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Slovenia seeks to avoid EU bailout Slovenia unveils reforms as it seeks to avoid EU bailout
(about 5 hours later)
The government of Slovenia is due to unveil an economic action plan that it hopes will help it avoid an EU bailout. The government of Slovenia has announced a package of measures it hopes will help avoid an EU bailout.
The plan, which will be presented to the European Commission, is expected to include tax increases, banking sector reforms and privatisations. The measures include a tax increase, a major restructuring of Slovenia's ailing banking sector, and a programme of mass privatisation.
Slovenia's mostly state-owned banking sector is suffering from mounting bad debts and the government has struggled to borrow money.Slovenia's mostly state-owned banking sector is suffering from mounting bad debts and the government has struggled to borrow money.
The country's economy has been in recession since 2011. The European Commission will now consider the plan.
Analysts have cited Slovenia as the most likely country to seek help from the EU following the bailout of Cyprus earlier this year. It is expected to deliver its verdict by the end of the month.
European officials have expressed concern over the stability of the country's banking sector. Slovenia has been in recession since 2011, and analysts have cited it as the most likely country to seek help from the EU following the bailout of Cyprus earlier this year.
The government's ability to borrow money was dealt a blow last week when Moody's, a ratings agency, cut Slovenia's bonds to "junk" status. European officials have expressed concern over the stability of the country's banking sector, which is struggling under billions of euros of bad debts.
Despite this, the government was able to raise 3.5bn euros (£3bn; $4.6bn) from international bond markets last week, but at relatively high rates of interest. Meanwhile the government's ability to borrow money was dealt a blow last week when Moody's, a ratings agency, cut Slovenia's bonds to "junk" status.
Analysts say the funds buy Slovenia time, but do not address the underlying economic and financial problems. Despite this, the government was able to raise 3.5bn euros (£3bn; $4.6bn) from international bond markets last week, which has bought it some time.
The plan, due to be presented by the newly-formed government of Prime Minister Alenka Bratusek, is expected to include tax increases to shore up public sector finances. State sell-off
The country is also planning a "bad bank" to take on the financial sector's bad debts. The package of measures was announced by Slovenia's recently installed Prime Minister, Alenka Bratusek, and her Finance Minister, Uros Cufer.
The governor of Slovenia's central bank, Marko Kranjec, is also advocating the privatisation of some banks. The measures include a 2% increase in VAT to shore up government finances.
The European Commission will study the plan before recommending action. A "bad bank" will also be created to allow the banking sector to offload its bad debts.
Meanwhile a total of 15 publicly-owned businesses will be sold off, including the second biggest bank, Nova KBM, the flag-carrying airline, Adria Airways, and Telekom Slovenia.
The biggest bank, NLB, has already announced plans to downsize.
Announcing the measures, Ms Bratusek said she expected the budget deficit to rise to 7.8% of GDP this year, but was forecast to fall to 3.3% next year.
She also said the VAT increase was decided on as the tax rise with the least impact on economic growth.
Slovenia is seeking to avoid becoming the latest in a strong of EU countries to seek a bailout from European authorities.
Earlier this year Cyprus agreed a 10bn euro bailout with the EU and the International Monetary Fund (IMF) after its banking sector faced near collapse.