Croatia’s debt-cancelling policy is admirable

The news that Croatia will cancel the debts of up to 60,000 of its poorest citizens will be welcomed in many quarters, either as an example of progressive economic thinking designed to facilitate future growth, or as a potentially life-changing reprieve for people who perhaps have fallen on hard times through no fault of their own.

Nevertheless, the measure is provoking reaction in all the expected quarters, riling for example the  director of the Zagreb-based Institute for Public Finance, Katarina Ott, who has been quoted in the Financial Times as saying that “decent” taxpayers “could also rethink their compliance in the long run” as a result of this initiative. This statement reveals two things about the naysayers of debt-cancellation. The first is that they believe the poor are in debt first and foremost because of some moral deficiency – sadly a common trope among right-wing commentators. The second is that they are prepared to threaten to hold to ransom any government which enacts legislation with which they disagree. No matter how many conditionals a seemingly innocuous piece of speculation contains, any such statement issued by an influential organisation can only be interpreted as sabre-rattling, designed to worry present and future governments into submission.

For all this, Milanovic’s scheme ought to be recognised for what it is: a cynical piece of pre-election populism. It is no coincidence that the initiative was announced hot on the tail of presidential elections in the country in which the ruling party’s candidate lost to the opposition Croatian Democratic Union. Were it anything other than this, it would have formed part of a package to combat the scourge of growth-slowing and public-health worsening inequality, instead of being a stand-alone headline-grabber. However, even while recognising the less than honourable nature of its coming into being, ‘fresh-start’ (as the scheme has been dubbed by Milanovic)  is both a breath of fresh air into the debate about how best to stimulate economic growth and promote prosperity in Europe, and a practical experiment which will provide hard data that may in future go some way towards fracturing the contemporary small-state consensus.

With the rise to power of Syriza in Greece, and the expected Podemos surge in Spain, it is also no longer beyond the realms of possibility that, if re-elected, the incumbent Social Democratic Party may be emboldened to pursue more radical measures, to the benefit of all. Change is coming to Europe, but it is advancing slowly and from the so-called periphery, with each treacherous step nothing short of miraculous in such a hostile environment.

At present the Croatian government has limited room for manoeuvre in effecting this change, the country being saddled with a public debt of more than 60 per cent of GDP and subject to the dubious counsel of neoliberal hawks like the IMF. It is an uncomfortable truth to the idealistic spectator that pragmatism is the order of the day in politics, and all regimes are forced to operate within the reigning paradigm, no matter how uncongenial. Yet, it is under these conditions alone that Croatia’s hesitant step on the route to a fairer society must be judged, cynicism or no.

There are many of us who dream that one day there will be no need to cancel the debts of the indigent, because the conditions that create poverty will no longer exist, but for now, instead of lamenting the slow march of progress, let us rejoice with the 60,000 Croatians whose fetters have been transmuted from iron to aluminium.

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