BRUSSELS (AP) -- European finance ministers met Monday to discuss the economic plans of Italy's new government and take a closer look at Slovenia's precarious financial situation — and whether it could become the bloc's sixth nation to require a bailout.
The ministers from the 17 countries using the euro currency were also discussing the outlook for Portugal, Greece and Cyprus, which have already received emergency loan programs and must meet tough conditions in return.
The Eurogroup of finance ministers approved the next batch of 7.5 billion euros ($10 billion) in bailout loans for Greece, an EU diplomat said. He would only speak on condition of anonymity because the details of the meeting were confidential.
The ministers were not, however, likely to release more aid for Portugal because they were still waiting for Lisbon's latest austerity measures to be cleared by the country's parliament.
The ministers in Brussels met their new Italian counterpart, Fabrizio Saccomanni, who was expected to brief them on his government's economic and financial policies. Italy has the eurozone's third-largest economy, and markets have greeted the new centrist administration with relief after February's inconclusive elections.
Nonetheless, Italy is saddled with a huge debt — about 127 percent of its annual economic output, second only to Greece. While its economy was growing, the country was able to manage its debt. However, a leading international economic body forecasts Italy's economy will shrink by 1.5 percent this year and grow only 0.5 percent in 2014. That will push the country's debt up to 131.5 percent of annual GDP, according to a forecast by the Organization for Economic Cooperation and Development.
The new Italian coalition government has pledged to continue overhauling its budget and introducing economic reforms to help bring this debt load down.
Monday's Eurogroup meeting came amid a relative lull in the bloc's three-year-old debt crisis, but was overshadowed by fears that Slovenia could become the group's next problem member. Officials, however, sought to dispel fears the country might join the bailout club of Greece, Ireland, Portugal, Spain and Cyprus.
"The Slovenian government has said it doesn't want a rescue loan package, wants to pull it off without one," said German Finance Minister Wolfgang Schaeuble on his way into the meeting. "I think this is right, but it must still deliver the necessary measures. That is not easy," he said.
Markets have started worrying because of Slovenia's shaky banks, which are reeling from a burst real estate bubble and unpaid property loans.
The tiny Alpine nation accounts for only 0.4 percent of the eurozone's overall economy, but the lenders' troubles are large enough that investors fear the government might face huge costs rescuing them.
While its overall public debt is well below the EU average, the country of 2 million is already facing difficulties refinancing its debt, forcing it to implement budget cuts and tough reforms.
"The relevant countries have to push through difficult adjustments one way or the other," said Schaeuble. "By now, the insight that rescue programs are not exactly invitations for comfort is also well-known," he added.
Among budget cuts, tax hikes and other measures Slovenia was expected to present Monday, the government is setting up a so-called bad bank to take shaky loans and investments off lenders' hands. The EU Commission, the bloc's executive arm, will assess the proposals by the end of the month.
The ministers were also taking stock of the progress in Cyprus, which had dominated the eurozone's agenda early this year until an agreement was reached on a messy 10 billion euro bailout in April.
The bloc's permanent bailout fund, the European Stability Mechanism, transferred an initial 2 billion euro tranche to Nicosia Monday.
"The loans granted by the ESM help to maintain financial stability in the euro area and buy time for Cyprus", said ESM chief Klaus Regling. "This time enables Cyprus to undertake the reforms necessary to rebuild its economy on a sustainable basis.
The ministers will be joined by their counterparts from the 10 EU nations that don't use the euro currency on Tuesday. The wider group will discuss Europe's way forward toward a full banking union and how to step up the fight against tax evasion.
Juergen Baetz can be reached on Twitter at http://www.twitter.com/jbaetz
- Financials Industry
- Budget, Tax & Economy