European Commission States Slovenia Won’t Require Bailout

European Commissioner Olli Rehn announced on Thursday that Slovenia will not require a bailout, stating that the country can recapitalize its struggling banking sector independently.

The central bank of Slovenia revealed the findings of European Union-supervised bank stress tests, which indicated that an additional EUR 4.8 billion will be necessary to manage bad debts within the banking system. Governor Bostjan Jazbec noted that the three largest state-owned banks—NLB, NKBM, and Abanka—will need EUR 3 billion, while five smaller banks will require an extra EUR 1 billion.

The central bank highlighted that this effort to stabilize the banking sector will raise Slovenia’s national debt to 75.6% of its gross domestic product.

Prime Minister Alenka Bratusek’s administration has already allocated EUR 4.7 billion for banking sector recapitalization, which includes EUR 1.2 billion sourced from public funds. Finance Minister Uros Cufer mentioned plans to raise an additional EUR 1 billion through a debt auction, along with the possibility of imposing haircuts on bondholders to generate another EUR 500 million.

Commissioner Olli Rehn remarked that the stress test results demonstrated Slovenia’s capability to address its financial sector issues without seeking help from European partners. Jeroen Dijsselbloem, president of the eurogroup of finance ministers, also expressed approval, stating that Slovenian authorities would utilize their own resources to meet the banking sector’s capital needs effectively.

Following this news, the yield on Slovenia’s 10-year bonds fell to a nine-month low of 5.34%, down from 5.6% the previous day, as markets reacted positively to the country’s avoidance of a bailout.