Croatia: With or without you

Posted on 28/03/2016 · Posted in Croatia, FX Loans in Europe
  • The Croatian Parlament has approved the legislation that allows the loans that are in swiss-franc to be converted in euro. This decision has been taken despite the constant warnings and threats they have recieved from the foreign banks, stating that the only thing they will achieve is weaken their national currency, the Kuna.

  • The package of law allows the loans to be converted from swiss francs to another coin, to help the citizens pay the loans, that in some cases are still increasing. The governemt expects the banks to assume the conversion costs, estimated to be 6 billion kuna, while the central bank says the burden may reach 8 billion kuna.

Like other eastern European countries, including Hungary and Croatia, mortgages and consumer loans in francs became very popular. ¿The reason this happened? The clients were informed that coins sush as the swiss-franc of the japanese yen offered lower rates than those in the national currency. ¿Result? The croatian citizens are now forking out more kuna to cover payments, whilst many are struggling or cannot keep up.

Five of the main foreign banks were prepating to sure Croatia in the International Center fro Settlement of Investment Disputes in Washington if the government decided to continue with the mentioned plan. According to the banks, Croatia was violating the European Union laws as also the bilateral investment treaties. The banks also alleged they understood the necesity of reopening talks and finding a solution that was compromising with the citizens, but that the option choosen by the craotian governemnt was by all instances wrong and illegal.

Fitch Ratings, a global international agency, helped the Croatian governemnt defend its idea declareing that of course there would be a significant “one-tie losseson banks” but their “capitalization would remain robust”, and that the “switch should also help stabilize non-preforming loans which have grown rapidly in recent years”.

The foreign banks consortium, which are actually most of the banks that are in croatia since this country hardly has national banks, claim that the problem related to the loans is actually political.  This idea therefor tries to explain that it is not the banks whom are responsible of the current situation, but the governemnt. But whilst one blames the other, and viceversa, the only truth is that the clients of the banks are “slaves of the loans“. These citizens need a solution to a problem that was not created by them.

The consortium mentioned above is formed by : Austria´s Erste Group Bank AG, Italy´s UniCredit SpA, Russia´s OAO Sberbank, Ausatria´s Raiffeisen Bank International AG and the Austrian Hypo Group Alpe Adria AG. On the other side, the goverment was being defended by the finance minister Boris Lalovac, that asseverated “the goverment protects its citizens in accordance with the constitution”. Lalovac also states that “where are the banks when citizens should been helped; where were they when they granted so-called spelucative loans?”.

The answer to these questions is most wanted and searched by the citizens. Whilst the goverment and the banks blame each other, is the is the citizens whom are still “slaves of the loans“. During their “with or without you” debate, the need to wake up and start taking care of the clients, those whom are actually the only actors none of them can carry on without them.