Finance Minister Zdravko Maric on Monday commented on a warning sent by the European Commission (EC) regarding the conversion of loans pegged to the Swiss franc, underscoring that the conversion was conducted lawfully in accordance with the law and a solution would be found with the EC and Croatian banks through dialogue aimed at protecting the state budget and taxpayers.

The EC on Friday confirmed that it had sent Croatia a formal warning in mid-June regarding the conversion of loans denominated in Swiss francs into euro loans, being of the opinion that the country's loan conversion law had shifted all of the conversion costs onto banks and that its retroactive application jeopardised the principle of legal security.

Emphasising that the EC's opinion was not surprising because during the actual process of adopting the law facilitating the conversion there had been "certain warnings and objections by Brussels," Maric said that it was "essential to say that the law was adopted in accordance with the law."

"The conversion has been consumed by almost 94% of debtors with Swiss franc pegged loans and their loans have been converted to the euro or kuna currency and there is no going back now," he said replying the reporters after signing an agreement between the European Investment Bank and the Croatian Bank for Reconstruction and Development.

A solution for this case, he said, will be sought in dialogue with the EC and Croatian banks which provided loans pegged to the Swiss franc and based on that dialogue we will respect Croatian legislation and defend national interests.

"You can be assured that we will do everything in our power to protect the state budget and taxpayers," Maric underscored.

Adding that he understood the great interest of not just the 60,000 citizens who had loans pegged to the Swiss franc but the general public for a solution to be found, Maric said that he could not specify what compromise might be reached as this was a "very complex problem."

The issue of loan conversions was also discussed with credit rating agencies. That matter, Maric said, could potentially jeopardise the state budget in the sense that taxpayers would have to bare the brunt and we explained the situation to them too and what steps might be taken next without going into detail and we will do everything we can so that the bad scenario doesn't occur.

Asked whether this could mean that credit rating agencies could revise Croatia's rating, Maric said that our economic indicators are in our favour but agencies focus on the political situation too.

"We expect a decision that will be based on the talks we had about three weeks ago when their delegation was in Zagreb. The economic indicators, that is, economic recovery, primarily the situation in public finances where we showed the domestic and international public that we are indeed responsibly managing the public debt and the recent examples of our activities on international and domestic markets go in our favour. Therefore, we could say that we have a lot of arguments and reasons to defend our credit rating," he said.

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