Croatia wiping out thousands of its citizens’ debts

Some 60,000 of the poorest citizens in Croatia will have their slates wiped clean from today after the government passed a plan to write off their debts.

Under the country’s “fresh start” programme, people owing up to 35,000 Croatian kuna (€4,544) would have their debts torn up if they were on welfare or had monthly income of under 1,250 kuna (€162).

Several banks, utility companies and the Croatian tax office, among others, agreed to the deal which would mean they walked away with nothing from the eligible debtors.

When the plan was voted in last month, it was predicted the move would apply to 60,000 citizens – which put the potential cost of the haircut to creditors at up to 2.1 billion kuna (€273 million).

Only those without property or savings would benefit from the deal, which is predicted to free up bank accounts for 20% of the over 300,000 Croatians whose finances have been frozen because of bad debts.

Prime Minister Zoran Milanovic said it was the first time any Croatian government had tried to solve the “difficult” problem and it was proud of the plan, according to Reuters.

The nation of 4.2 million, which joined the European Union in 2013, has been in recession for six years and its GDP has shrunk 12% over the period since the financial crisis hit.

Its unemployment hit 17% in late 2013 and the youth jobless rate remains over 40%, one of the highest in Europe behind Greece and Spain.

Croatia was also among the eastern European countries hit hard when Switzerland suddenly abandoned a three-year bid to hold down the value of its currency last month.

Over 100,000 people in the country had taken out loans in Swiss francs – nearly three-quarters of which were to buy property – before the Croatian currency lost nearly 15% of its relative value overnight.

Source Credits: TheJournal.ie, AFP

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