Slovenia Must Issue Bond by June 6 to Avoid Trouble: Former PM

Former Slovenian Prime Minister Janez Jansa
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Former Slovenian Prime Minister Janez Jansa

Slovenia, which is struggling to avoid a bailout, must issue a bond by June 6 to meet its financial obligations, former Prime Minister Janez Jansa said on Thursday.

Analysts already expect Slovenia to issue a bond of at least one billion euros in coming months because of outstanding debts falling due for repayment in 2013 which officials have estimated to total at least two billion euros.

Slovenia's new government has so far declined to say anything about its borrowing plans. Officials in the outgoing administration previously said new issuance would be needed in mid-year to avoid problems, but Jansa's remark was the first to give an exact date.

Jansa, whose conservative government was replaced on Wednesday by the new center-left cabinet of Prime Minister Alenka Bratusek, said Slovenia had no liquidity problems at the moment.

"The Slovenian state is liquid and can meet its obligations without any problems for now, but the situation can change significantly on June 6 unless we issue new bonds by then," Jansa told reporters while handing over power to Bratusek.

June 6 is the maturity date for 907 million euros ($1.3 billion) of 18-month treasury bills issued in December 2011.

Last October, Slovenia issued a $2.25 billion 10-year bond with a yield of 5.7 percent. The yield on another 10-year bond, issued in January 2011, stood at 5.2 percent on Thursday, virtually unchanged from the previous day, according to Reuters data.

Bratusek said on Wednesday Slovenia will not need a bailout.

"I assure you that with the decrees we are preparing ... we are able to solve our financial problems by ourselves," she told parliament before it confirmed her government.

Bratusek said she would focus on solving the problems of Slovenia's banks, reviving the economy, improving its competitiveness and creating new jobs for the young.

The International Monetary Fund said on Wednesday the former Yugoslav republic, which joined the euro zone in 2007, might have to borrow 3 billion euros or more this year to finance the budget, repay debts and help troubled state-owned banks.

The IMF estimated that Slovenia would need to provide 1 billion euros of fresh capital for its three largest banks, in which the state has large or majority stakes.

Local banks are struggling with some 7 billion euros of bad loans, equivalent to 20 percent of national economic output, and are at the heart of speculation that Slovenia might be forced to follow Cyprus and other troubled euro zone states in requesting a bailout.

Analysts said Slovenia's future depended upon the steps that the new government will take.

"Politics will be the main thing to watch going forward because of its impact on both fiscal and banking sector policy," said Peter Attard Montalto of Nomura.

"Additionally, we must watch market contagion forcing the government's hand on a bailout - both through cost and availability of debt... Ultimately this will be more about the spiral of expectations and self-fulfillment rather than necessarily core fundamentals," he added.

Slovenia is burdened by a renewed recession due to lower export demand and a fall of domestic spending caused by budget cuts.

Jansa's government lost its majority in parliament in January over a corruption scandal, but was also unpopular because of its austerity drive, a policy Bratusek has vowed to change.