Standard & Poor's downgrades Slovenia credit rating

Standard & Poor's downgraded Slovenia's sovereign credit rating, to 'AA-/A-1+' from 'AA/A-1+'. "In our view, Slovenia's fiscal position has deteriorated since the onset of the 2008 financial crisis," the ratings agency said. "Policy makers have not thus far presented a consolidation strategy we consider credible. The outlook, added the agency, "is stable and balances the still-moderate, if increasing, debt burden" against what the firm said was the likelihood of further delays to reforms, which "could put at risk the competitiveness of the Slovenian economy and thus its growth prospects." "Slovenia's debt burden, which had been declining between 2002 and 2008, has rapidly increased as a consequence of the government's policy of cushioning the economy and banking system from the negative impact of the crisis," the ratings agency said. It said S&P expects general government debt "to grow to 43% of GDP in 2011, double the 2008 level." "A positive rating action in the medium term is possible if government reform efforts reduce some of the structural rigidities in the economy and allow for a more efficient allocation of resources in the economy. In turn, this would result in a more adaptable economic structure, more competitive economy, and higher income levels," Standard & Poor's said. But a "negative rating action is possible if the government's commitment to fiscal consolidation does not meet our expectations and results in a significant increase in gross and net general government debt levels." Prime Minister Borut Pahor's center-left government lost a confidence vote in late September after a months-long crisis that began with the rejection of pension reforms at a June referendum.