GOVERNMENT SAYS CROATIAN BANKING SYSTEM IS STABLE

( Editorial: --> 5555 ) ZAGREB, May 21 (Hina) - The banking system in Croatia is stable, Prime Minister Zlatko Matesa told a Government session on Thursday. There are some problems on the margins of the system but the Croatian National Bank and the Government are capable of confronting and resolving them, Matesa said during a discussion on a final bill proposing changes and amendments to the law on banks and savings institutions. The changes suspend the principle of reciprocity as a mandatory requirement for the foundation of banks in Croatia by foreign parties. That legal change was necessary because legal experts of the World Trade Organisation (WTO) had found the principle of reciprocity contrary to the provision on the most favoured nations and hence it was not suitable in national legislation of particular countries. In the citation of the bill, the Government says the principle of reciprocity would not be suspended for countries which were not members of the WTO. Finance Minister Borislav Skegro informed the cabinet about the fluctuation of prices after the introduction of the value added tax (VAT). Since the introduction of VAT on January 1 this year, prices first increased by 2.31 per cent on the average and then stabilised. The increase was most marked in the prices of services, which cannot be justified by the VAT's introduction, Skegro said. He said the Consumer Protection Commission, which monitors prices, suggested the Government streamline amendments to legislation regulating the prices of communal services. and to consider the justification of prices of services by public companies, especially those that finished the last fiscal year with high profits such as Croatian Post and Telecommunications (HPT). The Government endorsed a report on the carrying out of the state budget during last year. Finance Minister Borislav Skegro said the budget deficit amounted to one per cent. He described the report by the State Auditing Commission as very positive, adding that it was much better than the previous ones. Presently Croatia is much less in debt than it had planned. Croatian foreign debt is US$100 million below the planned level, Skegro said. Prime Minister Matesa said the report on the execution of the budget proved that the Croatian financial system was in good shape. He commended Finance Ministry and the State Auditing Commission. (Hina) jn mr /mb 212238 MET may 98