Business

EC Considering Suing Croatia Due to Swiss Franc Loans Conversion

By 14 May 2016

European Commission demands from the government to find a more balanced solution.

European Commissioner for Financial Services Jonathan Hill criticized in the European Parliament the Croatian law on conversion of loans in Swiss francs into euros and threatened that the Commission would sue Croatia to the European Court of Justice if the new government does not find a “more balanced” solution that would not put the full burden of conversion on banks, reports Večernji List on May 14, 2016.

In the debate, Austrian MEP Othmar Karas said that the controversial law, adopted by the previous Croatian government, was part of an effort of “European populists” to violate the legal order of the EU for their short-term gain in the elections.

“The Croatian law puts almost all the cost of conversion, which to my understanding is about one billion euros, to the banks, without taking into account the different circumstances of debtors”, said Hill. He noted that the former Croatian government had not consulted with the European Commission before the proposal was adopted in Parliament, but added that the government was not required to do so. The Commission started to analyze the Croatian law only after it had already been passed, and Hill for the first time revealed some of the results of this analysis.

“It is clear that protection of debtors in order to avoid a debt crisis can justify some restrictions. But, in our opinion, allowing debtors to perform loan conversion from Swiss francs into euros at an artificially low exchange rate and transferring the costs almost exclusively to banks goes beyond what is necessary to avoid a crisis and protect debtors”, said Hill who also revealed that Prime Minister Tihomir Orešković’s government was in communication with the Commission and wanted to find a solution that would take into account the Commission's criticisms.

“I support such approach, but progress has to happen fast, because otherwise we will take appropriate action”, said Hill. This procedure would probably mean an action against Croatia at the European Court of Justice. While the court process could take more than a year, experts warn that, if Croatia loses at the Court, some future Croatian government would probably have to compensate the banks for the costs of conversion of the loans, plus interest.

“We need a solution that strikes a good balance and that is in accordance with EU regulations, which protect consumers, but also investors and the single market”, said the European Commissioner.

“If anyone should be sued, then it is the banks which should be sued, and not Croatia”, said the head of the Franak Association Goran Aleksić. “Banks in the end did not lose anything. With the conversion, they just returned the money that did not belong to them in the first place”, said Aleksić.

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