The Slovenia Times

Eurogroup Chief Checking Slovenia's Progress Towards Economic Stabilisation

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The visit by Dijsselbloem comes as stress tests are being conducted at 10 banks in Slovenia as part of efforts to gauge the actual state of the banking sector which is struggling to deal with toxic assets stemming from a series of failed management buyouts and the ongoing recession.

While the stress for Slovenia's biggest bank, NLB, is scheduled to be completed on Monday, the results are not expected to be made public before December, when the stress tests are completed at the all the banks involved.

The Eurogroup head's visit is part of his tour of all members of the eurozone, as part of which he wants to get acquainted in detail with the situation in individual member states. Dijsselbloem's next stops after Slovenia are Spain and Latvia.

While EU officials have described the visit as routine, Slovenia's current position and EU demands of the country have prompted speculation about what could be going on behind the scenes.

Dijsselbloem is scheduled to meet Finance Minister Uroš Čufer, Banka Slovenije Governor Boštjan Jazbec, Prime Minister Alenka Bratušek and President Borut Pahor during his stay in Ljubljana.

He will also visit the National Assembly to meet members of the finance and monetary policy and EU affairs committees.

Efforts to fix the banking sector and consolidate public finances will top the agenda of Dijsselbloem's meeting with Čufer. It is expected that the Eurogroup head will again urge Slovenia to take decisive action in dealing with its two biggest economic challenges.

Well-placed sources in Slovenia have maintained that the results of the NLB review will not be made available for the visit, as they will be retained under lock until all the stress tests are completed.

The results of the stress tests are expected to provide the much-sought answer to the questions of whether Slovenia will be able to finance the required recapitalisation required to stabilise its banking system system alone.

The Slovenian government has set aside EUR 1.2bn for helping the three biggest banks, but indications are that the hole in the system could be significantly higher. Reports in the Slovenian media have speculated that the figure could range anywhere between EUR 3bn and EUR 8bn.

Slovenian officials have so far maintained that the country will be able to deal with the situation on its own, and the EU has until now refrained from speculating about the need for a bailout.

The shared view is that the situation is manageable as long as the Slovenian government acts decisively and quickly to deal with the main imbalances in its economy.

Nevertheless, a number of high-placed sources in Brussels have indicated in recent weeks that Slovenia may actually find it cheaper to request aid to fix its banks.

Analysts have pointed out that the issue is not one of pride but pragmatism, as the country could obtain loans from the European Stability Mechanism at an interest rate of around 3%, while it would currently need to pay interest of more than 6% on loans it would take out on international bond markets.

Despite Slovenia's ongoing optimism, the yield on Slovenian state bonds has remained well above 6%, although it did fall from near 7% to around 6.3% in recent days.

If Slovenia were to seek ESM aid for its banks, this would mirror the path taken by Spain a year ago.

Unlike the more comprehensive bailouts given to Greece and Portugal, the Spanish bailout did not include the IMF in the funding and feature softer conditions which were mostly focused on banks.

Dijsselbloem was initially expected to visit Slovenia on 30 September but postponed the visit due to budget negotiations in the Netherlands.

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