Published On: Tue, Feb 3rd, 2015

‘Fresh Start’: Croatia Cancels Thousands of Poor Borrowers’ Debts

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Its a move that Croatia’s leaders say has never been done before, but maybe there is a reason for that–the amount it could cost creditors. In a scheme called “Fresh Start, ” which some consider a politically-motivated strategy to curry favor among citizens with the far left government, debts of those who rent their property and owe no more than the equivalent of 5, 000 will simply be erased.

Many of the poorest Croatians have their bank accounts frozen, and “Fresh Start” is aimed at allowing them to continue spending again to stimulate the economy. While debt is a problem the world over, Croatia’s comparatively small population of 4.4 million makes the indebtedness of tens of  thousands of its poorest citizens more burdensome. In addition, Croatia is a part of the European Union, but is not a member of the EuroZone and doesn’t have some of the privileges of other European countries.

Deputy Prime Minister Milanka Opacic told Reuters, “We assess that this measure will be applicable to some 60, 000 citizens. Thus, they will be given a chance for a new start without the burden of debt.” The move could be a boon to low income citizens but will cost creditors 2.1 billion kuna or $309 million. Time will tell if it will pay off.

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