December 10, 2012 / 10:14 AM / 5 years ago

ECB's Kranjec-Slovenia can avoid bailout if it reforms-paper

BERLIN, Dec 10 (Reuters) - Slovenia can avoid a bailout if the government makes sweeping and urgent reforms to its troubled banks, labour market and pension system, central bank head Marko Kranjec told a German paper.

“The pace of reforms is very slow, it is too slow,” Kranjec told Handelsblatt in an interview published on Monday.

The country of 2 million people, which joined the euro zone in 2007, was badly hit by the global crisis as its export-driven economy shrank in the face of dwindling demand, a lack of fresh loans and strained public finances.

Non-performing loans reached 6.7 billion euros ($8.70 billion) at the end of September, equalling 19 percent of GDP.

Kranjec blamed state institutions for the turmoil.

“We don’t have any evidence that there was any influence on lending activity. But the assumption that this is what took place is certainly not wrong,” he added.

Kranjec also slammed the country’s political system and politicians’ inability to unite and scrap a law allowing trade unions to call referendums on reform measures.

Slovenia had planned to introduce a law to set up a bad bank to allow its lenders to transfer non-performing loans to a state company. But this was stalled by a trade union demand for a referendum.

Slovenia’s Finance Minister Janez Sustersic told Reuters in an interview last week he believed Slovenia could save its troubled banks and avoid a bailout even without this law. But he acknowledged the country would have to seek help next year if that failed. (Reporting by Alexandra Hudson)

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