"Their debt must be lower than 35,000 kuna ($5,100), and their monthly income should not be higher than 1,250 kuna ($138). Those applying for the scheme are not allowed to own any property or have any savings." Independent.The debts are not just owed to banks, but also to utilities and other companies. In a country of 4.4 million people the targeted debt amounts to an estimated $4.11 billion.
The Inde quotes one economist as saying that businesses will think twice before lending to poor people again. And he says it as though it is a bad thing. But of course poor people are nuts to borrow money. The debt repayments become an intolerable burden and causes them on-going hardship. Making it more difficult to borrow is a good thing. So many of the recent economic problems have been caused by lending money to people (and countries) who could not afford it to service the debts.
Debt is a way of mining the future
for wealth. But it means that
eventually we have no future.
The relief from debt will free up money in poor households. Instead of a large proportion of their income going to lenders, it will start going back to shops. The poor spend most of their income. The boost in retail will have a ripple effect, increasing profits, and tax revenues. As an economic stimulus package this is quite a sensible move. The effect might be quite small, but it ought to make a difference.