Rohatinski: The Prime Minister Lacks Support for Serious Cuts

We are in an election year, and based on previous public statements, I conclude that the Government lacks support from both coalition and social partners for more serious cuts. This prevents significant changes from being achieved through the rebalancing in 2010, but perhaps certain matters will be established that will impact the future period, said Governor Željko Rohatinski after a conversation with Prime Minister J. Kosor.

Although there is no confirmation yet, there is increasing belief that the Government may propose the introduction of a crisis tax on banks, which would be in effect for one year, possibly at today’s session. This assessment was also emphasized by a separate meeting of Prime Minister Jadranka Kosor first with bankers and then with the Governor of the HNB, Željko Rohatinski. Bankers did not want to reveal details of the ‘constructive’ conversation with the Prime Minister, while Governor Rohatinski stated that the discussion revolved around two hot topics: the debt of Ljubljanska Bank and the rebalancing, or the possible tax on banks. – My stance on the bank tax is known, and whether the Government will decide to introduce it is an open question – said Rohatinski, adding that he was not told anything concrete in Banski Dvori about what the tax would look like, but even if they had, he would not spread it further. – Regardless of the fact that the fiscal situation is such that the possibility of introducing a tax on banks cannot be excluded, the potential benefits of that move may be relatively small, while the potential damages could be very large – the governor is convinced, who reiterates that the moral aspect referred to by the EU and the USA when talking about the bank tax is not applicable to us.

The Government’s coalition partners HSS and SDSS have indicated that they find it more acceptable to increase tax pressure than to reduce salaries and other expenses. At the mention of salary cuts, unions have risen up, and even HNS leader Radimir Čačić says that due to the extraordinary profits they generated, state bailouts, and the low prices at which they were sold, there are grounds to ‘go after the banks’. Čačić fears that the Government will ‘screw up that money’ and thus waste another chance to do something, so it is better not to introduce it. Rohatinski responds that the bailouts from the 90s are being mystified: – Only when fresh money from abroad came into the banks did the problems with illiquidity and insolvency of banks disappear – says the governor, who is concerned about the possibility of capital flight from the country and the consequences on the exchange rate if banks are burdened with additional taxes. (www.vecernji.hr)