ZAGREB, Aug 25 (Reuters) - Croatia plans to convert loans denominated in Swiss francs into euros, a government source said on Tuesday, a measure that should bring relief to tens of thousands of Croatian debtors in the Swiss currency.
About 60,000 Croatians hold Swiss franc-denominated loans, mainly taken out during the 2000s when many in central and eastern Europe were attracted by low Swiss interest rates.
Since then a strong franc has driven the loans’ costs sharply higher and governments across the region have been grappling for solutions.
“The government is likely to adopt the measure quite soon,” the source said.
According to the plan, whose details have yet to be made public, the costs of the conversion would be borne by the banks while those losses would be recognised as a tax deduction.
Croatia’s centre-left cabinet, which faces a parliamentary election by early 2016, fixed the franc rate to the kuna at 6.39 for a period of one year in January, aiming to put a cap on the mounting debts while a lasting solution is found.
The current market rate is around 7.00 kuna per franc. ($1 = 6.5649 kuna) (Reporting by Igor Ilic; Editing by Zoran Radosavljevic and Andrew Heavens)