Will debt forgiveness boost consumer demand? Flickr/Alex Berger. Some rights reserved.Those looking for an economic revolution in Europe will undoubtedly have had their eyes focused on Yanis Varoufakis, the newly-elected Syriza Minister of Finance in Greece, as he carried out his whistle-stop tour of the continent's capital cities. They may have then been disappointed when this culminated in decidedly reasonable proposals for managing the Mediterranean country’s debt. Far from being the pantomime spectre of economic destruction some have sought to paint him as, Varoufakis announced that his coalition government would not seek to cancel Greek debt but to reconfigure it into more a more manageable burden linked to economic growth.
All of this diverted attention from where the real seeds of change, and potentially an answer to Europe’s growth problem, may have been planted. From February 2, around 60,000 of Croatia’s poorest citizens are having their debts wiped under the country’s “Fresh Start” scheme. This figure carries greater significance when placed into context of Croatia’s population of around 4.4 million.
Having endured six years of recession, and with growth forecasts remaining stubbornly low, around 317,000 Croatians have found their bank accounts frozen due to debt, stifling economic demand. Those with a debt under the equivalent of around £3,300, with a weekly income under £91 and with no investments or savings have now found themselves with a clean slate.
