The Cypriot saga has thrown the spotlight on Slovenia, which is also a small euro zone country struggling with an over-burdened banking sector.
Slovenia’s mostly state-owned banks are nursing some 7 billion euros of bad loans, equal to about 20 percent of GDP, underpinning persistent speculation that the country might have to follow other vulnerable euro zone countries in seeking a bailout.
According to Standard Bank’s head of emerging market research Tim Ash:
The latest crisis in the euro zone, this time in Cyprus, continues to raise questions as to possible contagion effects throughout the region, and in particular which economies could be next.
Perhaps first in the firing line/spotlight is Slovenia, which is also currently grappling with its own banking sector crisis, and trying to fend off a Troika bailout.
Slovenia’s central bank was quick to dismiss any comparisons between the two euro zone countries this week, arguing on Monday the cases were different because Slovenia’s banking sector was much smaller relative to its economy than Cyprus’. It said deposits in Slovenian banks are safe.