If you thought you could take a breather following the crash of Cyprus, you were wrong. Bloomberg reports Slovenia’s Nascent Cabinet Under Pressure to Avoid Cyprus Fate.

Slovenia’s six-day-old government is being urged to prevent the nation becoming the euro region’s next bailout battleground.

Prime Minister Alenka Bratusek’s Cabinet must quickly carry out a plan to revamp the country’s ailing lenders, the central bank said yesterday. The former Yugoslav nation needs about 3 billion euros ($3.9 billion) of funding this year, while banks need 1 billion euros of fresh capital, the International Monetary Fund said last week.

European Union officials are striving to contain a debt crisis that prompted Cyprus to join Greece, Portugal, Ireland and Spain in agreeing on a bailout. Slovenian banks such as Nova Ljubljanska Banka d.d. are struggling with surging bad loans that equal a fifth of economic output, fueling investor concern that it may be next to seek aid.

Most Vulnerable

Slovenian and Hungarian banks are the most vulnerable in the region with non-performing loans at about 20 percent and growing, analysts at Standard & Poor’s Ratings Services, led by Paris-based Pierre Gautier, wrote yesterday in a research note.

Nova Ljubljanska, the nation’s biggest lender, reported a loss of 275 million euros in 2012, its fourth consecutive negative result. Nova Kreditna Banka Maribor d.d., which had a 205 million-euro loss last year, fell to the lowest level since its 2007 listing after a debt-equity swap increased the government’s stake to 79 percent. The shares plunged more than 40 percent last week and were unchanged at yesterday’s close at 79 euro cents in Ljubljana.

The government vowed to stick with a bank-recapitalization plan of as much as 4 billion euros, though with unspecified modifications, as surging bad loans fuel investor concern that the country may require a rescue.

Story Ends in Disastrous Bailout

Anyone who has followed Ireland, Greece, Cyprus, or Portugal knows how this story will end: In yet another disastrous bailout followed by the destruction of the Slovenia economy.

Mike “Mish” Shedlock