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The Commission said that Slovenia needs to undertake urgent action to deal with imbalances, including by stabilising banks, speeding up privatisation and ensuring deleveraging in the corporate sector.

A total of nine recommendations are issued to Slovenia in the report published as part of the annual Semester proceedings aimed at coordinating fiscal policy in the bloc.

With the focus of its concerns on the banking sector, the Commission calls for an independent assessment of the situation at state-owned banks while also calling for culpability in the sector for the bad decisions that have brought about the current situation.

Apart from the need to shore up bank stability and reduce corporate debt, the Commission calls on Slovenia to formulate new measures for consolidating public finances.

While establishing that the country's request to have the deadline for reducing the budget deficit to below 3% of GDP extended for two years until 2015 is warranted, it says that additional measures would be necessary to meet the target as well as to ensure long-term sustainability.

The extension was granted on the basis of the unforeseen consequences brought about by the extended period of recession. The double dip recession in the country is continuing to affect domestic consumption, which is in turn adversely affecting budget revenue and expenditure.

In return for the extension, Slovenia will have to ensure that its budget deficit does not exceed 4.9% of GDP this year, which net of the cost of recapitalising the two biggest banks in the country amounts to 3.7% of GDP.

Next year the deficit will have to be brought down to 3.3% of GDP, followed by a further reduction to 2.5% in 2015.

This is "consistent with an annual improvement of the structural balance of 0.7% of GDP in 2013, 0.5% of GDP in 2014 and 0.5% of GDP in 2015," the report states.

To achieve these goals the Commission says that Slovenia will have to implement consolidation measures totalling 1% of GDP this year and 1.5% of GDP in each of the coming two years. The deadline for the first package of additional measures is 1 October of this year and then every six months thereafter until the deficit is brought under 3%.

Moreover, the report makes a special mention of the projected growth in age-related expenditure in the medium- and long-term, saying that the country will have to make adjustments to its pension and social security systems.

A new area targeted by the Commission is also the justice system, with Slovenia being called on to take measures for shortening court procedures and reducing backlog in civil and commercial matters, especially in enforcement proceedings.