EU warns Croatia over loan conversion act

The European Commission warned Croatia on the issue of conversion of Swiss francs loans into euro, saying it could hurt investors' confidence in the economy, local media reported on Friday.

Last year, Croatian government adopted a law asking banks to convert all loans denominated in Swiss francs into euro after the Swiss central bank abandoned the cap on the Swiss franc's value against the euro.

The European Commission criticized the law saying it put loan conversion costs exclusively on lenders and the step was too far from what was needed to avoid the crisis and protect debtors, the Croatian News Agency Hina reported.

"We hope that Croatia will find a proportionate solution. It is important in the interest of all, consumers and investors," Commission spokeswoman Vanessa Mock was quoted as saying.

The current Croatian government hasn't defined concrete measures to reply to the Europea Commission's warning due to political crisis which led to the government and parliament dissolutions and an early election being called.

Analysts here believed that the issue would be hard to avoid in the upcoming electoral campaign as it concerned over 100,000 borrowers.

It remained a doubt if the Commission would wait for Croatia's reply after a new government is formed or it could take further action through the European Court of Justice, the report said.

Most of Croatia's Swiss franc loans were made during 2000s, driven by low interest rates.
Source:XINHUA