Slovenia opposition seeks referendum on scheme to avert bailout

Reuters News
Posted: Oct 31, 2012 7:27 AM
Slovenia opposition seeks referendum on scheme to avert bailout

By Zoran Radosavljevic

ZAGREB (Reuters) - Slovenia's opposition has called for a referendum on two laws the government sees as crucial to help the country stave off the risk of a bailout, state news agency STA reported on Wednesday.

The move, initiated by 27 deputies from Positive Slovenia (PS) and three other legislators shortly before the midnight deadline on Tuesday, could derail Prime Minister Janez Jansa's efforts to stabilize public finances and overhaul troubled state-owned banks.

"The laws are not a solution for managing the state assets and the position of our banks but are just deepening our troubles," the PS said on its website.

"The referendum is the last opportunity to stop the government's irrational suggestions," it said.

Slovenian banks, mostly state-owned, are nursing about 6.5 billion euros ($8.4 billion) of bad loans, amounting to some 18 percent of the small euro zone economy's annual output.

Jansa, who took office in February, cancelled a news conference called for 11 a.m. (0900 GMT) on Wednesday saying he wanted to wait for a formal confirmation that the opposition demands were legal, the government's press office said.

If the opposition demands are validated, parliament must call the referendum within seven days.

Last Tuesday, the parliament passed reform laws on banking and management of state firms but the opposition and powerful trade unions said they could lead to a sell-off of state assets.

The first law would enable the establishment of a state company to take over bad debts from state-owned banks in exchange for state-guaranteed bonds, as a means of easing the credit crunch that is choking the economy.

The parliament also approved the creation of a new state holding that would manage all state firms and speed up privatization.

The Slovenian economy, driven by exports of cars, household appliances and pharmaceutical products, was badly hit by the global financial crisis and is now struggling with a new recession after a mild recovery in 2010 and 2011.

Last year a number of laws proposed by the previous centre-left government were rejected at referendums, among them a crucial pension reform. This resulted in the fall of the government and a snap election that brought Jansa's conservative administration to power.

Slovenia raised $2.25 billion earlier this month with a 10-year bond, its first sovereign bond this year, staving off a bailout for now.

But Jansa told parliament last week the country would not be able to borrow abroad again unless it passed reforms to boost its credibility on the financial markets.

His government plans to raise the retirement age and ease regulations governing the hiring and firing of employees from the start of 2013. It also plans more cuts to public sector wages to bring the budget deficit below 3 percent of GDP next year from some 4.2 percent in 2012.

($1 = 0.7705 euros)

(Reporting by Zoran Radosavljevic; Editing by Ruth Pitchford)