‘People should pay their bills, but if they find themselves in deep trouble, this measure can help,’ says Croatian PM.
Imagine if the debt that keeps you up at night suddenly went poof and disappeared.
That unlikely reality is what will happen for 60,000 low-income Croatians who live on less than $233 a month.
Last month, Croatian Prime Minister Zoran Milanovic announced a new program will forgive the debt of the poorest of the poor in Croatia. He said he was launching the program to prove that big government can have a heart and lend a helping hand.
“People should pay their bills, but if they find themselves in deep trouble, this measure can help,” Milanovic said on Jan. 15, according to the government of the Republic of Croatia website.
Social Welfare Minister Milanka Opacic chimed in to say that this will be “a new start for some 60,000 citizens” whose accounts have been frozen for more than one year and are in dire straits. She added this measure was made in agreement with the banks, telecom operators and utility companies in at least four major cities.
Opacic added that this act of forgiveness is a “one-off measure” that the government would not repeat. It is hoped the move will free up cash and help stimulate the economy with new spending.
By late last year, about 322,000 Croatians had blocked bank accounts because of unpaid bills and their combined debts amounted to $5.89 billion, reported Agence France-Presse.
Croatia, a country of just over four million people, has been in a recession for the last six years. Milanovic, leader of the centre-left Social Democratic party, faces an election in late 2015. Milanovic’s failure to lift Croatia out of recession led to the election of a centre-right president last month. Kolinda Grabar-Kitarovic, a former ambassador to the United States, is Croatia’s first female presidential leader.
Croatia joined the European Union in 2013 but it is not part of the euro zone of 19 nations sharing the same currencies. The Croatian currency is the Kuna.
The 60,000 citizens chosen will have “overdue liabilities to state-owned utility providers, such as the HEP electricity company or the national broadcaster HRT, as well as debts to private creditors such as banks or telecom operators,” the government announcement said.
Homes without savings and assets whose monthly income in the last three months does not exceed 2,500 Croatian Kuna, or $466, and those living alone whose monthly income was not over $233 can apply for the debt write-off.
And on Jan. 29, the government extended the benefit to encompasses owed taxes. The tax administration will write off taxpayers’ debts amounting to up to 25,000 Kuna or $4,663 and incurred by Sept. 20, 2014.
Croatia isn’t the only country in the European Union to embrace the idea of debt forgiveness. Greece’s new Prime Minister Alexis Tsipras has floated the idea of debt forgiveness to its troika of lenders.
Greece received a $342 billion bailout deal that has helped keep the country out of bankruptcy. However, the European Central Bank, the International Monetary Fund and the European Commission have balked at the idea of debt forgiveness for Greece.
In an olive branch to the EU, Greek Finance Minister Yanis Varoufakis said on Tuesday that Greece is willing to forget the idea of debt write-offs in exchange for a debt-swap or exchanging European rescue loans for debt linked to future economic growth, the Financial Times reported.
Varoufakis is currently travelling through the EU, looking for support for the new left-leaning government’s alternative ideas to austerity policies that have financially crippledthe southern European nation of 11 million. Greece has an unemployment rate of 26 per cent and the government debt-to-GDP is 178 per cent.
Varoufakis will be in Germany to meet with ECB President Mario Draghi on Wednesday.