Now that the Cyprus bank bailout deal has been inked with the EU, everyone is looking at Slovenia.
Government bond yields there are spiking in the wake of the crisis in Cyprus.
The country, another relative newcomer to the euro, is struggling with its own banking problems. The IMF expects Slovenia will have to recapitalize its three largest banks this year, which could cost a billion euros.
That will increase Slovenia’s budget deficit, which is bad news because the country is already having trouble selling sovereign bonds on the open market in order to finance the government.
So, the question is whether Slovenia will be the next EU member state to need a bailout.
Slovenia’s top central banker, Marjo Kranjec – who also sits on the ECB Governing Council – says it’s not going to happen.
Reuters correspondent Marja Novak reports:
Asked by Reuters at a business conference on Friday whether Slovenia could avoid a bailout, Kranjec said “Yes”.
“I am very sure that we (Slovenia) will not get into such a situation (as Cyprus),” Kranjec, who is also the Bank of Slovenia governor, told reporters on the sidelines of the conference.
However, the market may be starting to bet otherwise.
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