Despite the study, Linić abolishes incentives for housing savings?

The fate of housing savings banks is still undecided, hinging on whether or not Finance Minister Slavko Linić will completely abolish state incentives for housing savings. Rumors suggest that he will.

Namely, although the results of the study on the housing savings incentive system (commissioned by the Ministry of Finance from the Institute of Public Finance!) showed that for every kuna invested from the budget, housing savings banks return two, he allegedly stated that he is not interested in the study’s results!

An additional element for speculation is the fact that Žana Pedić from the Ministry of Finance, who was announced to be on the panel about housing savings organized by the magazine Banka, did not appear (due to a presentation in the Parliament), and some even had information that the minister himself was supposed to appear.

Without state incentives, the housing savings system cannot survive, and unfortunately, this means that Credo and Centar bank could also be joined by savings banks. However, four out of five (Prva stambena, Raiffeisen, PBZ, and HPB) have strong banking groups behind them (or in the case of HPB, just a bank), only Wuestenrot, which was once the most aggressive in business, operates alone. The costs of secured savings would amount, according to estimates, to one to one and a half billion kunas (mostly secured savings from Wuestenrot), assuming that the parent banks would take care of the other four.
Whatever the outcome, savers will be taken care of, and there is really no reason for concern. However, what is more worrying is the way the finance minister removes everything that threatens his budget deficit cuts.
For such panic, at least regarding savings banks, there is really no reason. In its best years, 180 million kunas were paid annually from the budget for state incentives, now due to the crisis and the reduction of incentives on two occasions (from 1250 first to 750 then to 500 kunas annually) it has almost halved – to only 100 million kunas!
Abolishing incentives due to such a small contribution to savers makes absolutely no economic sense, because if cuts are necessary, there are immeasurably more important and expensive addresses, those measured in billions of kunas!

What did the Institute’s study specifically show?
The analysis of direct and indirect effects (impact on employment growth, GDP growth, growth of budget revenues…) shows that for every kuna paid from the budget as an incentive, housing savings banks return two kunas to the budget (this is a fiscal multiplier of 2.00) while the value-added multiplier from 2006 to 2012 is even 2.69. Other positive effects include, for example, the reduction of the gray economy through targeted lending activity, a decrease in the rate of non-payment of housing loans (the average for savings banks is 1.2 percent, in banks it is 6.2 percent), stimulating GDP through housing construction, improving energy efficiency, developing financial literacy and a tradition of saving…
If we were to order such analyses for every 180 million kunas, budget money would be spent immeasurably more efficiently, concluded analyst Velimir Šonje, who warns of one of the most important roles of savings banks – promoting transgenerational savings.
Currently, there are 750 thousand people in the housing savings system, 6.5 billion kunas in long-term deposits, 3.5 billion kunas in loans (a total of 5.6 billion has been approved since its inception) and more than 1.7 million housing savings contracts. 

Housing savings banks are currently optimistic because, they say, the numbers are on their side, and the analysis showing that there is no reason to abolish incentives was commissioned by the Ministry itself. Surely they won’t contradict themselves. If it turns out otherwise, we will be the only country in the world that has abolished incentives for housing savings!