News / Europe

Slovenia Eases Concerns with Debt Buy Back

Reuters
Slovenia, struggling to avoid becoming the eurozone's next bailout case after Cyprus, raised more than twice as much as planned in a treasury bill tender on Wednesday aimed at easing pressure on its finances.
 
With investors increasingly skeptical that the small eastern European state can deal with its troubled banks on its own, the finance ministry used the proceeds to buy back a large tranche of debt maturing on June 6.
 
The move should buy time for the four-week-old government to unveil a plan to heal its state-owned lenders, sell public assets and push through budget cuts in a bid to restore market confidence and borrow the rest of the funds it needs to stay solvent later this year.
 
The ministry sold 1.1 billion euros ($1.4 billion) of 18-month treasury bills at a yield of 4.15 percent, more than doubling its plan to place 500 million euros of the paper but paying around three times as much as bailed-out Portugal did last month to borrow over the same period.
 
The finance ministry then used some of the proceeds to buy back 510.7 million euros of similar bills early and at a small discount.
 
The operation appeared to calm nerves. The cost of insuring Slovenian debt against default through five-year credit default swaps fell by 16 basis points on the day to 350 bps.
 
“It was a good idea to refinance most of the debt that would mature in June now so as to reduce uncertainty on the markets,” said Saso Stanovnik of investment firm Alta Invest. “However, Slovenia will have to tap international markets by the end of this year and that will be the real test.”
 
Roll Over
 
Wednesday's deal rolled over a large part of the debt Slovenia has maturing this year, the finance ministry said, although several redemptions of smaller issues of short-term treasury bills are coming due from May onwards.
 
Analysts have said the operation was most likely pre-arranged with Slovenia's three big banks NLB, Abanka Vipa, and Nova KBM, in which the state is either the majority or a strategic stakeholder. NLB told Reuters it alone had bought 295 million euros worth of the bills sold.
 
It is the banks that are at the center of Slovenia's problems, choking on some seven billion euros worth of bad loans which officials must find a way to cover or, as in Cyprus earlier this month, let banks fail. Prime Minister Alenka Bratusek's government says it needs to find one billion euros for the banks and another two billion to keep the state itself afloat.
 
“The strong demand at today's sale gives the government some breathing space,'' said Nicholas Spiro, head of London-based Spiro Sovereign Strategy. “Still, the increased reliance on the country's banks to meet the state's funding needs accentuates the negative feedback loop between a vulnerable sovereign and an even more vulnerable banking sector.”
 
Since taking power after a center-right coalition collapsed following protests against corruption and austerity, Bratusek's four-party coalition has faced criticism from Brussels and the OECD club of wealthy nations for moving too slowly to shore up the export-reliant economy with a population of two million.
 
The yield on Slovenia's 10-year benchmark bond eased to 6.8 percent on Wednesday but was still two percentage points higher than a month ago and near the red-line of roughly seven percent at which other eurozone members have had to ask for a bailout.
 
Alone among the European Union's ex-Communist members, Slovenia has refused to sell the banks, a policy that has led to bad management, disastrous lending and three waves of taxpayer funded bailouts since the 1990s. The government plans to start moving many of the failing loans to a “bad bank” in June and then spend some one billion euros to recapitalize the banks.
 
Bratusek has also promised to introduce cost cutting and launch at least one major privatization at the end of next week to raise cash and address concerns that the economy - dominated by publicly-owned companies - relies too much on the state.
 
But diplomats and analysts say decades of resistance by Slovenia's political elite to selling state assets may pose obstacles and complicate the bank cleanup.
 
“I don't think Slovenia is out of the woods yet, what the market will want to see now is a pretty detailed reform program,” said Tim Ash, emerging market analyst at Standard Bank. “Slovenia's own track record of state ownership leaves a major question mark as to whether they will push ahead aggressively enough with state asset sales.”

You May Like

India PM Modi's party distances itself from religious conversions

BJP under fire for being slow to rein in hardline affiliate groups allegedly trying to promote a Hindu-dominant agenda by luring Muslims and Christians to convert to Hinduism More

Anti-Whaling Group Found in Contempt of Court

Radical environmentalists who threw acid and smoke bombs at Japanese whalers in the waters off Antarctica continue their campaign to disrupt Japan's annual whale hunt More

UN's Ban Urges End to Discrimination Against Ebola Workers

Ban was speaking in Guinea on the second day of a whistle-stop tour aimed at thanking healthcare workers of the countries at the heart of the epidemic More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid