Tuesday, March 26, 2013

Slovenia: Next European Domino to Bail?

The ink is hardly dry on the Cypriot bail-out (and bail-in) where some 40% of deposits over $85,000 were seized. Banks are still not re-opened there and, when they do, expect withdrawal limits for a long time.

Then along comes news today that Slovenian banks are continuing to struggle and may require so much money from their government that the government itself may need a bail-out from the ECB (European Central Bank).  Already market for Slovenian government debt has taken a hit with the market souring after the Cyprus debacle.

Financial confidence is a delicate thing--something that the ham-handed European authorities may soon be reminded.

From Bloomberg Slovenia's New Cabinet Under Pressure to Avoid Cyprus Fate:
Slovenian and Hungarian banks are the most vulnerable in the region with non-performing loans at about 20 percent and growing, analysts at Standard & Poor’s Ratings Services, led by Paris-based Pierre Gautier, wrote yesterday in a research note.
Nova Ljubljanska, the nation’s biggest lender, reported a loss of 275 million euros in 2012, its fourth consecutive negative result. Nova Kreditna Banka Maribor, which had a 205 million-euro loss last year, fell to the lowest level since its 2007 listing after a debt-equity swap increased the government’s stake to 79 percent. The shares plunged more than 40 percent last week and were up 3.8 percent today at 82 euro cents in Ljubljana.
The government vowed to stick with a bank-recapitalization plan of as much as 4 billion euros, though with unspecified modifications, as surging bad loans fuel investor concern that the country may require a rescue.
Nova Ljubljanska needed 381 million euros last year.
Cyprus was the 5th European country requiring a bailout (out of 17 countries).  The 5th bail-out was supposed to be Spain.  At the end of last year, European authorities in Brussels were trying to force Spain into taking bailout money in the middle of a Spanish bond panic, but so far they've refused.  The immediate panic of last year has eased however.  ECB buying of distressed country bonds had the effect of calming down a financial panic in distressed bonds of Italy, Portugal, Spain, Greece, Ireland and Hungary.

I wonder if the panic is about to resurface?

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