lend it money to refinance debt, it needs to get ready for concessions to the troika.

The yields on Slovenian ten-year eurobonds dropped 0.16% today to 5.27%, but that comes after a 0.30% rise on Friday, according to data from the electronic exchange MTS.
 

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