Tuesday, February 3, 2015

Debt Forgiveness in Croatia

From the Washington Post: Croatia just canceled the debts of its poorest citizens
Starting Monday, thousands of Croatia's poorest citizens will benefit from an unusual gift: They will have their debts wiped out. Named "fresh start," the government scheme aims to help some of the 317,000 Croatians whose bank accounts have been blocked due to their debts.

Fresh Start is expected to affect about 60,000 of the 317,000 with blocked bank accounts, out of Croatia's population of 4.4 million people.

... the number of indebted citizens is significant and has become a major economic burden for the country. After six years of recession, growth predictions for Croatia's economy remain low for this year.


Among economists, the scheme is regarded as unprecedented and exceptional. "I can't think of anything comparable," Dean Baker, co-director of the Washington-based Center for Economic and Policy Research, told The Washington Post.

Some economists, among them Baker, are skeptical whether the scheme will succeed: "I am not sure that this is the best way to help low-income people..."

Yeah, no. Don't think of it that way. Don't think of debt forgiveness as a way to help low-income people. Think of debt forgiveness as a way to restore vigor to the economy. Debt forgiveness helps everybody.

Evidently, Dean Baker does not see excessive accumulation of debt as the cause of economic lethargy. If he did, he would call for more debt forgiveness, not less.

This is always my focus: to convince people that excessive debt slows the economy, that this is our problem today, and that it has been the problem -- in the U.S. at least -- since the 1960s.

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