Croatia’s political leaders need to come to agreement on how to end the former Yugoslav republic’s longest economic recession on record and avoid “serious” social consequences, President Ivo Josipovic said.
“Like the historical consensuses on independence and the country’s future in the European Union, this is the moment when Croatia needs to seek an understanding on its economic direction within the wider political spectrum, primarily between the two major political parties,” Josipovic said yesterday in an interview in his office in the capital, Zagreb.
“If we are not able to agree on that, we won’t be able to solve our problems.” The Adriatic Sea nation, which joined the EU in July, has failed to harness its membership in the bloc to pull itself out of a five-year recession.
The country’s $60 billion economy is now 12 percent smaller than it was before the 2008 global crisis, the second-biggest contraction in the EU after Greece, according to Zagreb-based Independent Union of Research.
The Social Democrat-led government of Prime Minister Zoran Milanovic is struggling to rein in a bloated public payroll and cut unemployment that reached 22.3 percent in March.
The cabinet on April 24 submitted to the EU a budget plan to narrow the fiscal deficit to 4.4 percent of economic output this year, below the EU target of 4.6 percent.
Croatia may be one of only two EU countries, along with Cyprus, whose economy will contract this year, according to an International Monetary Fund report released this month.
Sluggish public and private consumption and low foreign direct investment will contribute to a “certain” fall in gross domestic product in 2014, central bank Governor Boris Vujcic said yesterday.
Large, Inefficient
“Our administration is too large, on both local and central levels, and it is also not efficient enough,” Josipovic said.
“We need reforms, and we seek a balance between development and social wellbeing. But social aid must be focused on those who are most in need.”
The 56-year-old composer and law professor is running for his second five-year term this fall.
The Social Democrat was elected president in 2010 after pledging to protect civil rights and eradicate corruption. His duties include ensuring the stability of the government as well as commanding the armed forces and working with the premier to oversee foreign policy.
Neither major political party has wide-spread support, with both the ruling Social Democrats and the Croatian Democratic Union, the main opposition party, polling at less than 20 percent, according to a survey released yesterday by Ipsos Puls, an independent survey company.
Josipovic is the highest-ranked politician in the survey, with 68 percent support. Next parliamentary elections are slated for no later than fall 2015.
Corruption Persists
The current government rode to power in 2011 on promises to fix the economy and eradicate corruption.
Scores of government officials have since been charged with graft, and former Premier Ivo Sanader in 2012 was sentenced to 10 years in prison for abusing his office in a case involving Hungary’s refiner Mol Nyrt. and Austria’s Hypo Alpe-Adria-Bank International AG.
The Supreme Court is expected to issue a binding verdict on the case in coming weeks. Josipovic said investors are still concerned about corruption.
“Although we’ve drastically improved corruption enforcement efforts, the problem remains and investors have warned me about it,” he said. “I don’t think it’s a dominant problem, but it persists.”
Red Tape
While the government in recent years enacted laws to ease investment, complaints about red tape remain, Josipovic said. “Investors seek speed and more legal certainty,” Josipovic said.
“Our court processes still take three, five, seven years to reach a decision, and that’s one of the biggest problems that need to be solved.”
The yield on the Croatian government’s dollar bonds maturing in 2024 rose 0.02 percentage points yesterday to 5.527 percent in Zagreb, the highest since April 3.
The cost to insure the country’s debt against non-payment for five years using credit-default swaps was 309 basis points, compared to 223 basis points for similarly rated Hungary, and 168 basis points for former Yugoslav partner Slovenia, according to data compiled by Bloomberg.
Croatia’s public debt reached 67 percent of gross domestic product by end-2013, according to the central bank. Finance Minister Slavko Linic said in November that Croatia can meet its financial obligations this year without seeking aid.
Another Chance
Croatia should try “once more” to resolve the conflict over its largest energy company, INA Industrija Nafte d.d., with Hungary’s Mol Nyrt, Josipovic said.
“It’s always worth trying to reach a solution, as a split between partners in such a big company would be damaging for all,” he said. For the past three years, Croatia has battled Mol, which owns 49.1 percent of INA, accusing it of bad management.
The government has a 44.84 percent stake. Both sides have filed cross-claims in arbitration court, and met three times since September to try to resolve the issue.
bloomberg.com
“Like the historical consensuses on independence and the country’s future in the European Union, this is the moment when Croatia needs to seek an understanding on its economic direction within the wider political spectrum, primarily between the two major political parties,” Josipovic said yesterday in an interview in his office in the capital, Zagreb.
“If we are not able to agree on that, we won’t be able to solve our problems.” The Adriatic Sea nation, which joined the EU in July, has failed to harness its membership in the bloc to pull itself out of a five-year recession.
The country’s $60 billion economy is now 12 percent smaller than it was before the 2008 global crisis, the second-biggest contraction in the EU after Greece, according to Zagreb-based Independent Union of Research.
The Social Democrat-led government of Prime Minister Zoran Milanovic is struggling to rein in a bloated public payroll and cut unemployment that reached 22.3 percent in March.
The cabinet on April 24 submitted to the EU a budget plan to narrow the fiscal deficit to 4.4 percent of economic output this year, below the EU target of 4.6 percent.
Croatia may be one of only two EU countries, along with Cyprus, whose economy will contract this year, according to an International Monetary Fund report released this month.
Sluggish public and private consumption and low foreign direct investment will contribute to a “certain” fall in gross domestic product in 2014, central bank Governor Boris Vujcic said yesterday.
Large, Inefficient
“Our administration is too large, on both local and central levels, and it is also not efficient enough,” Josipovic said.
“We need reforms, and we seek a balance between development and social wellbeing. But social aid must be focused on those who are most in need.”
The 56-year-old composer and law professor is running for his second five-year term this fall.
The Social Democrat was elected president in 2010 after pledging to protect civil rights and eradicate corruption. His duties include ensuring the stability of the government as well as commanding the armed forces and working with the premier to oversee foreign policy.
Neither major political party has wide-spread support, with both the ruling Social Democrats and the Croatian Democratic Union, the main opposition party, polling at less than 20 percent, according to a survey released yesterday by Ipsos Puls, an independent survey company.
Josipovic is the highest-ranked politician in the survey, with 68 percent support. Next parliamentary elections are slated for no later than fall 2015.
Corruption Persists
The current government rode to power in 2011 on promises to fix the economy and eradicate corruption.
Scores of government officials have since been charged with graft, and former Premier Ivo Sanader in 2012 was sentenced to 10 years in prison for abusing his office in a case involving Hungary’s refiner Mol Nyrt. and Austria’s Hypo Alpe-Adria-Bank International AG.
The Supreme Court is expected to issue a binding verdict on the case in coming weeks. Josipovic said investors are still concerned about corruption.
“Although we’ve drastically improved corruption enforcement efforts, the problem remains and investors have warned me about it,” he said. “I don’t think it’s a dominant problem, but it persists.”
Red Tape
While the government in recent years enacted laws to ease investment, complaints about red tape remain, Josipovic said. “Investors seek speed and more legal certainty,” Josipovic said.
“Our court processes still take three, five, seven years to reach a decision, and that’s one of the biggest problems that need to be solved.”
The yield on the Croatian government’s dollar bonds maturing in 2024 rose 0.02 percentage points yesterday to 5.527 percent in Zagreb, the highest since April 3.
The cost to insure the country’s debt against non-payment for five years using credit-default swaps was 309 basis points, compared to 223 basis points for similarly rated Hungary, and 168 basis points for former Yugoslav partner Slovenia, according to data compiled by Bloomberg.
Croatia’s public debt reached 67 percent of gross domestic product by end-2013, according to the central bank. Finance Minister Slavko Linic said in November that Croatia can meet its financial obligations this year without seeking aid.
Another Chance
Croatia should try “once more” to resolve the conflict over its largest energy company, INA Industrija Nafte d.d., with Hungary’s Mol Nyrt, Josipovic said.
“It’s always worth trying to reach a solution, as a split between partners in such a big company would be damaging for all,” he said. For the past three years, Croatia has battled Mol, which owns 49.1 percent of INA, accusing it of bad management.
The government has a 44.84 percent stake. Both sides have filed cross-claims in arbitration court, and met three times since September to try to resolve the issue.
bloomberg.com
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