Negative interest rates help Lithuanian borrowers but may signal coming financial crisis

The Bank of Lithuania calculated that the due to the negative EURIBOR rates, Lithuanian consumers and companies last year saved more than €15 million on interest. However, the Central Bank’s experts are not so inclined to cheer as they warn that negative interest rates are a consequence of a weakened economy and could again can lead to a financial crisis.

“Every resident who has a €50,000 loan saves €100 per month. However, low interest rates represent a difficult period for the economy,” said Marius Dubnikovas, a representative of the Lithuanian Confederation of Business.

Marius Jansonas, the president of the Finance and Credit Management Association, said that low interest rates warn of a possible second crisis: “Everyone is talking about the second crisis, I agree with that – it is not normal that the interest rates are negative.”

Chairman of the Bank of Lithuania Vitas Vasiliauskas said that “160,000 residents have taken loans associated with floating interest rates, linking to a 3 or 6 months EURIBOR rate.” More than 40,000 companies are also tied to variable rate loans.

Analysts predict that the European Central Bank will raise interest rates as early as the second half of next year.

LRT