In Croatia, 60,000 of the country’s poorest citizens will have their debts erased in a plan that creditors have signed on to in an effort to give a fresh start to people who are in debt and don’t have any assets. The debt write-off surprisingly even includes tax debts and government fines.
According to the specifications of the plan, debtors must have no savings or property, and have a debt under five thousand dollars.
“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 a burden of debt,” Deputy Prime Minister Milanka Opacic said on Monday.
The measures will only affect about 1% of the country’s entire economy, but will still wipe clean nearly $31 million worth of debts.
“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 said.
While the program has been welcomed by many, some economists have warned that this plan could have unintended consequences in the long-run.
Dean Baker, co-director of the Washington-based Center for Economic and Policy Research, told The Washington Post that the plan could result in higher interest rates when poor people want to take out loans in the future.
“I am not sure that this is the best way to help low-income people. If lenders think this can happen again they will charge very high-interest rates to low-income borrowers,” Baker said.
This debt cancelation is an unprecedented move so there is no telling what will happen, but the creditors did voluntarily sign onto the plan, and at least for now many of the country’s poorest people are being given a chance to start over.
John Vibes writes for True Activist and is an author, researcher and investigative journalist who takes a special interest in the counter culture and the drug war.