Croatia votes to scrap debt of its poorest citizens

ZAGREB (Reuters) - The Croatian government voted on Thursday to wipe out the debts of its poorest citizens, with a program that could cost creditors as much as 2.1 billion kuna ($319.26 million).

Under the scheme, debt worth up to 35,000 kuna will be scrapped for citizens who either get welfare benefits or have monthly income no higher than 1,250 kuna per member of a household. They cannot have any other property or savings.

“We assess that this measure will be applicable to some 60,000 citizens,” Deputy Prime Minister Milanka Opacic told a cabinet meeting. “Thus they will be given a chance for a new start without a burden of debt.”

The government program involves major local banks, leading telecom operators, the four biggest Croatian cities and several public utility companies. The government will not pay the debts; the creditors will simply absorb them.

At the end of July last year, some 317,000 citizens in the country of 4.4 million people had their bank accounts blocked because of unpaid bills.

“This is the first time that any (Croatian) government tries to solve this difficult problem and we are proud of it,” Prime Minister Zoran Milanovic told a cabinet session.

Croatia has suffered a recession six years in a row. Most projections are for growth this year of no more than 0.5 percent at best.

Reporting by Igor Ilic; Editing by Larry King