Finance Minister Slavko Linic - Photo: Boris Scitar/PIXSELL
Croatia’s finance minister Slavko Linic had spent a recent week in the USA in the successful bid to sell USD1.5 billion Croatian bonds to private investors. While increasing Croatia’s foreign debt, the government says this was essential in order to create the capability of repaying due foreign debt obligations and to create an atmosphere/conditions for foreign investments in Croatia.
In his interview by journalist Jadranka Jusresko-Kero, Vecernji List, 24 April, Linic stated how domestic analysts are ruining Croatia’s rating with the International Monetary Fund (IMF) and the World Bank (WB).
Linic stated that the result from his recent visit to Washington shows that the IMF and WB have faith in Croatia’s government’s plan to lift the economy and move it forward. “Imagine, Croatian analysts believe in us less than IMF and WB,” he said. The IMF and WB believe that our government has potential to bring on the needed reforms, he added, also stating that the negative attitude of domestic analysts is destructive as it discourages foreign investments.
Linic also said that eight years of HDZ (Croatian Democratic Union) government is to blame for the state of economy and that it is fortunate that Croatia is still able to secure foreign loans.
Reading other sources it would seem that the WB views about the potential of the Croatian government in which Linic is the finance minister have less to do with faith in the government and more with warnings.
On 24 April Croatian news agency HINA reported that in an interview for Al-Jazeera Balkans TV network World Bank Director for Croatia Hongjoo Hahm said “Croatia has had three years of negative growth, a very deep recession, the deepest since it became independent, and the World Bank’s outlook for 2012 is also negative. These are very difficult economic times for Croatia, but it is time for action for Croatia to weather this storm … The World Bank has warned the countries of Eastern Europe and Central Asia about the negative effects of the spillover of the eurozone crisis, and Croatia, because of its close integration with Europe, can hardly avoid such a scenario. Croatia is very integrated with the rest of Europe, the integration of the Croatian financial market with Italy, Austria and Slovenia is high. The banks in Croatia are to a large extent foreign owned, and there is also great trade integration with Europe, especially with Italy. If the eurozone goes into a deeper and prolonged recession, the spillover of the crisis will have a negative impact on Croatia”.
Hongjoo Hahm has also stressed that the honeymoon period is over for the new government in Croatia and that now is the time for action.
The warnings that can be read between the lines in Hahm’s statements are stern.
Major overhaul and structural economic and fiscal reforms are essential. In particular, growth, genuine privatisation and increasing market competitiveness are faced with enormous challenges. Challenges are even greater in the reality of relatively high dependency on the government, which was deeply entrenched in the former communist Yugoslavia system and still fares strongly at the grassroots in Croatia.
As Hahm said: it is time for action and for Croatia to weather the storm.
A great storm will undoubtedly continue with processes needed to reform scandalously complex and slow bureaucratic red tape, corruption (in form of bribes) and sluggish work attitudes that seem to prevail in many key places processing licensing, approvals, registrations, etc. for any new business or investment.
Judging from what Hahm said there does not seem to be anything any domestic analysts can say that’s not already known to the world.
Linic’s criticism of domestic analysts is highly suspect. One can easily see that he may well be setting up a new culprit if his coalition government fails at needed economic and fiscal reforms. That is, time will come when he can no longer blame the old HDZ government, so he needs to find someone else, as time moves on.
In all honesty, Linic’a Social Democrats have spent many years in opposition since the beginning of Croatian independence shift (1990); between 1990 – 1999 they did nothing to influence economic reform and stamping out corruption, but rather concentrated on their own party’s political survival. When in government, 2000 – 2003, Linic was Deputy Prime Minister – again, not much done on reforms, and foreign debt increased. Again, in opposition from 2004 to 2011 – years wasted as Social Democrats failed miserably in their mandate to keep the HDZ government to serious account and push for changes.
In the interview with journalist Jadranka Juresko-Kero, Linic referred to Guste Santini, economist and analyst, when he expressed his objections to the negative views of analysts (private consultants) on problems facing the critically plunging Croatian economy. True analysts must tell the truth and work with the truth. As recent as 21 April Santini expressed his assessment of the situation as follows:
“… Local elections are before us and the Kukuriku (Cock-a-doodle-doo) coalition wants to win in local elections too.
Tax reform is not even in sight, yet. Changes in the tax system are only mild ironing out in relation to the changes that are needed and, therefore, appropriate to the Croatian economy…
What must concern us is the continued rise in unemployment. The investment cycle is just a mental construction. It is not certain that this year’s start of the investment cycle will have an effect on reducing the number of unemployed…”
There’s nothing wrong with this “domestic analysis”, as far as I can see.
And, given the complex nature of the economic environment Croatia is in, it just may be that domestic analysts and economists, private operators, will be the ones (not the government rhetoric) who will, with their creativity, critique and knowhow, galvanise the nation into true economic and fiscal reform. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)