Lalovac: Default interest rates are just a drop in the ocean of banks' profits

Finance Minister Boris Lalovac said in an interview with the commercial television channel Nova TV on Tuesday evening that banks would not be seriously affected by the planned reduction of default interest rates because they were just "a drop in the ocean" of the banks' profits.

When asked if he expected counter-measures from the banks following the announcement that the default interest rates would be reduced as of June from the present 12.14% to 8.14% for natural persons, Lalovac said that the default interest rates in Croatia had for long been a trigger of debt bondage.

"That's why it is good that they are being reduced to bring them to the EU level. The banks won't find it hard because I think that 60 to 100 million kuna, which they might lose as a result of the reduction of interest on consumer loans, is just a drop in the ocean of their profits," the minister said.

Speaking of Croatia emerging from the recession, Lalovac said that the government had adopted a lot of measures to that effect, including those to relieve the economy. He said that one of the indicators of economic recovery was the fact that more money was being paid into the budget. "Revenues from VAT are as much as 1.5 billion kuna higher than at this time last year, and profit-tax returns are also better. This can also be seen from other fiscal figures."

Lalovac said that although these were positive trends, they were still not enough to set the economy in motion. He said that one of the main reasons for this was a large debt of private citizens and companies.

"According to the latest Eurostat report, their debt is about 140% of GDP, or about 420 billion kuna," the minister said. When asked if this meant that Croatia was worse than Greece, he replied affirmatively. "Yes, judging by this fact we are worse than Greece. The government owes 280 billion, and private citizens and companies 420 billion," Lalovac said.

In this context, Lalovac spoke of the government's debt write-off scheme, saying that 4,500 citizens qualified for debt write-off, but only 100 had applied for it. He called on them to go to the Tax Authority and settle their tax status. "They won't have to pay anything because they meet the criteria" for debt write-off, he said.

(EUR 1 = HRK 7.57)

(Hina) vm

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