Bank Boss Warns against Rising Inflation after Euro Adoption

13. Juli 2006, 00:00

The director of Bank Austria Creditanstalt in Slovenia France Arhar has said that there is a danger of inflation...

The director of Bank Austria Creditanstalt in Slovenia France Arhar has said that there is a danger of inflation pressure following the adoption of the euro in Slovenia. Slovenia needs to keep an eye on the danger of inflation in relation to real interest rates, which could be fueled by excessive household consumption, he told Radio Slovenija Wednesday.

The European Central Bank is not concerned about energy prices, but about growth in loans, he said, adding that credit growth is fast in proportion to household spending, but most loans are used for purchases of property.

"But if the story takes a turn and a shift to classical consumer loans takes place, this could affect the daily prices and a reduction of the real interest rate, which can deform the markets," said Arhar, a former central bank governor. He said the period following the adoption of the euro in 2007 would therefore require a lot of attention in administered prices, as well as moderation and caution.

The head of the Consumers Association, Breda Kutin, also stressed the danger of increases in administered prices, especially those of utility services, where there is no efficient system of regulation.
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