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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: 167 - (26/05/11)

Several keys issues have dominated the political landscape in Croatia in recent months. Primarily, there is the country’s ongoing bid to join the European Union, which remains imperilled by suggestions that the nation’s judicial system needs further reforms, and that corruption is endemic in the Balkan state. In addition to this, the continuing prosecution of members of the Croatian military for war crimes in the International Criminal Tribunal for the former Yugoslavia, also a pre-requisite of EU accession, has proved a source of popular discontent. The work of the UN Tribunal has provoked widespread protests across the country, where Croatian self-determination is seen as a point of pride and its assertion, no matter how bloody during the Balkan conflict, a matter of national interest.

The most recent case at the ICTY was particularly high-profile. The Hague sentenced General Ante Gotovina to 24 years in prison for leading a campaign in 1995 to drive Serbs out of the Krajina region, during which troops under his command shelled towns, pillaged, murdered and persecuted civilians. Another general in the same 1995 campaign, Mladen Markac, was sentenced to 18 years. A third, Ivan Cermak, was acquitted and released. When the outcome of the trials was broadcast live in the centre of Zagreb to a crowd of 1000 people, a chorus of boos and hisses resounded across the city, a microcosm of the mass upset that the verdicts provoked across the country, where the defendants are seen as national liberators who fought a meritorious battle for the assertion of Croatian identity. Tens of thousands of Croatians took to the streets to protest against the ruling. Prime Minister Jadranka Kosor also joined the chorus of dissent, calling the verdicts “unacceptable” and pledging that the government would try to overturn it. Particularly unpalatable was the notion, asserted by the Hague, that the campaign was part of a “joint criminal enterprise.” run by then President Franjo Tudjman to drive Serbs from Krajina. Tudjman died in 1999 as prosecutors at the Hague were planning to have him tried. The verdict against Gotovina has been taken as an indictment of the Tudjman presidency as a whole.

Particularly troubling for Croatia’s leadership was the fact that at protests against the prosecutions, some ralliers were seen gleefully burning EU flags. A centrepiece of Croatian Prime Minister Jadranka Kosor's stratagem since her election in 2009 has been the aim of completing talks on joining the European Union by this summer. The effective prosecution of war criminals is a key requirement for nations who plan accession to the EU; Croatia has to demonstrate full cooperation with the International Criminal Tribunal for the former Yugoslavia to ensure the viability of its integration hopes. Apparently Croats at large remain apathetic, if not downright distrustful towards the notion of joining, and the ICTY’s recent verdicts have only served to reinforce a feeling of antipathy.

Another prong in the campaign to complete EU accession is the crackdown on corruption (which has been rife since the Communist era) and the reform of the judiciary system. As part of European Union negotiations, the Croatian government was required to calculate the total sum of money stolen from the state over the past 5-6 yeas. The figure of 101.5 million euros was a startling reflection of systemic graft. A recently published United Nations survey of the western Balkans found that about one in six respondents were exposed to bribery involving a public official in 2010 and, even more remarkably, in nearly half the instances, they did so without solicitation, reflecting how deeply-rooted an anticipation of corruption is. Several high-profile cases have demonstrated Zagreb's willingness to tackle the predicament. The extradition of former Croatian Prime Minister Ivo Sanader to face charges of money laundering and embezzlement in his homeland has demonstrated that not even those who occupied the highest echelons of the political hierarchy are immune from prosecution. The unravelling of the web of the “untouchables” which has been a keystone of Kosor’s tenure, began when Mladen Barisic, the former treasurer of Mr Sanader's party and head of Croatian customs, was arrested last September and, presumably after making a deal with prosecutors, began to talk. Details emerging of bags full of cash making their way round government offices exposed the political elite as shameless profiteers. Bojan Milkovic, head of INA, Croatia’s national oil giant, was also arrested in March for questioning about taking bribes worth up to 10% of business deals struck in the period from 2002 to 2009. This has certainly been taken as evidence of a genuine desire to expose corruption. There are also signs that Croatia has managed to improve its judicial system, increasing transparency and the requirements for those wishing to become judges. These changes, some say, were only achievable because the lure of EU membership made them indispensable.

Croatia’s desire for EU accession is motivated to a large extent by hopes of improving its economic prospects. High unemployment (nearly 20%) and feeble growth are two of the scourges of the country’s economy. The state’s GDP fell from 2.4% growth in 2008 to 5.8% contraction in 2009, then tumbling a further 1.2% in 2010. Estimates for growth in 2011 range from a sluggish 1.3% to 1.8%, which analysts believe will be insufficient to turn round the jobless rate from its 8-year high of 19.3%. Foreign investment is also dwindling, falling last year to 440 million euros from 2.1 billion in 2009 and the record-high 4.2 billion in 2008. However it is precisely the investment climate and the praxis of doing business in Croatia which have proved off-putting to European companies. The level of bureaucracy, which prevents projects from developing easily, has deterred investors. Land registry issues, in particular, have stymied several development projects. A Wild West real estate phenomenon has developed across all the Balkans post-conflict, where land has been eagerly purchased, but projects cannot come to fruition due to an excess of red tape and a lack of transparency in taxes and fees. Improving the investment climate has been the task of Domagoj Ivan Milosevic, who was appointed first deputy PM last December. He has proposed tax breaks linked to job creation and has pledged to improve the land registry sector, instructing courts to deal with cases related to investment projects quickly and efficiently, as well as shortening procedures for urban planning. The government has begun to eliminate certain non-tax fees on business, consolidate overlapping government agencies, and identify administrative barriers to foreign investment. Progress is however, on the whole, slow.

Despite the utmost of efforts from the Croatian leadership, it looks like the ride to Europe may still be a bumpy one. It seems highly unlikely that the accession talks will be completed in June, which was the original deadline proposed by the government. The latest progress report approved by the European Commission has suggested that in terms of judicial reform, the country's efforts have been insufficient. Western complaints that accession states Romania and Bulgaria were given "too easy a ride" prior to joining in 2007 have also toughened conditions for entering. Croatia's bid could equally be jeopardized by other external issues troubling the Union as a whole, such as the problem of the Roma minority, and fears of a possible new wave of refugees from North Africa. As in all of the West Balkan nations, the shadow of conflict continues to loom over Croatia’s contemporary politics. The inextricable linking of the war crimes tribunal to Croatia’s EU bid means that as long as its past is under scrutiny, its future will remain uncertain.

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