Caretaker Finance Minister Zdravko Maric said on Saturday it was good news that the Fitch Ratings agency had affirmed Croatia's long-term foreign and local currency issuer default ratings at 'BB' with negative outlooks.

"Considering all the circumstances that prevailed in recent weeks, this is certainly good news," Maric told Croatian Television.

He recalled that Fitch downgraded Croatia's rating twice in the past four years, two notches below investment grade. "It's an important message why this time they decided to affirm the credit rating. Despite certain elements of political instability, all economic indicators are going in the right direction, notably indicators concerning public finances, the budget and the public debt."

Maric said it was key that Fitch "looks ahead". "They are clearly saying, continue with these measures you have undertaken, first and foremost in public finances, continue to reduce the public debt, to implement reforms, and we can expect the Croatian credit rating to improve which, most importantly for us, would impact the interest rate price, the price of the debt we all pay together."

Maric went on to say that the Croatian Democratic Union's announcement of cutting VAT from 25 to 24% was realistic. "Expenditures are completely under control, revenues are going up practically by 10%, the budget deficit has decreased, the public debt is decreasing for the first time in 15 years. Those are necessary prerequisites for reducing VAT."

Maric said the Croatian economy and society needed an alleviation of the tax burden, including VAT and notably income and profit taxes.

As for the results of a stress test for 51 banks in the European Union which show that in case of certain shocks, some banks in Italy and Ireland would have to be recapitalised, Maric said the results need not upset Croatia's banking system.

"Despite the fact that those are mainly euro area banks, I think our banking system is stable. Our high bank capitalisation, which is nearly twice the European average, and the liquidity of the banking system are an additional argument and a reason for not showing excessive concern."

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