Eurozone member Slovenia’s bond yields rise after rating cut

LJUBLJANA - Agence France-Presse

Standard and Poor’s and Moody’s have downgraded the credit note of Slovenia. EPA photo

Eurozone member Slovenia’s bond yields rose above the danger level of seven percent on Aug. 3 after a Moody’s downgrade that the government called “surprising”, while denying it needed a bailout.

Fellow U.S. credit rating agency Standard and Poor’s added to the pressure later on Aug. 3 by also downgrading the small former Yugoslav republic, citing worries about the capability of the government to help stricken banks and fix public finances.

Moody’s “decision to downgrade Slovenia’s rating has surprised the government since it did not take into consideration the measures” adopted by the government over recent months, a finance ministry statement said.

Ministry confident on banking system
“Slovenia can’t be compared with Spain, Italy nor Greece and its banking sector problems are not by far as serious as those in, for example, Spain,” the finance ministry said.

It added that the center-right government led by Prime Minister Janez Jansa believed that “at this moment (it) has no need to ask for financial aid from the EU mechanism.” Moody’s on Thursday downgraded Slovenia’s government bond rating to Baa2 from A2, keeping a negative outlook for the Balkan country of two million people.

Moody’s cited the Slovenian banking system possibly needing further recapitalization, the increasing costs of funding and the continued weakness and rising vulnerability to shocks given its reliance on trade.