The Slovenian Democratic Party of Pensioners quit Prime Minister Janez Jansa’s four-party coalition, raising the risk the nation will hold a second round of early elections in a year and be forced to seek a bailout.
The party, led by Karl Erjavec, decided to leave the government because of corruption allegations against Jansa, the party said on its website today. The Citizens List already dropped out of the group last month and another partner has threatened to do the same, leaving Jansa short of 46 votes in the 90-member Parliament to pass legislation. Jansa has vowed he will continue as premier even with a minority Cabinet.
An early vote would derail the government’s plan for an economic overhaul, including the recapitalization of the nation’s banks such as Nova Ljubljanska Banka d.d. and force the nation that adopted the euro six years ago to seek an international rescue package. Erjavec, who steps down as foreign minister on Feb. 22, said today he was given a mandate by the party to try and form a technical administration.
“The opposition is still struggling to put a rival coalition together and Jansa seems to be happy to tough it out in a minority capacity and continue to legislate and this could all drag on for some time,” Timothy Ash, an emerging markets economist at Standard Bank Plc. in London wrote in a note to clients today. “Watch for the risk of ratings downgrades, and the Finance Ministry will need to think of coming to market sometime in the first half of the year.”
Jansa took over the Finance Ministry on Feb. 1 after Janez Sustersic resigned since he’s a member of the Citizens List.
A benchmark bond sale may be at risk after Jansa overruled Sustersic on the debt-sale plan for this year of as much as 4.5 billion euros ($6.09 billion). Dejan Krusec, who was deputy finance minister before stepping down, said in a Jan. 15 interview that Slovenia plans to sell debt “sooner, rather than later.”
The yield on Slovenia’s dollar-denominated debt maturing in 2022 was little changed from yesterday at 5.14 percent at 2:57 p.m. in Ljubljana, according to data compiled by Bloomberg.
The Adriatic nation is rated Baa2 at Moody’s Investors Service, the second lowest investment grade while Standard & Poor’s gives it an A and Fitch Ratings an A-. All three companies have a negative outlook on the sovereign.
Slovenia held an early vote in December 2011 after the collapse of the government of Premier Borut Pahor.
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