Xinhua: Slovenia Voices Regret over Moody's Downgrade

Slovenia voiced on Friday its regret over the downgrade by Moody's rating agency of Slovenia's government bond rating from A2 to Baa2, which is just two notches above junk.

Slovenia is disappointed by Moody's failure to take into account its measures consolidating public finances and the political consensus on the golden fiscal rule and the management of bank claims, the finance ministry said in a press release.

In response to Moody's concerns about Slovenia's troubled banks and rising borrowing costs, the ministry said that macroeconomic data did not allow a comparison of Slovenia with Spain, Italy or Greece, which are all in serious financial crisis.

The problems of Slovenia's banking sector were not as serious as those of Spain, the ministry said.

"The Slovenian government has adopted a number of measures for the consolidation of public finances, and the act on the balancing of public finances and the supplementary budget for this year were vital steps towards balancing public finances this year as well in the mid-term," the ministry said.

Stressing its efforts to secure a stable banking and financial system, the ministry also reiterated that Slovenia did not need at present to request aid from European mechanisms to fix banking problems.

Slovenia was not exposed to refinancing risks, and funds available allow the budget for this year to be executed smoothly even in the event of tougher conditions on financial markets, the ministry insisted.

Citing Slovenia's three major banks which are likely to require capital support in the range of 2 percent to 8 percent of GDP, Moody's claimed that "the deteriorating macroeconomic environment" in the country "opens the possibility that external assistance may be required."

Unofficial sources said recently that Slovenia would need to borrow some 1.3 billion euros (1.6 billion U.S. dollars) in November.

NLB, the biggest state-owned bank in Slovenia, has 1.5 billion euros in so-called "red category" loans, which will probably never be repaid, Slovenian Finance Minister Janez Sustersic said in July.

Bad loans at Slovenian banks increased in April to more than 6 billion euros, putting more pressure on the fragile banking industry. (1 euro = 1.23 U.S. dollars) 

From: Xinhua
Time: 2012-08-04