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"This is good news and demonstrates both the paramount importance of decisive action by the authorities and the fact that the overall economic recovery of the eurozone is now solidly underway," Rehn said in a written statement.

A similar response came from Eurogroup chief Jeroen Dijsselbloem, who said assurances from Slovenia had convinced him that the Slovenian authorities would adequately meet capital needs of Slovenian banks.

The comments come after the Slovenian authorities revealed today that the eight Slovenian banks which have undergone EU-mandated stress tests are EUR 4.78bn short of capital under the the worst-case scenario. The government will earmark EUR 3.01bn for the recapitalisation the largest three banks.

Rehn noted that eight months ago, when the Commission established excessive imbalances in the Slovenian economy, he had stated the situation was still manageable provided swift and decisive action was taken. "While significant challenges remain, I am pleased to say that this has so far been the case," he said today.

Rehn is now looking forward to the effective implementation of the strategy to fix and modernise the banking sector as outlined by the Slovenian authorities today. "This represents a convincing and robust response to one of the key challenges facing the country", he said.

But he also urged Slovenia to move forward with broader economic reforms, in particular strengthening corporate governance, carrying out privatisation and regulatory reforms to improve the business environment.

"Swift and decisive progress on all of these fronts will be essential to restore confidence, boost investment and create the conditions for sustainable growth and higher employment. The Commission will continue to closely monitor the implementation of the relevant policies, in partnership with the Slovenian authorities."

Dijsselbloem expressed his conviction that the recapitalisation of the banking sector, together with measures for the restructuring of the financial and corporate sector, would stabilise Slovenia's banking sector.

Stronger banks and improved business environment will provide the groundwork for economic recovery, Dijsselbloem said, hailing transparent communication of the stress test results.

Other sources in Brussels who wished to remain unnamed told the STA that the Commission was very satisfied with the professionalism, political will and courage demonstrated by Slovenia.

Comparing today's situation to six months ago, the difference is immense, the sources said, adding however that it was necessary to carry out banking and other reforms.

STA's sources moreover praised cooperation of Slovenian bodies as exceptionally good and productive, above all the cooperation with Finance Minister Uroš Čufer and central bank governor Boštjan Jazbec.