Low-income Croatians given ‘fresh start’ as debts wiped

The new scheme aims to boost the country’s economy in the long term

The Croatian government has taken the unorthodox step of wiping the debts of 60,000 citizens in a bid to boost the economy.

The scheme, which was agreed in January, has been dubbed “fresh start” and will see debts erased by banks, telecoms and utilities operators, so that households may regain access to basic facilities such as bank accounts. At the end of July last year some 317,000 citizens had bank accounts blocked because of unpaid bills.

Qualifying households must have debts below 35,000 kuna (£3,500) and a monthly income no higher than 1,250 kuna. Those with property or savings are not eligible.

“We assess that this measure will be applicable to some 60,000 citizens,” deputy prime minister Milanka Opacic said as she was introducing the measure. “Thus they will be given a chance for a new start without a burden of debt.”

“Citizens will be given a chance for a new start without a burden of debt”

Around 2.1bn kuna (£20m) worth of bad debts are expected to be written off by creditors who have signed up for the scheme, including several banks, telecommunications companies, major utilities, cities and municipalities, as well as the government’s own tax agency. None will be refunded for their losses – creditors are expected to absorb the costs.

“This is the first time that any (Croatian) government is trying to solve this difficult problem and we are proud of it,” prime minister Zoran Milanovic told a cabinet session.

Croatia has suffered a recession six years in a row, with experts projecting growth this year at 0.5% at best.

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In addition to debt wiping, Milanovic’s government is considering other ways to help its debt-laden citizens amid the economic recession. For example, Croatia’s capital Zagreb wants to follow Bulgaria’s lead and fix a favourable exchange rate for mortgage loans taken in Swiss francs.

It’s thought that the debt-wiping scheme will be acknowledged by Greece, where the new Syriza government is trying to renegotiate the terms of its multi-billion euro bailout.