Standard and Poor's on Tuesday said it is placing the 'A' long- and 'A-1' short-term sovereign credit rating on Slovenia on CreditWatch with negative implications, citing difficulties faced by the government in policy implementation.

In a statement, the rating agency said that the CreditWatch placement reflects its views about the ability of the Slovenian government to execute its proposed economic and financial sector structural reforms.

On October 30, Slovenia's opposition demanded that two laws, governing the management of state-owned assets, be subjected to a referendum. The second law, establishing an entity to receive and manage distressed assets of Slovenia's state-controlled banks, was invalidated for a referendum by the President last week.

However, the first law, establishing an entity to manage Slovenia's state-owned assets, has been placed before the Constitutional Court and the court will determine if this needs to be put for a referendum.

S&P said if the Constitutional Court allows the referendum on the first law to proceed, it remains unclear whether the referendum would pass and even if it passes, the establishment of an entity may possibly be delayed for at least a year.

Possibility that the parliamentary opposition will use the referendum procedure as a blocking device raised 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, the rating agency observed.

S&P said it could lower the rating on Slovenia by one notch to 'A-', or by more than one notch to the 'BBB' category if it see that the government's ability to enact key reforms has been weakened.

The rating can also be downgraded if S&P finds that the lack of political certainty is undermining Slovenia's other credit metrics such as its fiscal and debt dynamics.

RTTNews