Brussels trains its sights on Slovenia The European Commission is being pushed to take a tougher line with Slovenia amid mounting concerns that infighting is hampering the country's ability to overhaul its banking sector and avoid becoming the next rescue target in the eurozone crisis. According to two senior eurozone officials, concerns have focused on "non-cooperation" between Slovenia's finance ministry and central bank, which is responsible for supervising the financial sector. One of the officials said the central bank was being "obstructionist" towards the new government's clean-up efforts. The central bank's role could prove particularly problematic because the three largest Slovenian banks - most in need of a rescue - are state owned, raising questions about the supervisor's ability to evaluate their needs impartially. "The country has a governance problem of major proportions," the official added. The finance ministry said Slovenia was "aware of its obligations set by the European Commission" and did not believe any extra measures from Brussels were needed. After last month's botched Cypriot bailout, Slovenia emerged as the most likely candidate for the eurozone's next rescue because of the fragility of its banks and the government's difficulty in raising funds on the bond market. Slovenia's largest banks are saddled with an increasing number of non-performing loans issued in pre-crisis boom years. A severe recession has exacerbated losses, making it necessary for the government to recapitalise them. The government was able to raise €3.5bn in a bond auction last week, but at borrowing costs that were among the highest in the eurozone. EU officials said while the auction bought breathing room, the government should not be lulled into complacency. They added that the options discussed at a meeting of eurozone deputy finance ministers last week did not include a full-scale bailout. Instead, they focused on new powers given to the commission to force reforms on crisis countries. One of the most intrusive options would be to censure Slovenia for failing to correct economic imbalances - a move that would allow Brussels to fine the EU member if it did not quickly implement banking reforms. The option has been advocated by the European Central Bank. Olli Rehn, the commission's economic chief, must decide whether to put Slovenia into a so-called "excessive imbalances procedure" by the end of the month. "The stock of problems is not as vast as for many other countries, but the trend is very negative," Mr Rehn said at a news conference last week. Slovenia's economic situation is still manageable provided decisive action is taken without delay. Concerns about Spain, however, are hampering the commission's decision. Madrid was formally warned about its economic imbalances last month and some believe it may not be possible to impose new controls on Slovenia without doing the same for Spain - a move that commission officials worry might spark wider market unease. "As Spain goes, so goes Slovenia," a senior eurozone official said. Another option under consideration is to impose intensive EU monitoring on Slovenia. Though such monitoring cannot force reforms, it could give Brussels more insight into the country's troubled banks. ECB officials are also advocating a line of credit from the eurozone's €500bn rescue fund to reassure financial markets that Slovenia has emergency financing in place if needed. Such a "precautionary programme" comes with tough reform conditions attached.