Transfers of the debt to a 'bad bank' - called The Company for Management of Bank Claims - are due to start this month, and the entity has scheduled its first news conference for Tuesday.

But the audit ordered by the European Commission to uncover the extent of the non-performing loan problem is expected to delay the start of the cleanup until July.

The government aims to absorb 3.3 billion euros of loans that turned sour after a real estate bubble burst, putting Slovenia at risk of becoming the euro zone's euro zone's next bailout recipient.

That is less than half of the 7 billion euros the Bank of Slovenia estimates to be the true scale of the problem loans - a figure analysts say may also be too low as it was calculated earlier this year before the country's recession deepened.

"This has been the experience with other euro periphery economies, and the macro backdrop in Slovenia is getting worse than expected," said Timothy Ash, an analyst at Standard Bank.

Getting a clearer picture via audit may delay the cleanup.

"Due to the complexity of the measures involved it is not possible to say ...whether the first transfer will be made at the end of June or at the start of July," the finance ministry said in a statement, adding all transfers should be completed by the end of this year.

KEY TO BANK SALES

Ales Hauc, chief executive of the country's second largest bank Nova KBM (>> Nova Kreditna Banka Maribor d.d.), said he expected the bad loan transfer from his bank to begin in July and be completed in autumn, following which the bank could be sold to a private investor.

NKBM is the only bank on the government's privatisation list, expected to be confirmed by parliament this week along with 14 other firms including telecom Telekom (>> Telekom Slovenije d.d.) and airline Adria Airways.

Hauc told Reuters NKBM had 531 million euros of bad loans as of March. "An open question remains whether NKBM will have to make further writedowns due to the transfer," he said.

Some 1.3 billion euros of bad loans will be shifted from Slovenia's largest bank, Nova Ljubljanska Banka.

Along with the transfers, Slovenia also has to pump 900 million euros in the top three banks by the end of July to bring capital ratios into line with European requirements.

An EU official told Reuters the credibility of the Slovenian cleanup was more important than its speed, adding the external audit of banks should be completed in weeks, though the country had not yet chosen the auditor.

He said Slovenia's government agreed that the banks will be sold after they are cleaned up but analysts say it will be very difficult to get political consensus on that.

Prime Minister Alenka Bratusek runs a fragile coalition of four centre-left and centre-right parties with the second largest, the Social Democrats, openly opposed to privatisation although they say they will not quit the government over it.

(Reporting By Marja Novak, additional reporting by Jan Strupczewski in Brussels; Editing by John Stonestreet)

By Marja Novak