Move over, Cyprus. Slovenia is the new tiny country you should worry about

The Cyprus crisis, it appears, is soooo last week. The new country that’s provoking concern is Slovenia. The small former Yugoslav—wedged between Italy, Austria, Hungary and Croatia and best known for its exceptional skiers and Slavoj Žižek—had a pretty bad week, with long-term bond yields spiking to 5.4 percent Friday morning amid fears that the country would need a bailout. That’s not crisis-level — Cyprus’ yields are around 7 percent, for comparison — but it’s certainly in the “Danger Zone.”
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ancona said:

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We should all take heed of this ... this is not a test, this is real-time.

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Slovenia’s credit rating was cut to junk by Moody’s Investors Service, forcing the government to delay its first international bond sale this year, intended to to ease a financing crunch and avoid an international bailout.

The Finance Ministry yesterday postponed an offering of dollar-denominated benchmark bonds before the rating was lowered two levels to Ba1 from Baa2, on par with Turkey, and given a negative outlook. Five members of the 17-nation euro area are now rated junk by Moody’s. Standard & Poor’s and Fitch Ratings both assess Slovenia at A-, the fourth-lowest investment grade.
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The three biggest banks -- Nova Ljubljanska Banka d.d., Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. -- are government-owned or controlled and make up almost half the financial system. They have been buying sovereign debt as foreign investors stay away.

The government has injected about 1 billion euros into Slovenia’s three largest banks since 2008, according to data compiled by Andraz Grahek, a managing partner at Capital Genetics, a financial-advisory firm in Ljubljana. The country’s lenders will need an additional 900 million euros by the end of July, the government said last week.

A major factor underpinning the downgrade “is the ongoing turmoil in the country’s banking system and the high likelihood that the sovereign will be required to provide further assistance and capital injections,” Moody’s said late yesterday in an e-mailed statement from New York.
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