Croatia: far from Euro?

Finance Minister Slavko Linic – Photo: Boris Scitar/PIXSELL

At the meeting that put together the new leadership of the Croatian Social Democrats party (currently in government), June 16, minister of finance Slavko Linic said that new rises in prices were not dependent on the ministry of finances and that the prices of food, shoes and clothing did not rise with the increase of PDV (goods and services taxes). He said that it’s to be expected that once Croatia enters the EU the price of energy will be similar to those in Europe.

Social politics that ensure everyone has cheap energy, including the ministers whose income is higher, is unsustainable. The hits created by changes in the prices of energy must in some way be alleviated by social programs,” he said.

The contradictions in this statement by Linic seem to confuse. One the one hand Linic says social politics where energy is cheap can’t be sustained and on the other he says social politics must alleviate the pressure of price rises!

How a social program could alleviate the burden of higher energy prices, and therefore the burdensome pressure on living standards, Linic does not say. It is though reasonable to assume that Linic might be considering some forms of cash assistance to families/individuals, or subsidies to industry. If so this would mean more borrowing by the government, which in turn further  spells disaster “a la Greece”.

During last week Linic said that Croatia is far from adopting the Euro because it will take a while to narrow its budget deficit to less than the European Union’s limit of 3 percent of gross domestic product (GDP).

Linic said that his government’s task in the next for years was to strengthen the economy and undertake reforms of the health and pension systems.

Croatia proposed 4 billion kuna ($700 million) in budget cuts in January to narrow the budget deficit to 3.8 percent of GDP from 5.5 percent in 2011. The government has forecast the economy will grow 0.8 percent this year, while the World Bank predicted a 1 percent decline.

It’s been almost seven months since the Social Democrats (SDP) came into government (leading the Cock-a-doodle-doo/Kukuriku coalition) and no real changes to economic trends that may indicate recovery (however small) can be seen. SDP has launched many “ideas” (programs) for reforms however these ideas remain just that; no results are visible. Even president Ivo Josipovic agrees with this.

It would not be the end of the world if Croatia does not reach the economic standards “required” to contemplate and introduce Euro as its currency; a country can be a member of European Union without adopting the Euro, however inability to improve the economy, inability to increase the buying and earning power of individual citizens amidst rising living costs is dire. It, therefore, remains to be seen whether Linic and Croatian government are actually contemplating “social programs” similar to those former communist Yugoslavia that fostered a false economy based on borrowed money and handouts where actual and adequate GDP in many cases was incidental or often overlooked. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)


  1. Michael Silovic says:

    In every country there is some form of social programs to assist those who are in dire need and Croatia is no different. One of the issues here is not whether we have social programs but how it is administered. Social programs are not what bankrupts a country but the corruption behind the policy that causes financial crises.If the government were to give so called hand outs I would hope that they would start by assisting farmers to plant and harvest food source for the country.This is one of the most important aspect that many countries fail to provide these days as farming has gone of the way side to major corporations that feed the people instead of people feeding themselves.To be able to provide a lower cost food source is one of the best financial decision a government can make for it’s people.Why? because if people are able to feed themselves they can often survive without government assistance. In the United states many people are starting to have gardens to supplement there food source where for many years this was not the norm. But since government has not increased its hand outs people are becoming self reliant for the most part.Community farming is also growing in major cities like new york where neighborhoods are all working together to plant food source and share in the crops.Groceries in general should be tax free at all times.The government also has a responsibility to keep the cost of its natural resources to the people as low as possible such as natural gas and electric.It has to prove to the people that they are doing everything to put Croatians First with out putting the country into massive debt.The Croatian people must also help government to succeed by assisting the government in areas where they can volunteer to cut costs from rising such as in areas of public service to the community.Those who need assistance and are able bodied should have to perform community service in order to receive assistance other wise assistance should be given priority to senior citizens and war veterans first.In areas of taxation that should rise to assist in social programs they should include taxes on restaurants, night clubs,alcohol, tobacco, hotel and tourism in general. There should be a tax holiday once a year for clothing otherwise clothing should be taxed.Many social programs are born because of government taxation that does not leave people enough income to care for themselves.We need to have a Croatian First policy that enable peoples to be self sufficient. We need a government who will not force the euro in Croatia but rather take it’s time and allow the process to work slowly as not to have a impact on those who are already suffering. Croatia has a long hard road ahead of itself. If the government thinks that taxation on it’s people is the only way out they are wrong.I have faith in Slavko Linic as Minister of Finance to do the right thing. He is an honorable Croat that I believe will work for the best of Croatia.

    • John S. says:

      Let’s hope you’re right about Linic, Michael. So far lots of ideas and I do realise his job is not easy but I do worry about him and the company he’s in. He was deputy to Racan in 2000’s and didn’t do much really, he could have at least tackled corruption on the stronger basis. And now, he seems to have gone soft on his hard hand against tax evaders…of course, people do not have money to pay, maybe, but it seems to me more heavy handedness is needed when it comes to tax evasion – that’s the rule in the West, if the State is going to get any place when it comes to enforcing law.

      • Michael Silovic says:

        I hope I am right about Linic as well. I know some of his comments in the past have been very positive. His job is indeed very tough at this time and he needs to do everything he can to help us in this difficult time of finances. I worry more about the company he is in too. Having said that I honestly believe that he has the best interest of Croatia at heart but at the same time I also understand politics and party loyalty which sometimes makes a job much harder to accomplish.All of the comments posted are very good and we need more to express what everyone thinks our government should do to help improve the situation in our country.Discussion of what we believe is the best way to move Croatia forward can only help to give ideas to the people and government. I am not for Croatia as a welfare state in giving hand outs.Everyone who needs assistance should work for it in someway. This has been the failure of the American welfare system that does not need to be duplicated anywhere. Work for your assistance should be part of any policy in any country so that people do not think they jusdt can get something for nothing.We should be proud Croats and do all we can for our peoples who want to help themselves. We should not be rushing to the euro either as this is a form of welfare to our country and a poor example for our people.

      • No rush to pick up Euro.

  2. In order for social programs not to bankrupt a country, they must be productive and “temporary” in nature. Programs to assist starting new businesses, worker re-training, even subsidies for homeowner installation of solar, wind or geo-thermal power systems to reduce the impact of energy prices are examples of productive social programs. Welfare and programs for early retirement are not productive and cause great harm to a society’s productivity and dynamism.

    • Harold Lah says:

      Yes, helping business, small business is the go let’s hope Croatia will realise this. Too much welfare only creates dependency, it can get out of hand. Agree that some assistance is needed but with it there must be results. Croatia will need to “police” subsidies a bit better to avoid people rorting the system as in former Yugoslavia where money was dished out left, right and center for. e.g. olive planting, vines etc and no one actually monitored and policed whether plantations were actually maintained for produce – people took money, planted few plants in the wild & filled pockets with free money.

      • Michael Silovic says:

        There must be oversight in small business guarantees as well. Many small businesses do not have a business plan and only project what they think can be accomplished. This is the same plan as big business and we see how quickly they fail. Loan guarantees for any business small or big should be only given in increments as the business progresses and should be audited by the government every time additional funding is required. If the business is not being successful then no monies should be allocated.One of the major problems with business failings is that salaries for the so called corporate or business owner exceeds what the business can actually afford and in some cases more then what the business brings in a year..This is called Legal Corporate Fraud and theft that is legal. No business owner or corporation should be able to declare bankruptcy unless there is a guarantee that any funds provided by the government is paid back by the borrower since this money is actually a loan by the people of the country. In doing so the government will be assured that any assets of a business owner personal or otherwise that fails because of greed does not have huge personal assets from stealing from the people after bankruptcy. Corruption happens on more then one level and not just at the government level. It is the same as social programs that countries enact. They are fraught with deceit and theft and anyone caught stealing from the country coffers should be imprisoned for life.

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