EU body sees 'excessive' risks to Spain, Slovenia
Source: Bloomberg News |
April 11, 2013, Thursday
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Print Edition
Print Edition
THE European Commission has warned of "excessive" risks to the economic health of Slovenia and Spain, calling on both governments to take urgent action to stem the spread of the euro crisis.
Slovenian banks are likely to need fresh capital injections as over-indebted corporate borrowers struggle to pay back loans amid a double-dip recession, the Brussels-based commission said yesterday. It said Spain is encumbered by public and private debt.
Slovenia's ailing banks have made it a target for financial markets, with shrinking demand in a debt auction yesterday signaling investor expectations that it will be forced to seek a bailout. Spain is already tapping aid for its banking system.
Political gridlock and legal snags "have prevented Slovenia from addressing its imbalances adequately and enhancing its adjustment capacity, thus increasing its vulnerability at a time of heightened sovereign funding stress in Europe," the commission, which enforces European Union regulations, said in a report.
Both countries were given a May 29 deadline to make reforms or risk becoming the first to be punished under a year-old "macro-economic imbalances procedure" designed to deal with the lagging competitiveness and overstretched banking systems that fueled the debt crisis.
The commission detected less severe imbalances in 11 other countries: euro members Belgium, Finland, France, Italy, Malta and the Netherlands, as well as euro outsiders Bulgaria, Denmark, Hungary, Sweden and Britain. While all were urged to adjust economic policy, none were threatened with the disciplinary procedure that could lead to fines.
The assessment is a "wake-up call for several member states to take decisive action for restoring competitiveness," European Union Economic and Monetary Affairs Commissioner Olli Rehn said.
Yesterday's recommendations will test whether European authorities have gotten ahead of the curve in dealing with the more than three-year economic and fiscal crisis or remain a step behind in anticipating the next country to face the bond market's wrath.
Slovenia has a 35-billion-euro (US$46 billion) economy that makes it the fourth-smallest in the 17-nation eurozone.
Slovenian banks are likely to need fresh capital injections as over-indebted corporate borrowers struggle to pay back loans amid a double-dip recession, the Brussels-based commission said yesterday. It said Spain is encumbered by public and private debt.
Slovenia's ailing banks have made it a target for financial markets, with shrinking demand in a debt auction yesterday signaling investor expectations that it will be forced to seek a bailout. Spain is already tapping aid for its banking system.
Political gridlock and legal snags "have prevented Slovenia from addressing its imbalances adequately and enhancing its adjustment capacity, thus increasing its vulnerability at a time of heightened sovereign funding stress in Europe," the commission, which enforces European Union regulations, said in a report.
Both countries were given a May 29 deadline to make reforms or risk becoming the first to be punished under a year-old "macro-economic imbalances procedure" designed to deal with the lagging competitiveness and overstretched banking systems that fueled the debt crisis.
The commission detected less severe imbalances in 11 other countries: euro members Belgium, Finland, France, Italy, Malta and the Netherlands, as well as euro outsiders Bulgaria, Denmark, Hungary, Sweden and Britain. While all were urged to adjust economic policy, none were threatened with the disciplinary procedure that could lead to fines.
The assessment is a "wake-up call for several member states to take decisive action for restoring competitiveness," European Union Economic and Monetary Affairs Commissioner Olli Rehn said.
Yesterday's recommendations will test whether European authorities have gotten ahead of the curve in dealing with the more than three-year economic and fiscal crisis or remain a step behind in anticipating the next country to face the bond market's wrath.
Slovenia has a 35-billion-euro (US$46 billion) economy that makes it the fourth-smallest in the 17-nation eurozone.
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