“Loan shark” state: The Government’s newest debt support scheme. Isarescu weighs in

Newsroom 05/02/2014 | 14:46

Over 1 million Romanians could benefit from the Government’s help in paying off their debts. The State’s newest support scheme offers individuals with rescheduled loans a fiscal credit, but only after the rescheduling period expires. Prime-minister Ponta argued that banks could cut their interest rates by RON 4bln through this measure, which has only recently been approved by the IMF.

The reform will come into effect via government ordinance and it will apply to all credits contracted by employees or retired people.

“The only conditions are that these individuals have a monthly income that is at the most equal to the average montly net salary, of 1.601 lei, and also that they don’t have overdue payments older than 90 days for their bank loans. We’re talking about reducing monthly rates by half over a period of two years, but not more than RON 500 per month. It’s a fiscal credit offered by the state to cover rising interest rates for the two years (…) Practically, half of the rate they are paying will be postponed – those who have to pay a rate of 800 lei will only have to deliver 400 lei, and the rest is postponed for two years. The state will cover half of the rate, through a fiscal credit, using the income tax difference after the two year period is over”, Ponta explained.

The system the Government is devising is optional for the banks, since it would imply certain limitations for the relationship with their clients. Furthermore, the State so far has no deals with any credit institutions.

The International Monetary Fund approved the measure since it could boost consumption and lending, Ponta argued.

Central Bank administrator Mugur Isarescu weighed in on the State’s plans on Tuesday, arguing that banks have no reason to reschedule loans for clients who kept up with their payments, but they might choose to easen the burden for clients that are close to struggling.

Furthermore, the governor believes this is a first step towards implementing a system of progressive taxation:

“Ultimately, if the people who will benefit from this measure are strictly those with income of RON 1.600 lei or lower, this is a first step towards progressive taxation”, Isarescu argued.

 

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