LJUBLJANA, Slovenia (AP) — A review of Slovenia's financial system showed Thursday that the small eurozone state will need to spend about 4.8 billion euros ($6.6 billion) to rescue its banks — a sum it can afford without the help of an international bailout.
Slovenia was asked by the European Union to allow international auditors to conduct a stress test of its banks to determine how much money they would need to remain solvent. Had the sum been too high, Slovenia would have become the next member of the 17-country eurozone to seek outside help.
The test was meant to pave the way for a clean-up of the banking sector to reduce uncertainty over the economy and the country's financial future. The government had said this week it has the funds to rescue the banks.
Slovenia's central bank governor Bostjan Jazbec said about 3 billion euros will be earmarked for the three largest state banks, NLB, NKBM and Abanka. The move will first require approval from the European Commission, the EU's executive arm, because of EU rules restricting state aid to businesses.
"The recapitalization of the three state-owned banks will be carried out immediately after the European Commission's authorization," Jazbec said, adding that the approval is expected in the next few days.
Olli Rehn, the EU Commissioner in charge of economic and monetary affairs, confirmed that the stress tests indicated Slovenia will not be seeking an international bailout. "Today it is clear that Slovenia can proceed with the repair of its financial sector without turning to her European partners for financial assistance," Rehn said in a statement from Brussels.
Slovenian Finance Minister Uros Cufer said the government decided to privatize the largest state bank, Nova Ljubljanska Banka, while keeping 25 percent of its share. The second largest, Nova Kreditna Banka Maribor, will be completely sold.
A country of 2 million people, Slovenia was once an Eastern European model of economic success. It has been in recession for the past three years and only a slight economic recovery is expected in 2015, when the public deficit is set to fall below the 3 percent of GDP threshold set by the EU.
The eight troubled banks at the heart of Slovenia's financial crisis are estimated to be nursing about 8 billion euros in bad debts.
Associated Press correspondent Dusan Stojanovic contributed from Belgrade, Serbia.