Slovenia plans new debt up to 9.14 bln euros over next two years

By Marja Novak

LJUBLJANA, Oct 12 (Reuters) - Slovenia, struggling to avoid an EU bailout, is planning to take on new debt of up to 9.14 billion euros ($11.83 billion) in 2013 and 2014 to finance the budget, repay the maturing debt and secure bank stability.

According to an official document expected to be approved by parliament in October or November, the government will aim to borrow up to 3.15 billion euros in 2013 to finance the budget deficit and maturing debt.

New debt in 2014 could reach up to 3.2 billion euros, according to the same document, published on the parliament's website.

The government would also be able to take on additional debt of 2.8 billion euros in both years to intervene on its sovereign debt market and ensure stability of the banking sector.

Slovenia will test investor confidence in the coming weeks, when it plans to issue its first sovereign bond this year, a $1.5 billion 10-year bond, after postponing in April a similar issue in euros because the yield demanded exceeded 5 percent.

Since then yields rose further and stood at 6.17 percent on Friday for a 10-year bond, according to Reuters data, after peaking at 7.6 percent in August amid speculation that Slovenia could become the next euro zone state to ask for an international bailout.

The country was badly hit by the global crisis due to its dependency on exports and is struggling with a new recession after a mild recovery in 2010 and 2011 due to lower export demand and a fall in domestic spending amid the government's budget cuts.

The government hopes to reduce budget deficit to below 3 percent of GDP in 2013 from 4.2 percent this year by cutting public sector wages by about 5 percent and increasing a number of taxes, including taxes for students, media, banks and communal services.

The government also plans to establish a new state company that will take over bad loans of Slovenian banks which amount to some 6.5 billion euros or 18 percent of GDP and another that will manage all state assets and speed up privatisation.

It also plans to raise retirement age and ease hiring and firing of employees from the start of 2013 but trade unions are threatening to enforce referendums on most of its reforms which could delay or reject them.

($1 = 0.7726 euros) (Reporting By Marja Novak; editing by Zoran Radosavljevic/Jeremy Gaunt)

(( Messaging: