To be eligible for Croatia's debt forgiveness, applicants have to either be on social welfare or earn a maximum 166 euros a month
Zagreb (AFP) - Tens of thousands of Croatians are to be freed from the tyranny of debt under a new government scheme entitled "Fresh Start" which gives the hard-up a clean credit slate.
Around 60,000 people with debts of under 35,000 kunas (4,500 euros, $5,300), whose bank accounts have been blocked for more than a year, are expected to benefit from the one-off scheme, which came into effect Monday.
The beneficiaries of the amnesty will have debts with telecoms operators, big banks, several public utilities, four municipal governments and the tax office all torn up.
"This is a social measure of which we are proud," Prime Minister Zoran Milanovic said, while stressing that the scheme, which is expected to cost up to 46 million euros, was an "emergency" step that Croatia could not afford to repeat.
The Adriatic country of 4.2 million is mired in a cycle of low growth and high unemployment.
"We are doing everything possible to facilitate the lives of people affected by this long and exhausting crisis," Milanovic said.
- 'A bright note' -
To be eligible for the debt forgiveness, applicants have to either be on social welfare or earn a maximum 166 euros a month. They must also have no savings nor own a second home.
"I'm looking forward to it. This is a bright note in this country," Lucija Tomljanovic, a single mother of four who planned to apply for the debt relief, told state-run HRT television in the coastal town of Zadar.
As of December, more than 322,000 Croatians had their bank accounts blocked due to unpaid bills. Their combined debts amounted to 4.1 billion euros.
Zdeslav Santic, chief economist at the Societe Generale Splitska Banka, said the move could help spur a recovery.
"It could help socially endangered people and give a boost to partly revitalise personal spending," he told AFP, while stressing the scheme should be a one-off.
An association representing 10,000 Croatians whose bank accounts have been blocked slammed the programme, however, pointing out that only city dwellers could avail of some elements and calling instead for changes to banking regulations.
"The government is throwing dust into the public's eyes," Antun Rupa of the association told AFP, linking the largesse to elections due later this year.
The main opposition conservatives took a similar view.
"After ... not showing even a bit of social empathy, they have suddenly discovered, in an election year, that they are a Social Democratic government and they should act accordingly," said Zeljko Reiner, an official with the HDZ party.
Croatia joined the European Union in 2013.
Initial hopes that membership of the elite bloc would boost the economy have foundered on continuing high unemployment of nearly 20 per cent and stagnant growth, which the government has forecast to reach only 0.5 percent this year.
Economists have urged the government to reform the country's bloated civil service and take steps to encourage investment.