Croatian Govt freezes Swiss franc exchange rate for a year

Croatian Govt freezes Swiss franc exchange rate for a year

Zagreb, January 20, 2015/ Independent Balkan News Agency

By Marija Avramovic

Prime Minister Zoran Milanovic at a special press conference announced that the government will make amendments to the Law on Consumer Credit in Parliament, in order to freeze Swiss franc’s exchange rate at 6.39 kuna (0,78 euro) in the next 12 months.

The Government is supposed to discuss the amendments to this law, as soon as today, in an extraordinary telephone meeting, so that they be tabled to Parliament immediately, and be voted on, on Friday.

Milanovic told citizens with loans in Swiss francs to remain calm and to no longer look at foreign exchange rates, adding that financial institutions will bear the cost of the differences in exchange rates for the year in question.

Finance Minister Boris Lalovac was taken by surprise by such a move from the Prime Minister, bearing in  mind that Lalovac, yesterday before the meeting of representatives of banks, ministry and the Croatian National Bank (HNB), said that the most realistic option was the intervention onto the interest rate.

Finance Minister added that fixing the exchange rate was the second scenario, but that lawyers, bankers and primarily HNB must be consulted about it.

After the meeting in the Ministry of Finance, when the bankers expressed their willingness to “for a short period of time, up to three months, all alone bear the cost of facilitating the repayment of the loan by relying on existing solutions”, Lalovac claimed that the bankers are ready to help and they all agreed that they should search for a long-term solution.

“The deal between Łalovac and the bankers on the quarterly period, during which, banks would bear the costs of the increasing exchange rate was supposed to create a space in which they would search for a permanent solution. With such number of affected people this is truly an epidemic and it is to be approached systematically. Unfortunately, the Prime Minister apparently, made a political decision”, economic analyst Damir Novotny commented.

Novotny said that today could have been signed a 3 + 3 decision between Łalovac and the banks, but the Prime Minister has decided for a timeout of 12 months, when he will get a new mandate for the formation of economic authorities or shift the problem to the next government.

Association Franc, which is dealing with the protection and implementation of consumer rights and service users of credit and financial institutions, is not satisfied with the Prime Minister’s decision and seeks  from the government to make the conversion of loans in kunas at the rate of the day of signing the loan.

Debtors in other currencies are also dissatisfied and feeling disadvantaged and perhaps are willing to consider constitutional indictments.

According to the HNB data, the total amount of loans indexed to the Swiss franc in late September last year was 23.7 billion kuna (little over 3 billion euro) and more than 92% refers to loans for individuals, primarily residential loans.

Association Franc estimated that there were about 60,000 loans in Swiss francs and they believe that the strengthening of the franc will affect the lives of approximately 300,000 Croatian citizens.