The economic strategists of the Croatian Democratic Union (HDZ), Ivana Maletic, Zdravko Maric and Tomislav Coric, on Monday presented the party's solutions to the problem of corporate and household insolvency.

Addressing reporters at the party's offices, Finance Minister Maric said that at the end of June there were more than 32,045 businesses that were unable to meet their financial obligations worth more than HRK 19 billion. More than three quarters of those obligations were more than a year overdue.

A total of 328,787 private citizens had their bank accounts blocked, owing close to HRK 40 billion, most of which were debts to banks, said Maric.

Even though Croatia has moved up in the World Bank's rankings on the ease of doing business, Maric warned that countries in its neighbourhood were better than Croatia in terms of dealing with the problem of insolvency.

He said that such a situation caused additional instability in the financial system and hampered economic activity, resulting in serious socio-economic consequences.

Maletic said that solutions to those problems so far had been inefficient and helped generate new problems, notably regarding pre-bankruptcy settlement, which she said had resulted in the destruction of healthy businesses due to the debt write-off, designed to help ailing businesses.

She said that publishing the names of tax debtors was inefficient as well because it covered many entrepreneurs that had found themselves in problems because the state had not been meeting its financial obligations to them. As for the Zoran Milanovic government's decision to write off a part of debts owned by vulnerable social groups, Maletic said that that had incurred a big administrative cost with minimum effects.

She said those solutions were entirely inefficient as they dealt only with the consequences rather than the causes of the problems.

"Those measures are very expensive administratively, and the bill is always paid by the successful and those operating in the black. Our goal is a new system of control that will protect entrepreneurs in the collection of claims," said Maletic.

The chairman of the HDZ's Finance Committee, Tomislav Coric, presented the "Solvency 2020" system, based on an analysis of social networks and designed to integrate the currently unconnected data bases of the Financial Agency (FINA), the Croatian Financial Services Supervisory Agency (HANFA), the Croatian National Bank (HNB) and all other sources of information and make available on-line relations in the financial system - payments, debtor-creditor relations, fees, subventions, etc.

This, Coric believes, would help identify potential cases of insolvency on time, which constitute the biggest risk to the system.

He said that entities identified to be at risk of insolvency would be requested to carry out specific measures or be prevented from participating in tenders, awarding of contracts and grants.

As for household insolvency, Coric announced measures that would change the order of claims in distraint proceedings.

"Private citizens with debts currently pay administrative fees and default interest first, while the principal sum owed remains the same or grows due to growing interest rates. In the future, the principal would have to be paid first, which would make it possible for citizens to reduce their debt," he said.

Asked why those data bases had not been integrated before, Maric said that his ministry had identified data fragmentation as one of the key problems in the administration system and that the proposed solutions would help remove that and other system anomalies.

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