Wirtschafts Blatt: Slovenija obotavljiva glede reform

Avstrijski Wirtschafts Blatt danes piše, da je Slovenija še naprej obotavljiva glede reform in da je prestavila odločanje o slabi banki. Pri tem pa navaja moj komentar, da je verjetnost izogiba prošnji za finančno pomoč EU odvisna od tega, kako bodo finančni trgi ocenili strukturni reformni paket (pokojninska reforma in reforma trga dela) ter načrt glede sanacije bank.

Moji izvirni odgovori v intervjuju:

Do you agree with the creating of the bad bank as it is now planed by the government?

Though quite late, I think that the political decision to start resolving the bank problem should be welcome. There are still other views, such as that the banks should only get recapitalized and then they would resolve their bad assets by themselves. This approach has been proven to be inefficient as the problem of bad assets has deteriorated over the last 4 years. So a more active role of the government in resolving the bank problem is crucial. Though, there might arise many technical issues in implementing the government plan with the bad bank.

In our interview late July you stressed that there should be an “agency” taking the bad loans that have to be “backed” by state guarantees – the current plan of the government goes into that direction, right?

Yes, there will be an agency established that will issue the bonds backed by the state guarantees. This means that the public debt will not increase on impact, since government will not issue (sell) the bonds publicly. This agency bonds will be used by the banks to get access to liquidity by the ECB

What should be different, what is missing? What about the management of the bad bank? You stated in July it should be managed privately – but you had doubts that that would be the case?

There are several issues. One is the mechanism for determining the “price” of the bad assets exchanged for the agency bonds. There is no mechanism specified so far.

Second, the law on the bad bank specifies a “committee” that will be in charge to determine, which assets and at what price will be transferred from the banks to the agency. However, the law foresees that  this “committee” shall consists of government officials, which will surely lead to the “politicization” of many of the decisions regarding “what” and “whom” to bail-out. Instead, a highly professional body should be established, consisting of experienced financial professionals and of central bank officials.

Third, in exchange for the bonds, the agency will acquire the capital shares that have been used as a collateral in the original credit deals. The plan how to manage these shares has to be outlined. We have made very bad experience with government management of assets over the last two decades. The management of these acquired assets should be outsourced to a private company, such as an investment bank. Another “political” agency will just make the whole process of bank resolution much less efficient and much more expensive.

With the establishment of the bad bank is everything fine and Slovenia definitely has not to apply for help? Or will there be further obstacles? And which?

Hmm, this is not that simple. The question whether Slovenia will have to apply for financial assistance depends on how do financial markets perceive the economic situation in Slovenia. If financial markets see the establishment of a bad bank and the new package of structural reforms (to be fixed in 2 weeks) as sufficient, then the government bond spreads should go down. In this way Slovenia will be able to refinance the budget for 2012 and 2013.
If this is not the case, then there will be no other possibility for Slovenia than to ask for a bail-out. Please check the responses of financial analysts last week to the news about the bad bank decision in Slovenia (http://www.cnbc.com/id/49162469). As you can see, analysts mainly share a view that “efforts to shore up the banking sector with public money could push Slovenia’s debt to unsustainable levels“.

In other words, though the bad bank will not cause a direct increase of public debt in the short run, it will increase the implicit public debt through state guarantees and financial markets may see it as “unsustainable”.

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