Croatia's strongest opposition party, the Social Democratic Party (SDP), called upon the commercial banks on Wednesday to reduce their interest rates and thus share the risk of foreign currency-pegged loans with citizens.
The party said that the banks had enough room to cut their interest rates by 1-2.5% (in which case the interest rate would be 4.5% for loans pegged to the Swiss franc and 5.5% for those tied to the euro) and still make decent profits.
The SDP's economic strategist Branko Grcic held a press conference at the party's headquarters to present an aid model for citizens burdened with foreign currency-pegged loans. "In the present circumstances, when it is not possible to influence the exchange rate, particularly that of the Swiss franc, reduction of interest rates is the only direct and specific assistance to citizens burdened with foreign currency-pegged loans."
Grcic said that in 2005 and 2006, when loans pegged to the Swiss franc were issued, interest rates were mainly between 4% and 4.5% and that today interest rates on those loans ranged between 5.5% and 7%. He noted that the market interest rate for Swiss franc-pegged loans was now below 4.5%.
"So there is room for reduction and it ranges between 1% and 2.5% depending on banks," Grcic said.
He described as futile the government's agreement with the banks to extend loan repayment deadlines, adding that it favoured the banks because it tied people with bigger loans to the bank.
SDP leader Zoran Milanovic also appealed to the banks to cut their interest rates. He said that he, too, was affected by the rise in interest rates for loans pegged to the Swiss franc, adding that a monthly instalment of his car loan had gone up from 1,600 to 2,600 kuna.
Milanovic said that banks "have to be profitable, because otherwise the country's economic and financial structure would be upset. But it is necessary to find a line between a decent profit and a point where it turns into taking advantage of the situation."
Milanovic said that the banks could share the loan risk economically and should do so ethically. "This is about sharing the social responsibility, so that banks can make reasonable profits and that citizens can repay their loans, but there should be a reasonable and fair ratio."
Milanovic said that Croatia was stagnating partly because the money from the difference in interest rates "is dead and useless" both to the government and to society. He said that if the SDP-led coalition came to power it would not, like the present government, "borrow money at the expense of this generation, because that prevents development."
