Slovenia: Reforms on track despite ratings downgrade

Slovenia on Saturday said it was confident its newly-adopted action plan would stabilise public finances and lead to an economic recovery, a day after international ratings agency Fitch downgraded the crisis-hit country by one notch. "The consolidation of public finances will follow the objectives that have been clearly set. We will efficiently carry out all the necessary measures drawn in its stability and reform programs," Slovenia's finance ministry said in a statement in response to the downgrade. "Once the banks' capital adequacy is reached and companies' debts are cleared we expect a stable macroeconomic environment that will lead to economic recovery already in 2014," it added. Fitch on Friday cut the nation's main debt rating to 'BBB+' from A-, with a negative outlook, saying Slovenia's "macroeconomic and fiscal outlook has deteriorated significantly". "The agency now forecasts a 2.0 percent contraction in real GDP in 2013 and a decline of 0.3 percent in 2014, when Slovenia is expected to be one of only two eurozone economies to contract," Fitch said. Slovenia has been widely tipped as the next country to require a bailout from the European Union and International Monetary Fund, and the ratings downgrade could substantially raise the cost of borrowing for Ljubljana. The Slovenian government earlier this month adopted an action plan to bolster the economy and underpin its troubled banking system, including through privatisations, tax increases and austerity measures. But the European Commission in Brussels warned this week that Slovenia may not have done enough to dispel fears it could become the eurozone's sixth bailout case. Last month, Moody's downgraded Slovenia by two notches to junk status, with a negative outlook. Slovenian Prime Minister Alenka Bratusek said in an interview on Saturday that the government was considering legal procedures against Moody's for having announced the downgrade during an issue of dollar-denominated bonds that had to be interrupted for 48 hours. "No rating agency should be allowed to do what they (Moody's) did," Bratusek told the daily Vecer, adding: "They hampered without any justification the issue of Slovenian state bonds."