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HNB agrees with ECB to set up precautionary currency swap line. Plenkovic: ''It is important and encouraging agreement''

 The Croatian National Bank (HNB) said on Wednesday it had agreed with the European Central Bank (HNB) to set up a precautionary currency agreement, known as a swap line, that will allow the HNB to borrow up to €2 billion from the ECB in exchange for Croatian kuna.
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Objavljeno: 16. travanj 2020. 11:26
Finance minister Zdravko Maric and PM Andrej Plenkovic
Finance minister Zdravko Maric and PM Andrej Plenkovic
 Davor Pongracic / CROPIX

The HNB said ina press release that the precautionary currency swap line would be be activated if needed.

"The currency swap line allows for the exchange of the kuna for the euro in the amount of EUR 2bn," the national bank said.

This swap line gives the HNB "the space to provide additional euro liquidity to Croatian financial institutions, should they need it, without using its own international reserves."

The Croatian central bank said that it "will notify the ECB of the use of euro liquidity acquired through the currency swap line. The currency swap line will remain in place until 31 December 2020, and can be extended if necessary."

In March, the HNB conducted five interventions on the foreign exchange market to maintain the stability of the exchange rate of the kuna, selling a total of € 2.25 billion.

It has also taken some other measures to mitigate the economic impact of the coronavirus pandemic.

The currency swap line agreed between the Croatian National Bank (HNB) and the European Central Bank (ECB) is an important and encouraging signal in the fight against the consequences of the coronavirus pandemic and in the process of adopting the euro in Croatia, Prime Minister Andrej Plenkovic said on Wednesday.

Important and encouraging agreement

"We have received an important and encouraging signal as a country that has a strategy for the adoption of the euro and that has focused some of its activities on the action plan to fulfil the criteria for the European Exchange Rate Mechanism II as an antechamber to the Eurogroup. In this regard, the message about the currency swap is very important and encouraging to Croatia, not just for it to persist on the path to adopting the euro, but in the present situation it allows Croatia for the first time to exchange €2 billion with the ECB," the prime minister Andrej Plenkovic told reporters after an inner cabinet meeting.

He said that the arrangement also opened up the space for domestic financial institutions to cope with the present crisis caused by the COVID-19 pandemic.

Plenkovic was asked to comment on the IMF's projection of a 9% decline of the national economy this year and to say whether the government was considering public-sector pay cuts as one of the measures to address the crisis.

He said that projections by different institutions varied and that the crisis would certainly have negative effects on the economy, adding that it was important to maintain the possibility of financing government measures and ensuring the normal functioning of the state.

As for possible public-sector pay cuts, he said that the government would pursue dialogue on cost-cutting measures with the social partners to ensure the normal functioning of the state.

The prime minister was also asked to comment on claims that the granting of financial aid to employers to save jobs was not transparent enough and whether the names of the companies that received such aid would be made public.

He said that the government was not aware of any misuse of funds by employers and that he had asked the leader of a trade union federation for clarification but had not received an answer.

Plenkovic announced that the national employment bureau would publish a list of all legal entities that had applied for such aid. "It is crucial that we are transparent as much as possible and that it is clear which companies applied for and were granted aid," he said, adding that HRK 1.3 billion (€171m) had been paid to over 80,000 companies.

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