EUR 1.5 billion in recession debt forgiven from March 1st

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Tens of thousands of Finns let out a huge sigh of relief last Saturday. As of the stroke of midnight, the lion's share of the supplementary bill from the last recession - in other words all the private people’s debts the court decision for which was pronounced on March 1st 1993 or earlier - was pardoned.
      According to the Ministry of Justice calculations, the move concerns over 20,000 debt recovery clients, the combined debt of whom comes today to something like EUR 1.45 billion in total.
     
In actuality the forgiven sum is even larger, for in addition to the debt capital its interest will be pardoned as well. During the recession years, the banks' common penal interest reached a massive 16 per cent, which means that in 15 years the original collected sums have multiplied several times over, even though the interest rates have since become lower.
      The joyous morning greeted a significantly larger group of people than the 20,000 announced by the ministry in January or the 30,000 announced in the autumn. Namely, as the capital debts were forgiven, the responsibility of the guarantors was effectively annulled as well.
     
The effects of the pardoning of debts vary greatly from one part of the country to the next. People in the city of Turku and elsewhere in the southwest of the country seem the most fortunate, as their average forgiven debts were nearly twice the national average of EUR 70,000.
      The smallest pardoned debts were in the region of the northwestern cities of Kemi and Tornio.
      The reason for the move is the new law on recovery of old debts introduced at the beginning of the year. When the 15-year deadline of debt recovery has been achieved, a private individual’s debt expires and it can no longer be collected.
     
According to Turku District Bailiff Raimo Männistö, the Southwest of Finland was more keen on experimenting with new business ideas during the last upswing.
      In Turku this relates to real estate business in particular. The area’s average of pardoned debts is raised, among others, by a hotel chain business intended for Spain, Austria, and Finland. "The bankrupted undertaking amassed for five Turku residents EUR 37.5 million in debts, which now have expired”, Männistö describes the failed hotel business idea, which at the time escaped media attention.
      The signs in the southwest of the country often point at easy loans granted by the Lounais-Suomen Säästöpankki (LSP) Bank. Various law courts have spent years trying to unravel numerous such cases.


Previously in HS International Edition:
  Billions in recession debt to be forgiven in the spring (21.11.2007)
  Tens of thousands still burdened by recession-era debt (16.8.2005)

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