Fresh start scheme: Which European country has just written off the debt of its 60,000 poorest citizens?

The debt of thousands of Croatia’s poorest citizens has been written off by the government so they can start fresh.

15:15 02 February 2015

Croatia’s government has pledged to help 317,000 Croatians whose bank accounts have been blocked due to debts. The move is part of the “fresh start” initiative to help the country’s poorest citizens and has already seen the nation’s 60,000 worst off citizens have their debts written off by the government.

The small Mediterranean country’s economy has been burdened by the huge number of indebted citizens. After six years of recession, growth predictions for the country’s economy remained low this year.

Deputy Prime Minister Milanka Opacic said: "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.”

People who are eligible for the scheme are those who do not own any property, have debt that is lower than $5,100, and with monthly income not higher than $135.

The scheme, which is expected to cost the government up to $31million is expected to provide long-term benefits.

Dean Baker, co-director of the Washington-based Center for Economic and Policy Research, says that there is a disadvantage with this scheme.  "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.”