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Slovenian report
by Euro Reporter
2012-04-29 10:46:17
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Slovenia anticipated rate cuts

Moody's downgrade of Slovenia's three largest banks was "somewhat expected" but their ratings should improve once planned capital hikes are completed, Finance Minister Janez Sustersic said on Thursday. "Lower economic growth ... reflects itself in the worsening of the quality of bank portfolios so a cut of their rating was somewhat expected," Sustersic told a news conference.

Moody's cut on Wednesday by one notch the ratings of state-owned Nova Ljubljanska Banka (NLB) and Nova KBM and privately owned Abanka Vipa due to "the sharp asset-quality deterioration" and poor loss-absorption capacity. NLB and NKBM now have deposit ratings of Ba2, while Abanka's rating is Ba3, Moody's said, adding a further cut in the banks' ratings was possible.

"When the agreement on the capital hike (for NLB) is reached, that will have a positive impact on the ratings of our banks," Sustercic said. NLB must increase its capital by 400 million Euros ($527.4 million) by the end of June, under European Banking Authority demands. Sustersic said the government was in talks with private investors to agree who would inject fresh capital. According to Slovenian media, Belgian banking and insurance group KBC, which owns 25 percent of NLB, the European Bank for Reconstruction and Development and the International Financial Corporation (IFC) are among those investors.


Slovenia to raise takeover threshold to 33.3 pct

Slovenia has raised the shareholding threshold at which an investor is required to make a bid for a company, in which it builds a stake, saying its aim was to boost activity in the local stock market. Under a takeover law to be confirmed by parliament in May, the threshold would rise to 33.3 percent from 25 percent, Minister of Economy and Technology Radovan Zerjav said. "The main purpose of this (takeover) law is to give a boost to the market," Zerjav told a news conference on Thursday.

The government's move comes days after market regulator the ATVP ordered six state-owned companies with a joint 27.5 percent stake in pharmaceutical firm Krka to launch a takeover bid for the whole company or reduce their holding to below 25 percent. In the meantime the ATVP has scrapped the voting rights of the state firms in Krka. The ATVP has been pushing for a higher takeover threshold for over a year, as Slovenia had the lowest level in the European Union where the average is 33 percent.

"The higher takeover threshold will definitely help the state-owned firms and other investors who will be able to hold higher stakes in companies without the obligation to take them over," Sasa Cernel of Raiffeisen Bank told Reuters. "But it may not be enough to give a significant boost to the market, as I believe liquidity providers like banks should be exempt from the takeover obligation in order to be able to really boost the market," she added.


Public workers go on strike

Slovenian schools were closed and other services scaled down Wednesday as public service workers went on general strike to protest government austerity measures in the small European Union nation. The strike was organized by Slovenia's trade unions, which have rejected cuts proposed by the new, centre-right government envisioning a 7 to 10 percent wage reduction in the public sector. Union leaders said some 90,000 public sector employees have joined the action, as thousands of people marched in the capital and other Slovenian towns. Slovenia's STA news agency described the strike as "one of the biggest in Slovenia's history," shutting down some 600 schools, limiting police intervention to urgencies only and slowing down customs services on the borders.

Slovenia has been hit by an economic crisis caused by the global downturn and euro debt crisis. The country's public debt has swollen to almost 46 percent and the government has said it wants to cut the budget deficit to 3 percent, partially by introducing pay cuts and a hiring freeze in the public sector. Slovenia's Labour Minister Andrej Vizjak said Wednesday "the government must make cuts and reduce public spending by $1.3 billion in 2012."

Union leader Branimir Strukelj said teachers -- unhappy because much of the public spending cuts would be made in the education sector -- had formed the backbone of the strike. "This is wrong if the idea is for Slovenia to grow," Strukelj said, adding that about 85 percent of teachers and other education employees were striking. Oto Luthar, who heads the Research Centre of Slovenia's Academy of Science and Arts, warned any further cuts in financing of education would harm Slovenia's progress. "Structural reforms are about development and knowledge," Luthar said. The government has said it would not bow to pressure, with Prime Minister Janez Jansa saying on state television on Tuesday evening "it is time for the public sector to accept reality."

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