Slovenia Faces ‘Severe’ Banking Crisis in Recession, OECD Says
Source: Bloomberg News
Slovenia, hit hard by a boom-bust cycle and the euro areas debt woes, faces a severe banking crisis if it doesnt act quickly, the Organization of Economic Cooperation and Development said.
The Alpine nation should recapitalize distressed, viable banks while holders of subordinated debt and lower-ranked hybrid capital instruments should absorb losses, the Paris- based OECD said in a report today. State-owned banks such as Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. should be sold and non-viable banks should be wound down, it said.
Limited equity markets and the backlog in the privatization program are hindering foreign direct investment, whose increase would help smooth corporate deleveraging, the group of the worlds wealthiest countries said in the report. An agreement on a list of public assets to be privatized or managed by a new sovereign holding is still lacking.
Slovenian banks, burdened by rising bad loans and relying on financing from the European Central Bank, are at the center of investors worry the nation may follow Cyprus and other peripheral nations to ask for an international bailout.
Read more: http://www.bloomberg.com/news/2013-04-09/slovenia-faces-severe-banking-crisis-in-recession-oecd-says.html
Eurozone crisis: OECD warns Slovenia over bank debts - live
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Slovenia's bailout worries
The OECD's warning to Slovenia (see 9.04am) comes at an awkward time for the country, with speculation over a possible bailout swirling.
As Reuters puts it this morning:
Following last month's messy rescue of Cyprus, the country of 2 million perched on Italy's northeast border is facing intensifying market pressure while seeking funds to heal its state-owned financial sector.
Slovenia's banks, downgraded by Fitch last Friday, are still largely in public hands too.
One of the OECD's criticisms is that the Slovenian government hasn't yet agreed a list of public assets to be privatized or spun off.
http://www.guardian.co.uk/business/2013/apr/09/eurozone-crisis-german-exports-slovenia
formercia
(18,479 posts)This is what it's really all about.
Loan them 'funny money' created out of thin Air (Fractional Reserve currency).
Initiate a Depression. (Funny money house of cards collapses).
Demand repayment in Hard Assets. (Public Infrastructure)
dipsydoodle
(42,239 posts)There's no point in them borrowing if they lack the ability to repay - its called sustainable debt. Its their choice and they are the only ones who make it. The background to their woes is delinquent debt owed to their two large state owned banks largely as a result of loans to the construction industry there. In terms of cause and effect the actual cause was the antics of American financial institutions 2007/8. Might be Hobson's choice but they either go for an ECB loan at low rates with conditions attached or to the market at twice the rate.
Javaman
(62,439 posts)didn't pay their taxes and the Greek gov used creative accounting to get into the EU? (is Slovenia even in the EU?)
Slovenia is in the EU.
dipsydoodle
(42,239 posts)their problem is almost wholly due to delinquent/bad debts to their construction industry which collapsed along with the same in Spain etc. In this instance the actual issue seems to be why some of those loans by state owned banks were granted in the first place as the companies involved seemed to be iffy at best - fraud may be involved.
They didn't need to do anything crook to get in the EU and then the Euro - was a breeze because they were exemplary.
Its a shame. Never been there myself - my son has a few times and a Dutch girlfriend's mother retired there years ago. Its a very very pretty place just like Austria next door. They managed to stay out of the debacle when Yugoslavia broke up. There's only 2 million people there - quarter of the population of London.
Javaman
(62,439 posts)only with banking/construction there propped up on bad loans.
all crooked roads lead to banks.
dipsydoodle
(42,239 posts)These are state owned banks and they were not working remortgaging scams. The loans referred to developments for which there was simply no demand for after the crash..............which as most of Europe is acutely aware of was caused by the US.
Javaman
(62,439 posts)once again the people suffer.
dipsydoodle
(42,239 posts)Slovenia's prime minister has attempted to quash speculation that she will become the next eurozone leader to seek a bailout, after an influential report warned that the country faces the threat of a "severe banking crisis".
On an official trip to Brussels on Tuesday, Alenka Bratusek insisted that her government was committed to fixing Slovenia's banks, which are struggling with bad debts as a double-dip recession continues.
Bratusek admitted that Slovenia did not face an easy task, but denied that it would be forced to seek international help.
"The new government is determined to do everything in its power to solve its problems by itself," she told a press conference, after holding talks with European Commission president José Manuel Barroso. "We are aware that the banking sector is the number one problem in Slovenia."
http://www.guardian.co.uk/world/2013/apr/09/slovenia-eurozone-bailout-rumours