Croatia in Trouble with EC Over Swiss Franc Conversion Law

Croatia is threatened by an infringement procedure for violating EU law

The same day the Croatian Parliament voted no-confidence in PM Tihomir Orešković and his government, the European Commission (EC) confirmed a new official letter to Croatia regarding the conversion of loans tied to the Swiss Franc, Poslovni Dnevnik reported on July 5, 2016.

There is no doubt that the government received this last warning in the meantime, with an official procedure soon to follow due to infringement of EU law. The technical government does not have the means to seriously deal with this letter, at least not in defining concrete measures to fix the disputed changes to the Consumer Loan Law. It remains to be seen if the EC will show more patience until a new government is formed. This topic will be hard to avoid in the upcoming electoral campaign.

According to EC statistics, 85 percent of such conflicts to-date with EU members have been solved peacefully, before reaching the Luxembourg court, with member nations adapting their laws.

EC will surely not give up its position, mainly because other legal solutions are still being debated in other countries. The Polish Parliament is still debating their conversion model. For EC, it is a matter of principles. This was underlined by the German Finance Minister Wolfgang Schäuble, who referred to the Croatian case as “such a law cannot be part of the EU legal acquis.” The Croatian government has sent signals citing the will to find a way to a more balanced approach, or a more fair dispersion of conversion load.

The EC doesn’t find it disputable to protect debtors in order to avoid a debtor crisis with certain limits on the movement of capital and business freedom. But enabling debtors to exchange their loans in Swiss Francs to Euros at an artificially low exchange rate and placing the costs exclusively on creditors is a step too far from what is needed to avoid the crisis and protect debtors, the EC feels.

Lord Hill warned: “We must find a proportional solution. However the dispute over the Croatian conversion model ends, there is no more risk for debtors. The risks are now on the state and indirectly all taxpayers.”

 

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