LJUBLJANA (Reuters) - Slovenian Prime Minister Miro Cerar on Tuesday rejected the resignation of Foreign Minister Karl Erjavec, Cerar's office said.

Erjavec, who also heads the junior coalition party Desus, offered to resign last Thursday over a scandal involving a leaked tape that led to a breakdown in international border arbitration with neighboring Croatia.

"Considering the fact that the arbitration procedure is going forward there is no reason to dismiss the minister," the office said.

Erjavec offered to resign a few hours after the Permanent Court of Arbitration in the Hague announced that it would continue its work on the border issue between Slovenia in Croatia although Croatia withdrew from the process.

Croatia withdrew last year after a leaked tape revealed a Slovenian judge on the arbitration panel exchanging confidential information with an official of the foreign ministry.

Twenty-five years after the break-up of federal Yugoslavia, the two states still disagree over their land and sea border. Slovenia is demanding access to international waters in the Northern Adriatic, where its territory is squeezed to a coastal sliver between Croatia and Italy.

(Reporting By Marja Novak; Editing by Ralph Boulton)