By Marja Novak
LJUBLJANA (Reuters) - European Central Bank Governing Council member Marko Kranjec did not rule out on Tuesday that Slovenia may have to ask for international aid to prop up its banking sector, but he said there was no need to do so at the moment.
He also told an economic conference it was too early for joint euro bonds to help ease the euro zone debt crisis, saying many other "things" have to be agreed upon before the euro zone states could agree on joint bonds. He gave no further details. France has pushed for euro bonds but Germany has repeatedly rejected the idea.
Asked whether Slovenia would have to ask for international help because of the problems of its banking sector, Kranjec, who is governor of Slovenia's central bank, said: "We do not exclude anything ... but for now this is an entirely hypothetical question."
"Conditions (in the Slovenian banking sector) are going in the bad direction, but for now I do not see a reason that Slovenia would need to ask for (international) help," Kranjec said.
The Bank of Slovenia said earlier on Tuesday that provisions for non-performing loans of Slovenian banks jumped by 36 percent in the first four months of this year compared to the same period of 2011.
Spain this month secured up to 100 billion euros in bailout money to recapitalize its ailing banks, which raised concern in the markets that such a step would push Europe's fourth-largest economy further into debt and potentially closer towards requesting a full bailout program.
Kranjec also stressed the need for fiscal consolidation in Slovenia to bring the country's borrowing costs down.
"Yields on our (Slovenian) debt are very high but poor availability of (financial) resources is even more worrying," said Kranjec, referring to severe cuts in availability of international financial resources since the middle of 2011.
Slovenia's five-year credit default swaps have more than tripled over the past year to reach 411.25 basis points by 1000 EDT on Tuesday, up 3.44 percent on Monday's close, according to Markit data.
The yield demanded for Slovenia's 11-year sovereign bond reached 5.2 percent on Tuesday, according to Reuters data. In April Slovenia postponed the issue of a 1.5 billion euro sovereign bond because the yield demanded exceeded 5 percent.
Finance Minister Janez Sustersic said on Friday Slovenia's largest bank, state-owned Nova Ljubljanska Banka (NLB), needed 500 million euros of fresh capital by the end of June to meet the European Banking Authority capital requirements and more money later this year to keep operating into the future.
Slovenia's second and third largest bank, state owned Nova KBM and privately owned Abanka Vipa also need fresh capital this year.
The central bank said this month that the country's banking system would probably post a loss for 2012 for the third straight year because of non-performing loans to local companies and said the sector was also burdened by a shrinking offer of international funds.
Slovenia was the fastest-growing euro zone member in 2007 but was badly hit by the global crisis due to its dependency on exports.
After a mild recovery in 2010, economic output fell by 0.2 percent in 2011 and the government expects it to fall a further 0.9 percent this year due to lower export demand and a fall in domestic spending amid budget cuts.
(Editing by Susan Fenton)
