Croatia Forgives the Debt of 60,000 of its Poorest Citizens
The government passed a measure that would help relieve the economic burden of a $4.1 billion national debt.
Croatian Prime Minister Zoran Milanović. Image via Wikimedia Commons.
The Croatian government just passed a radical measure that would clear the debt of an estimated 60,000 of its citizens. The “Fresh Start” initiative is part of an effort to offset the deleterious impact of a six years-long recession on the economy. About 317,000 Croations don’t even have use of their bank accounts anymore, because outstanding debts to the government have blocked their access.
“We assess that this measure will be applicable to some 60,000 citizens,” Croatian Deputy Prime Minister Milanka Opacic said last month. “Thus they will be given a chance for a new start without a burden of debt.”
Croatian debt stands at an incredible $4.1 billion, which is a hefty sum for a country as small as the Mediterranean nation of 4.4 million inhabitants. In order to implement the measure, a number of lenders have been persuaded to forgive the debt without compensation from the government.
But there are some eligibility requirements that must be met for the program. Croats who apply must have debts that amount to less than 35,000 Croatian kuna ($5,100) and must make a monthly income of less than 1,250 kuna ($138). They can’t be in possession of any savings or property.
Still, the program has some critics. Dean Baker, co-director of the Center for Economic and Policy Research told the Washington Post, that although there is no precedent for this kind of government action, it might not be a perfect solution.
“I am not sure that this is the best way to help low-income people. If lenders think this can happen again they will charge very high interest rates to low-income borrowers," Baker said to the Washington Post.