"The CreditWatch placement reflects our views about the ability of the Slovenian government to execute its proposed economic and financial sector structural reforms," the ratings agency said in a statement.
S&P also said in the statement:
"[..] On Oct. 30, a group of opposition members of Slovenia's parliament demanded that two laws, the first establishing an entity to manage Slovenia's state-owned assets, the second establishing an entity to receive and manage distressed assets of Slovenia's state-controlled banks, be referred to the electorate under Slovenia's referendum procedures. On Nov. 2, the president of the parliament invalidated the demand for a referendum on the second law on procedural grounds. Slovenia's Constitutional Court will determine whether the first law will be subject to referendum.
Even if the Constitutional Court allows the referendum on the first law (the establishment of the asset management entity) to proceed, it remains unclear whether the referendum would pass. If the referendum against the creation of the state-owned asset entity passes, we expect the establishment of that entity could be delayed for at least a year, although we believe the management of Slovenia's state assets can continue under the current legislative regime.
We believe the possibility that the parliamentary opposition will use the referendum procedure as a blocking device raises significant uncertainties that could threaten the government's ability to develop and execute structural reform policies of higher importance to Slovenia's long-term macroeconomic stability. Affected policies could include budgetary consolidation, pension and health care, labor market, and state administration. Although we acknowledge that there are various ways to address the solvency of state-controlled financial institutions, we believe delays in resolving the issue will likely harm investor confidence and could increase Slovenia's financing costs.
We expect to resolve the CreditWatch placement after the Constitutional Court rules. We could lower our rating on Slovenia by one notch to 'A-', or by more than one notch to the 'BBB' category if we believe that the government's ability to enact key reforms to promote a more flexible and responsive economy and financial markets has been weakened, and if we see that the lack of political certainty is undermining Slovenia's other credit metrics such as its
fiscal and debt dynamics.
Conversely, if these concerns were mitigated by what we consider to be unhindered and appropriate policy action, we could affirm the ratings at the current level."
