Wrapping up a two-week mission to Slovenia, Spilimbergo highlighted the recapitalisation of banks as the priority, stressing that the country will have to tackle the issue as soon as the results of ongoing stress tests at eight banks were completed.

While there is still no indication on the outcome of these tests, which are due to be completed by December, Spilimbergo also voiced confidence in the ability of Slovenia to deal with its problems alone.

"Slovenia has all the means necessary to deal with its issues internally with Triglav in charge," Spilimbergo said using a reference of Slovenia's highest mountain (which has three peaks) for the trio of PM Alenka Bratušek, Finance Minister Uroš Čufer and Banka Slovenije Governor Boštjan Jazbec.

Turning down speculation about the need for the troika of lenders featuring the IMF along with the European Commission and the European Central Bank in Slovenia, he said he was confident in the desire and the ability of Slovenia's leaders to implement key measures.

Presenting the preliminary findings of the mission - a final report is due to be confirmed by the IMF in January - Spilimbergo said that the bank recapitalisation will have to be coupled with an overhaul of corporate governance and restructuring of the corporate sector.

"If you try to fix the banks without fixing the original source of the problem - the corporate sector, you will not have a stable solution," he said.

While banks will need to be recapitalised and made to focus on their core activity by offloading holdings in various companies obtained during the crisis, the corporate sector needs to be deleveraged and infused with better governance.

As part of this, Slovenia needs to reconsider the role of the state in the economy, said Spilimbergo, who assessed that the state has too great a role in the corporate sector.

The IMF is confident that the Bank Asset Management Corporation (BAMC), the bad bank, can help greatly in both efforts by mopping up toxic assets held by the banks and promoting corporate restructuring.

Spilimbergo said that the IMF was also encouraging Slovenia to open up to foreign investment, as this was also a means of rejuvenating the economy.

Highlighting that young people in Slovenia have been the group hardest hit by the crisis (unemployment in this category has shot up from 9% in 2008 to 24% in 2013), Spilimbergo said data showed that companies controlled by FDI were more inclined to hiring young people.

Moreover, he called for changes to insolvency legislation in order to facilitate corporate restructuring. "Slovenia needs to move away from the protection of owners to the protection of companies in insolvency proceedings."

Lauding measures implemented in the last year, including the golden rule of balanced budgets and referendum reform limiting referenda on financial issues, the IMF official said Slovenia was now in for the long-haul of measures to turn its economy around.

The IMF does not expect this to happen quickly due to the "vicious cycle of corporate distress, increasing non-performing loans, bank deleveraging and needed fiscal consolidation prolonging the recession".

"This is a balance sheet recession and it will take many years for the balance sheets of the corporate sector to improve," said Spilimbergo.

The IMF therefore projects that, after shrinking by about 2.6% this year, the Slovenian economy will contract by a further 1.4% next year.

But the mission also found positive trends in the economy, including low public and household debt, unemployment below the euro average and expanding exports that have helped keep Slovenia's current account in surplus.

Slovenia must build on this by taking decisive action, said Spilimbergo, who added that one of the keys will be "a continued gradual fiscal consolidation".

In this respect, Spilimbergo said the IMF believed Slovenia has more room for cutting expenditure by overhauling its pension system.

Touching on Slovenia's budget for 2014, Spilimbergo said that "the objectives are good", but admitted "concern about the expected revenues". Moreover, he said the IMF would have preferred to see more "targeted cutting in expenditure", highlighting that investment spending is "very low compared to the past".