 |
|
|
Croatian government has
gotten creditors on board a plan to erase the debts of some 60,000 poorest
citizens. The “fresh start” scheme targets less than 1 percent of the entire
debt, but is hoped to boost the economy in the long-term.
The unorthodox measure
was voted for by the government on January 15 and comes into force on Monday. To
be eligible to participate debtors must have no savings or property, have a
debt no greater than about US$5,100 and live on welfare or an income of no
higher than US$138 per month, according to RT.com.
"We assess that this
measure will be applicable to some 60,000 citizens," Deputy Prime Minister
Milanka Opacic said as he was introducing the bailout. "Thus they will be given a chance for
a new start without a burden of debt."
Some US$31 million worth
of bad debts are expected to be written off by creditors who have signed up to
the government’s scheme. Those include several banks, telecommunication
companies, major utilities, several major cities and municipalities as well as
the government’s own tax agency. None will be refunded for their losses.
The program would return
access to bank accounts to about 20 percent of the 317,000 Croatians, whose
accounts were frozen in July last year due to debts. The entire population of
the small Mediterranean nation is 4.4 million.
"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.
 |
|
|
In addition to debt
erasing Milanovic’s government is considering other measures to help its
debt-stricken citizens amid the economic recession, which has been plaguing the
country for six years in a row. Zagreb wants to follow the example of Bulgaria
and fix a favorable exchange rate for mortgage loans taken in Swiss francs.
The Swiss currency was
popular among lenders due to its long-running stability, and mortgage loans
denominated in francs were popular in many Eastern European nations. But the
economic turmoil in the Eurozone put pressure on the Swiss franc, which was
pegged against the euro since 2011, when market volatility made investors rush
to the Swiss safe-haven currency.
The
pegging ended in mid-January, sending the franc’s value up 20 percent against
other currencies. This led to franc-denominated debts costing much more for
foreign borrowers.
Hungary was lucky to
dodge the damage due to a program launched by the government of Prime Minister
Viktor Orban in 2011, which forced a conversion of franc-denominated mortgages
into the Hungarian national currency at a fixed rate. Banks operating in the
country took the hit, but now the Hungarian government is celebrating saving its
citizens from a hard fall.
Poland and Romania are
considering a similar move, while Croatia has amendments to its Credit
Institutions Act already floating in the legislature.
No comments:
Post a Comment