Milanovic says interest rates on euro-indexed loans won't rise

Prime Minister Zoran Milanovic has dismissed the possibility of an increase in interest rates on loans pegged to the euro, adding that he believes that there won't be any new increases of excises taxes either, following the latest increase of two days ago in tobacco and petrol excises.

Asked by reporters during a visit to the southern town of Sinj on Saturday if interest rates on euro-indexed loans would rise, the PM said: "It won't happen, I can guarantee it to citizens."

He underlined that a high level of household indebtedness was a big problem.

Household debt is a bigger problem in economic and financial terms than public debt. Public debt is a serious matter and should always be controlled. I believe we have reached a ceiling in that regard, but household debt is restricting consumption, which is simply stagnating. That is why the situation, as far as loans are concerned, cannot be worse than it is now, said Milanovic.

Asked to comment on Finance Minister Boris Lalovac's criticising banks for not lowering interest rates, Milanovic said that "there has been a game between the euro and LIBOR the whole time."

"There has been a game between the euro and LIBOR - the interest rate at which banks borrow money on the financial market in London... LIBOR was 5% at the time when most of the loans were taken, today it is 0.5%," Milanovic said, noting that banks "know what they are doing and are playing their own game."

"It has been a tug of war the whole time, with banks always having it a little better. We will do and are doing our best so that banks can make money and do not fold, but also so that citizens do not get short-changed," Milanovic said.

Asked if the government would again raise excise taxes, after it increased petrol and tobacco excises two days ago, Milanovic said that he believed it would not.

"I believe that this is the beginning of economic growth and definite recovery of the national economy, consumption growth and better times for both Europe and Croatia. It seems that now things can only change for the better - it is almost obvious today," said the PM.

Asked to comment on reports that large amounts of money were syphoned from Croatia via Hypo Bank, Milanovic said that he could not comment on it as "courts and prosecutorial authorities are dealing with it."

(Hina) rml

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