Sanader in show of support to central bank

The Croatian government supports the stance of the central bank (HNB) that commercial banks should not be raising interest rates at a time of crisis. “They were making too much money to be pressuring citizens now, in times of crisis,” Croatian Prime Minister Ivo Sanader said on Monday after a meeting with his party’s senior officials. Sanader in show of support to central bank This came in response to Zagreb Bank Director Franjo Lukovic’s statement that the Croatian currency, the kuna, should be devalued to eight kuna to one euro. The central bank, however, decided against raising interest rates at Sanader’s behest. The initial statement was met with criticism by the government and citizens, because a devaluation of the kuna would lead to increased loan repayments, a possible run on the banks leaving them without foreign currency, which, in turn, would increase their value because of the reduced supply. Lukovic’s initial proposal was met with criticism from President Stjepan Mesic as well. The value of the kuna is slowly falling. It was at 7.1 kuna to the euro last spring but has since fallen to 7.44 kuna to one euro. The HNB announced support to stabilize the kuna, reiterating however that a poor tourist season could also have a damaging effect on the value of the domestic currency.

Sanader in show of support to central bank

This came in response to Zagreb Bank Director Franjo Luković’s statement that the Croatian currency, the kuna, should be devalued to eight kuna to one euro.

The central bank, however, decided against raising interest rates at Sanader’s behest.

The initial statement was met with criticism by the government and citizens, because a devaluation of the kuna would lead to increased loan repayments, a possible run on the banks leaving them without foreign currency, which, in turn, would increase their value because of the reduced supply.

Luković’s initial proposal was met with criticism from President Stjepan Mesić as well.

The value of the kuna is slowly falling. It was at 7.1 kuna to the euro last spring but has since fallen to 7.44 kuna to one euro.

The HNB announced support to stabilize the kuna, reiterating however that a poor tourist season could also have a damaging effect on the value of the domestic currency.