After Cyprus: Is Slovenia the Next Domino?

Michael Teague  |

The Cyprus bailout crisis is over, in the sense that the politicians of the island country of give or take 1 million citizens managed to finagle its share of the money in order to qualify for the 10 billion Euros it desperately needed from the European Union.

Furthermore, after banks re-opened on Thursday, the much feared run did not materialize (though this was due to the fact a 300-Euro cap on withdrawals from private accounts is currently in place, along with other controls on money transfers).

But the crisis may not exactly be over. European markets have been badly shaken, and the troubled southern countries are worried that they will be subject to the same sort of tax on private accounts with which Cypriots were threatened, in the event that they too require more bailing out in the future.

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Enter Slovenia: the government there issued its first bond last October, and has announced that it must sell another by June 6th if it is to meet financial obligations resulting from 907 million Euros of treasury bills that are about to mature.

The yield on Slovenia’s bond rose to nearly 7 percent this past week, and the market already at least suspects that the country will not be able to meet its obligations. This will make it significantly more difficult for the government to get the money it needs by simply issuing another bond.

Meanwhile, Dutch Finance Minister and Eurogroup head Jeroen Dijsselbloem basically revealed that the private account tax could figure in to any future bank restructuring requirements mandated by future bailout offer from the Eurozone.

Slovenia, like many of the other financially troubled countries in the Eurozone, has been in the midst of a protracted political crisis carried over from 2012, and that began with anti-austerity protests in the first place.

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