Slovenia has the funds to recapitalize its troubled banks, the central bank said on Tuesday, indicating that the results of stress tests due this week mean Europe would not need to bail out another member of its currency union.
The test results, which are expected to be announced soon, will determine whether Slovenia can fix its banks on its own or has to seek assistance from the European Union and the International Monetary Fund, much like Greece, Ireland, Portugal, Spain and Cyprus, Reuters reports.
Slovenia's banks are burdened with an estimated $10.88 billion in bad loans - approximately one-fifth of all output - after two recessions since the start of the global crisis devastated the country's exporters.
The central bank said that a bill had been passed allowing the government to inject up to $6.45 billion into the banks.
"The appropriate legal basis for their recapitalization has been prepared and the government has the funds for that purpose, so the recapitalization will be implemented very quickly," the central bank said, according to Reuters.
Even if it escapes without a bailout, Slovenia faces trouble ahead. Economic output has shrunk 11 percent since 2008 and it is the only member of the 17 nation European bloc besides Cyprus that is expected to see further economic contraction next year.
At the same time, unemployment has topped 12 percent and is expected to keep rising as the government cuts spending.
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