The FT's Peter Spiegel has the latest take on Slovenia this afternoon, highlighting the fractiousness of the country's internal politics: One of the officials said the central bank was being "obstructionist" towards the new government's clean-up efforts. ... Our earlier backgrounder on Slovenia is here, and also check out the deeply reported stories by Michael Steen here and by Ralph Atkins and Robin Wrigglesworth here. The New York Times had a story this morning here. Two debt sales in the past month mean that Slovenia's financing needs are covered for the year, but this excludes the cost of potentially having to recapitalise its banks, which is widely expected. But it is politically difficult for the country to begin selling its state-owned assets, and its "bad bank" has yet to be capitalised. The country's prime minister will be presenting a recapitalisation plan to the European Commission this Thursday, which includes the possibility of asset sales. Of course, it remains unclear (but doubtful) whether that would be enough and whether the sovereign could raise the additional funds needed to recapitalise the deteriorating banks on its own. But the funds raised in last week's auction, which came the day after a Moody's downgrade, carried interest rates north of 6 per cent, and the prior sales of debt have mainly been to Slovenia's own domestic banks. These banks then repo the debt with the Slovenian central bank, and by extension with the ECB. As Peter explains, right now eurozone policymakers are more focussed on finding ways to force banking and governance reforms on Slovenia rather than on a full-scale bailout. But if at some point the ECB becomes uncomfortable with its growing exposure to the collateral pledged by the Slovenian banks (including those government bills), or if the Slovenian government becomes convinced that the banking system is deteriorating too rapidly and needs the help, a bailout is what we'll see. UPDATE: The great Barnejek has a post up on Slovenia today, and I regret not having come across it earlier. He reiterates the case that Slovenia is not the new Cyprus and explains why - and of course, he is correct about that. If it becomes necessary, a bailout of Slovenia would be different (favourably) in nature and scale from that of Cyprus. And last week's debt sale perhaps improved Slovenia's chances of escaping a punitive bailout more than I'd realised. Related links: Brussels trains its sights on Slovenia - FT Alphaville Stalled reform and poor governance fuel Slovenia bailout talk - FT Slovenia doubts point to wider EU crisis - FT