Up to 60,000 Croatian citizens will be able to erase some of their debts on Monday in a bold move by the Croatian Social Democratic Party.
The government plan, dubbed “fresh start,” lets the poorest citizens in the country ask for their debts to be written off for up to a maximum of 35,000 HRK (about $5,145). Only those on social welfare or with monthly income lower than 1,250 HRK ($184) per household member (2,500 HRK, or $368, for single citizens), may apply. Additionally, it will only apply to those without savings accounts, real estate (barring their current living situation) or other valuable property.
The measure comes after six years of recession, which crippled the country’s economy, impoverished many citizens and brought the GDP below the levels measured in 2008. While it earned SDP some praise for finally making a move to protect the poorest, many critics feel it’s a case of too little, too late. While it earned SDP some praise for finally making a move to protect the poorest, many critics feel it’s a case of too little, too late.
“Blocked,” an NGO that gathers Croatian citizens with blocked bank accounts, called the measure “discriminatory,” claiming it only helps one-fifth of the indebted and is generally more helpful to the creditors than the debtors.
The organization claims 320,000 Croatian citizens have blocked bank accounts. According to the Croatian government, the total debt of Croatian citizens whose accounts have been blocked for more than 360 days is a staggering 1.476 billion HRK ($217 million), much of it comprised of debts to banks, telecoms and the state. Individual creditors must agree to take part in ‘fresh start,’ however, and with some cities and companies possibly electing to opt out, Blocked views it as unjust.
“It’s solving the consequences and not the causes of the problem,” Saša Cvetojević, a Croatian entrepreneur and owner and CEO of logistics company Insako, told Mashable. “It’s just a quick, band-aid-style measure for a much bigger issue.” “It’s just a quick, band-aid-style measure for a much bigger issue.”
The move comes after another equally polarizing social measure, in which the exchange rate for the Swiss franc was fixed toward the euro in January to help some 60,000 Croats who hold loans tied to the franc.
While most experts agree that the pressure created by the strong franc must somehow be alleviated, some fear that this type of fix is temporary and unfair. Speaking to Croatian Television (HRT) on Tuesday, economist Velimir Šonje said this initiatve will only suffice until the next government is formed; then, a long-term solution will become necessary.
The fleeting and partial nature of both decisions — the first deeply social measures aimed at helping the struggling citizens of Croatia in three years of SDP’s governing — are likely what irks both the poorest citizens and entrepreneurs in the country. While economists looking from the outside see the debt erasure as unprecedented, the locals are, for the most part, shaking their heads.
“I feel for the people which are in these financial problems, I really do. I’m interested, however, in whether other measures, that could fix their situation long-term, would be a better solution,” Cvetojević added. “I’d hate to see these same people (whose debts have been erased) in the same situation in six months or two years.”
Prior to the 2011 elections, the SDP and its coalition partners promised a number of reforms, including severely cutting down the costs of both local and central government and decreasing the tax burden for businesses. Neither has happened, and with one year left until the next elections, this opportunity to boost Croatia’s economy and make it a better place for doing business — which would help the poorest citizens in the long run — could be lost.