franak - swiss_franck.jpg
Photograph: FreeImages.com/Michael Faes

The European Commission on Wednesday confirmed that Croatia has been granted an extension to respond to the Commission's official letter of warning, sent in June regarding the conversion of loans denominated in Swiss francs into euro loans.

"The Croatian authorities requested an extension of the two-month deadline to 17 September, which we have accepted. The Commission will examine the reply, once received from the Croatian authorities," a Commission spokesperson told Hina.

The European Commission sent Croatia an official warning on June 16 regarding the law on conversion of loans denominated in Swiss francs into euros, considering that the law shifted all of the conversion costs onto banks and that its retroactive application jeopardised the principle of legal security. The deadline for Croatia's response was 16 August, which has now been extended to 17 September.

"We would welcome Croatia proposing a solution that is suitable and proportionate. The Commission would then assess whether it is compatible with the Single Market and the commitments Croatia has made under European legislation," the spokesperson said.

A letter with a formal warning is the first step the EC takes against a country it believes has violated EU law.

If the country fails to reply to the letter or fails to provide a satisfactory explanation in its reply, the EC takes the second step, namely a reasoned opinion. If after that there is still no satisfactory response, the EC may approach the Court of the EU.

The EC is of the opinion that the law adopted by the Croatian parliament allows all loan holders (except for legal persons) to retroactively convert loans pegged to Swiss francs into euro loans in line with historical exchange rates, regardless of their ability to repay those loans. That makes loan conversion costs fall entirely on creditors.

The EC believes that it is necessary to strike a balance between the interests of consumers and the need to protect the single capital market and its legislative framework.

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