Croatia Minister Battles Banks Over Franc Loans

Croatian Finance Minister Boris Lalovac is running against the clock to find a solution to the problem of citizens who took out loans in Swiss francs that have now become too costly to repay.

The government intervened in January, freezing the exchange rate with the franc for a year, after it soared in value by 20 per cent, in a move to stabilise the problem of rising interest rates.

Time is running short to solve the problem, however, as in January 2016 the exchange rate with the franc will float freely again.

The main argument is over whether the banks or the state should assume the heavy financial burden of converting all 60,000 franc loans into loans valued in euro or the Croatian kuna.

Lalovac said on Tuesday the commercial banks, which earned profits even during the worst of the economic crisis, should take on part of the financial burden.

"In a time of crisis in Croatia, on the basis of withdrawal of profits, they made 1.3 billion euro.... I wonder where they made those profits," the minister said.

"I am disappointed because six months on, the banks have not offered anything," Lalovac added.

He has now warned that if the Croatian banking association, HUB, does not come up with a solution to the problem soon, the government will act by passing a law on housing loans.

This would implement a decision passed earlier by the supreme court, which would outlaw unilaterally adopted changes to interest rates on such loans.

Commercial banks are in no mood to cover all the costs of converting the franc loans, however. They say freezing the exchange rate with the franc has already cost them around 52 million euro.

The HUB has responded on Tuesday that it will cooperate in solving the problem, however, offering a...