April 25, 2015 / 3:18 PM / 4 years ago

Swiss franc debtors march in Croatia, demand cen bank governor to resign

ZAGREB (Reuters) - Thousands of Croatians holding loans denominated in Swiss francs took to the streets of Zagreb on Saturday, demanding local banks to restructure the debts and the central bank governor to step down for failing to take action.

People march during a protest organized by Udruga Franak in Zagreb's downtown April 25, 2015. REUTERS/Antonio Bronic

Some 60,000 Croatians hold around 27 billion kuna (£2.5 billion) worth of Swiss franc-denominated loans, mainly taken out during the 2000s when many in central and eastern Europe were attracted to low interest rates on the Swiss currency.

The franc surged in January when the Swiss central bank scrapped its peg to the euro, driving the loans’ costs sharply higher. The Croatian government fixed the franc rate against the kuna at 6.39 for one year to put a cap on the mounting debts. The current market rate is 7.35 kuna per one franc.

The loans, a vast majority of them taken out for mortgages, are equivalent to around eight percent of Croatia’s gross domestic product.

Carrying banners saying “Stop to financial slavery” and chanting “Thieves”, the protestors marched towards the main city square and then split into two groups to head towards the government offices and the central bank building.

The protestors want the loans to be converted into the national currency and the interest rates to be reduced to the level where they stood when the loans were taken.

“We demand the central bank governor to resign and a change of monetary policy,” Ivan Kontrec from Udruga Franak, which organised the protest, told the gathering.

Kontrec said the central bank failed to take action when the banks changed the level of interest rates “illegally”. The banks have said they were acting in line with consumer credit laws. They stand to lose some 400 million kuna this year due to the capped exchange rate for the loans.

Udruga Franak is an association representing the Swiss franc loan holders.

Earlier this week, Finance Minister Boris Lalovac warned the local banks, some 90 percent of which are in foreign hands, that the government would have to act unless they offered a fair long-term solution for the holders of loans pegged to the Swiss franc.

“The banks have room in their balance sheets to restructure the citizens’ private debt and come up with a fair and thorough solution. It is unacceptable that the citizens carry all the risks of exchange and interest rates movements,” he said.

The conversion of loans into the euro-denominated ones is seen as the most likely solution, but the details of conversion are yet to be defined.

Reporting by Igor Ilic; editing by Clelia Oziel

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