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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 28,322 22,421 20,300 61
         
GNI per capita
 US $ 5,350 4,640 4,550 70
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 126 - (03/12/07)

Parliamentary elections leave no clear winner
Croatia held elections to parliament at the end of November, with an inconclusive result. 

Croatia's president began consultations on November 29 with the country's parliamentary parties about the formation of a new government after inconclusive weekend elections.

The precise make-up of the new government will not be known until mid-December at the earliest. President Stipe Mesic is waiting for one of the top vote-getting parties from the November 25 election to gain the support of a majority in parliament before granting one of them a mandate to form a government.

Mesic, an old Yugoslav veteran known as a safe pair of hands, also wants to wait until the results are declared final, which is expected to happen around December 12, before naming a prime minister-designate.

The parliamentary election produced no clear winner. Prime Minister Ivo Sanader's conservative Croatian Democratic Union won the most votes, but fell short of an outright victory.

The opposition centre-left Social Democrats, which came in second, insist they, too, can muster enough support to form a government with help from smaller allies in the legislature, which may yet turn out to be the case.

The opposition Social Democrats decided to change their candidate for prime minister on November 30 and go with the party's leader, in an apparent attempt to woo allies to form a new government with them. Initially, the SDP named the party's economics expert, Ljubo Jurcic, as candidate for prime minister during campaigning before the election. But party officials have now decided to go with their leader, Zoran Milanovic.

President Stipe Mesic said he would give a mandate to the party that proves it has the support of the majority in the chamber.

Into the EU?
Whoever takes over has a clear task ahead of them. Croatia is the only outside country with a realistic chance of accession to the EU in the near future.

As a candidate country it has engaged in accession talks with Brussels and is generally viewed as maintaining its good track record on strengthening democracy and the rule of law, as well as meeting the political criteria of membership.

The Slovenian angle
Its chances may seem to have been enhanced by the coming assumption of the EU presidency by Slovenia. The forthcoming president of Slovenia, Donald Tuerk (he assumes office on December 22, after a stunning 68% victory on November 11), is generally favourable to the accession of former Yugoslav states to the EU. 

One European Commission condition, however, in the case of Croatia, is the resolution of a dispute over ownership of the waters of Piran Bay, which it has made into a fishery, denying Slovenia direct access to the Adriatic. "Croatia's fishery zone contravenes an agreement made with the EU several years ago and with the U.N.'s Law of the Sea convention. In that sense these are no longer bilateral issues. They concern the EU as a whole, which is very faithful to pacta sunt servanda [respect for contracts] and international law."

If Croatia continues with this, against the EU and Italy and Slovenia, then troubles are likely to come. The fishery zone is unacceptable to Slovenia because the Croats defined the border unilaterally. It is to be hoped that it can be settled bilaterally because an arbiter or conciliator would be much more expensive.

Tuerk admitted he did not know that Slovenia voted against Croatia in a vote for a temporary seat on the U.N. Security Council at the end of October. "In 1997 I was ambassador for Slovenia at the U.N. and led the campaign to join the Security Council and frankly did not know about voting behaviour. These things are irrelevant." Maybe to him, but if ambassadors and top politicians don’t know about their nations UN voting behaviour – then who does?
 
The critique by Brussels
A more fundamental criticism comes from the horse's mouth itself, the European Commission. A recent report is basically positive and clearly welcomes Croatia's application, both its application to join and its application in its pursuit to qualify for it.

“However there is considerable scope for further improvement in the judiciary, in public administration and in the fight against corruption”, the latest Brussels report on the subject says. Zagreb has made limited progress in reforming public administration, while the system remains inefficient. “The civil service continues to suffer from high staff turnover and a lack of qualified personnel as well as undue political influence at all levels. Further sustained efforts are needed”, the report says.

Although Croatia has introduced some legal reforms, the Commission says that “little progress has been made with regard to improving the accountability, impartiality, professionalism and competence in judiciary”.

Implementing the rationalization of court network has also been slow, while war crimes proceedings need further improvement. “Bias against Serb defendants still needs to be fully addressed, as does witness protection”.

In contrast to several other western Balkans countries, Croatia has notched up some successes in the fight against corruption, but the problem remains widespread and the Commission considers that there is a need for greater efforts to prevent, detect and prosecute graft. “No indictment or verdict has been issued in any high-level corruption case”, the report says, adding that the concept of a conflict of interests is little understood in Croatia.

The position of minorities poses a serious problem for Zagreb. “Croatia needs to encourage a spirit of tolerance towards the Serb minority and take appropriate measures to protect those who may still be subject to threats or acts of discrimination, hostility, or violence”. The report observes that while the Serb minority faces particular difficulties in employment, the Roma have to contend with difficult living conditions and widespread discrimination.

While Croatia has continued with full cooperation with The Hague Tribunal, Zagreb is criticized for its attitude towards some important aspects of ICTY indictments against Croatian citizens.

The report also argued that the negative thrust of the public debate on the role of the ICTY affects the ability to impartially prosecute war crimes at home.

Concerning regional issues, the report concludes that Croatia has made little progress in finding definitive solutions to various bilateral issues with its neighbours, particularly as regards the demarcation of borders, which has affected relations with Slovenia.

Croatia’s economy has registered strong and accelerating growth, and the country is praised for maintaining macroeconomic stability, including low inflation. Croatia is considered to be a functioning market economy. But the report warns that external imbalances may affect macroeconomic stability. “Croatia has improved its ability to take on the obligations of membership. Preparations for meeting EU requirements are moving forward at a steady pace and alignment with EU rules is high in some sectors,” the report concludes. 

Inflation Rate To Rise In 2007, CB Governor Says
Croatia's inflation rate will likely rise in 2008 to 4.5 percent, from 2.8 percent in 2007, the country's Central Bank governor said on November 13. Governor Zeljko Rohatinski was quoted by state-run HRT TV as saying that the country's gross domestic product will grow by 5.9 percent in 2007. Rohatinski was reported as saying that GDP growth will likely slow down to some 5 percent in 2008.

Croatia, formerly part of the now defunct communist Yugoslavia and now a candidate for European Union membership, has enjoyed steady 5-percent growth since 2001, mainly driven by state investment, personal spending and tourism. 

The International Monetary Fund has warned that the country's growth is unsustainable over the longer run and has called on the authorities in Zagreb to reduce Croatia's external vulnerability. 

According to the report Rohatinski said the Central Bank will "continue to keep the lid on credit expansion." He also announced that the Bank will "continue with its restrictive monetary policy" in 2008. 

Rohatinski said foreign debt is expected to stabilize at around 85.5 percent of GDP in 2007 and to drop to 85 percent in 2008.

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