Croatian Economy: The Gangrene Must Out

Porto Portugal Cartoon:

Porto Portugal Cartoon:

The beginning of 2013 was marked by stagnating movements in economic activities. Significant drop in exports came as well, coupled, though, with concurrent strengthening of domestic demand under the influence of increased government’s investment activities,” said the Croatian National Bank’s (HNB) analysis of the economic movements in Croatia on 8 May. “In such conditions, the administrative rate of unemployment stayed at high levels, which had already been reached. The fiscal politics were expressly expansive during the first three and a half months, however, sustaining such a trend for the remained of the year will only be possible if there is significant review of the fiscal goals for the whole of the year”, the HNB analysis continued.

In this clearly dark prognosis HNB emphasised that there had been significant fall in exports – up to 14.4 % in comparison to the same quarter of 2012, the industrial production had stagnated and so did small trade. Small movements in the building industry have been noted, as well as in job markets due to the temporary reduction in the number of unemployed associated with seasonal employment.

Consolidated central government expenditure has increased by 7.5% between January and February 2013, while government income had decreased by 1.2% in comparison with the same period last year.

“Total deficit in the consolidated central government for January and February was 60% of the planned amount for 2013. Central government debt in that period had increased by 3.9 billion Kuna, thus reaching 179.4 billion Kuna by the end of February…”

To remind oneself in the Budget for 2013-2015 the Croatian government had stated that Government Budget deficit for 2013 would be 10.9 billion Kuna or 3.1% of GDP. It forecasted revenue or income of 113.65 billion Kuna and expenditure of 124.52 billion Kuna.

The Croatian National Bank’s analysis talks about the need for the government to undertake a significant review of fiscal goals for 2013 if anything worthwhile is to happen in the economy. This could mean that the Croatian government must change its budget mid-year and that perhaps they did not know what they were doing when they picked up power in 2012.

Certainly, the Social Democrat led government seems to be floundering clumsily and helplessly through the economic nightmare that Croatia has been in for years. Successive governments (since the early nineteen nineties – secession from Yugoslavia) have done likewise, dragging their feet on administrative and legislative reforms that were and are absolutely essential for economic survival with the milieu of free and economically competitive nations.

Evidently none have made a point of fully taking up dr Franjo Tudjman’s advice and forecast that if Croatia was to become a truly prosperous democracy then it must learn from those who have succeeded in it, bring in the knowledge and the expertise from abroad, etc. But to do that, corruption and personal enrichment through privatisation of public companies would not have been entirely possible – the die-hard Communist political elite made sure that advancement of widespread entrepreneurship made only cosmetic appearances.

There is no doubt in my mind that the over-sized state is the culprit for the desperate situation Croatia is in economically. Too many people live off the state budget. It’s like a gangrene that must be cut out. All governments in Croatia – HDZ and SDP led ones equally – have done very little in cutting the public administration and in assisting the development of private enterprise. Indeed if the wealth of privatised public assets and companies did not go into the pockets of many individuals, either in hard currency or political favours, Croatia would now be in a much better place economically. It had and it has ample natural resources, it had and it has a nation of people among whom most are hard working in pursuits of a better life.
A serious and urgent reform is needed. Indeed, a reform that would see deep cuts in the public sector employment, but I fear no major political party will dare to bring this on in fear of losing votes.

The reality is that someone needs to cut out the gangrene (the huge surplus of public servants), otherwise all will fall.

The above mentioned analysis by the Croatian National Bank tells in no uncertain terms that the government is spending more and more, that the state revenue is less and less and that state debts are greater and greater.

It’s like the government politicians (and the opposition, for that matter) have fastened their seat-belts, shut their eyes, charging in a frenzy towards the “saviour” EU, hoping to wear the turbulent journey unscathed. Nope, that isn’t likely to happen, as majority have not made any serious progress away from the communist mind frame even though many almost swear they have.

Once in EU (from 1 July) Croatia will enter into a market of 500 million people, majority of which have established economically and political assertive practices while the Croatian lot still fail to assert their own political, professional and historical values on the international scene. They’ve kept tight with the markets within borders of former Yugoslavia – Serbia, Bosnia and Herzegovina, Macedonia, Montenegro … and come July 1 they will lose the freedom of trade they’ve had with these countries – they’ve done little if anything that truly counts to plug into the EU countries’ markets in preparation for entry into the EU.

And, at the end of the day, all we seem to hear from the Croatian government and the opposition is how they want foreign investments in Croatia, how they want domestic investments, how they want investments from the Croatian diaspora … but they’re doing almost nothing that would significantly make the state administration and red tape conductive to a strong investment climate. While acknowledging the fact that investments generally are on a slump worldwide, the Croatian government and the opposition nevertheless seem full of air and bubbles and someone needs to pop that balloon of political elitism before it takes the people into the dungeons of and economic gutter from which there is no return. Yep, the time has come when hitting the fist on the table, when determined measures regardless of the EU must be brought forward by Croatian, for Croatians. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)


  1. Croatian government chose the wrong strategy in fighting the economic crisis when it raised VAT and water, gas and electricity prices. Raising VAT was of no tangible benefit to the budget. The Croatian government has also admitted that the country’s economy is in big crisis, and is not expecting any growth this year. Government investment in the public sector has still not had any significant impact on the economy. Croatia may also have to swallow heavy losses in exports following its intended accession to the EU on 1st July 2013. Wrong Government – Wrong Economy !

    • I agree with you Croatian Center of Renewable Energy Sources: Wrong Government – Wrong Economy. They’re now talking up the EU funds as some kind of saviour but fail to tell the nation those funds will dry out and then what? Big crisis is not the right phrase – things are much worse than that and will worsen, unless drastic measures are placed into the system and I don’t mean increase in taxes etc … there just isn’t a partnership between the state and the private enterprise … antagonism and excuses everywhere all hide the politicians’ fears of losing their elite jobs.

  2. Laoi Primorac Ó Murchú says:

    Ina – to suggest that the economy is in trouble is an understatement. Right now, under Freedom of Movement of Services, any private venture could enter the market and put semi-State bodies like HP out of business, and that’s simply because of a lack of flexibility within the post office here… In truth it will take a massive wake-up call, not just for the Government but for the population, before anything is done. Someone like Mirela Holy had personality enough to say it like it was and is… Pusić maybe, but too many people see her attempts to heal the rift with Serbia as some sort of traitor. While, as an irishman, I can understand such feelings in the short term, I know that in the long term that if you ignore your largest neighbour then you are going to go bankrupt.

    The Mayor of Berlin commented on the rundown facade of Zagreb. Fixing that would be a start. Then, getting rid of this notion that foreign investment capital is some sort of invasion. Getting people to pay their taxes would be nice too – I pay mine, so that puts me ahead of a large percentage of so called patriots here.

    (and I’ve emailed you privately)


    • I agree with you Lee regarding nurturing relations with the neighbours but that also cannot be done by neglecting the pain of your own people. I do think that if Pusic was stronger in her stand regarding Croatian war, if she didn’t make it as if nothing much happened when dealing with Serbia then I believe the people would look at her efforts in healing the rift in a different way. Recognising and acknowledging the gravity of what happened is to my view the essential foundation for improving those relationships but it’s bizarre how such impressions do not emanate from Pusic. You cannot ignore your neighbour (Serbia) and I don’t think that the Croatians are asking for that… Croatian government have failed miserably as educating the public in citizen responsibilities, which include paying taxes, having a fair chance at getting a job on merit (rather than on who your uncle, father, mother … is), the value of work and profit, voting at elections etc etc The fact that many try to avoid paying taxes is a long standing attitude from the yesteryear when “the state – the party – took care of everything” more or less…

  3. Ivica V says:

    On first appearance it looks as though you’ve dealt only with the enormous state administration in Croatia. Cutting of the administration would chase the people into the job market, but here that remains only theoretical, due to the bad macroeconomic climate those people would have no place to get a job.

    That number would contribute to the mass of unhappy people which could then come to the boiling point when the people will finally demand the necessary changes.

    Perhaps too discretely for my taste, but at the end of your post you have clearly stated the problems of the Croatian society “ Someone must hand their fist against the table and burst that balloon of political elitism”. I like that.

    • Well Ivica V, yes many would lose their job but that could only mean a job in public service. It’s beyond me why the Croatian government can’t be more innovative, or copy what others have done … channel funds into private or NGO sector, broker out services provided directly by the state etc as in many countries the same former public servants do well as employees of government funded services etc… and then if that cannot be achieved to an adequate level – a blessing in disguise (?) – people will rise up and demand a revolution … demand a better government that actually is accountable to them day in and day out – no comfortable armchairs they can sit in for decades, causing rot in society and living standards

  4. “The Croatian government and the opposition nevertheless seem full of air and bubbles and someone needs to pop that balloon of political elitism before it takes the people into the dungeons of and economic gutter from which there is no return”. You’re so right, Ina. That bubble is our worst enemy. The political elite that used to function similarly in Yugoslavia. They know little and yet they won’t budge from their positions. They must be pushed off!

  5. Markota says:

    What chance has a country got whose government predicts budget deficits in advance, and does little to avoid that deficit except sit on their bums as if deficit is the normal thing. I fear for my Croatian brothers and sisters – I don’t want to see them poorest of the poor.

    • Yes Markota, and the disturbing thing is that they think it’s OK continue working with deficits without needing to demonstrate they’re fighting against it (successfully or not)

  6. Master James says:

    All I seem to be hearing in Croatia is how many billion Euro they will have at disposal once they enter the EU. Oh, Jesus, as if that will save them in the long run. No one seems to be talking about necessary changes that need to occur so that when the EU tap i turned off some years down the road, there will be solid foundations to continue. This sort of thing reminds me of how it used to be in Yugoslavia while Tito was alive – everybody knew things were bad, productivity couldn’t pay the wage workers were getting and the Tito would make a trip abroad and people would sigh: it’s going to be alright, Tito got a new loan. So the behavior instilled then is still lingering. Bring the diaspora back to Croatia, they will teach you what hard work means when it comes to securing your own future without relying on anybody except your two hands.

    • Fully agree with Master James (except the bit about bringing back the diaspora) and I fear the EU funding, significant though it is, will not be realised because nobody has the nouse to focus, plan, do and review a project to the satisfaction of the purse string holders. Projects will be set up, people will travel about and meetings will be held but, in the end, precious little will be delivered and consequently the funding will not come. How do I know this? It’s what I do and, with the odd exception, EU sponsored ,projects fail because we can’t get our act together.

      • Yes Pavao, I agree, the diaspora is not the only one where people know how to work hard, but most have earned their stripes of relative economic comfort through personal diligence, determination and ability to adapt to new and often harsh realities. Perhaps why many in Croatia cannot get their act together because most have depended on the state to worry about many ins and outs of economic life.

    • Master James, while I know what you may mean re the diaspora I also think that there is plenty of dedicated people in Croatia who could make a difference. If forces of the diaspora and the homeland were once again united as it was in the nineteen nineties Croatia would bloom. But, it seems, the die-hard antifascists/communists did not want that. So there you go, the diaspora continues to “work” for Croatia on a parallel track and hopefully the two will meet, again.

  7. Miso Sorbel says:

    That’s it do a new Budget for the year in the middle of the year and say: ooooops, I got it wrong before. Talk about a great strategy to maintain that rotten political elitism.

  8. The First Born says:

    I don’t get a second bite at the cherry in real life, so why should this hopeless government. Review of fiscal goals mid-year for the year. Man is that stupid. What, do you erase the disaster of the preceding six months. Only in Croatia, it seems. For how long though?

    • Yes The First Born – it seems that only in Croatia, in today’s day and age of democratic shifts – politicians get to have several bites at the same cherry…

  9. Branimir Joost says:

    The Cock-a-Doodle-Doo government coalition in Croatia had burst into government with their so-called Plan 21 – and so here are the results: in 21 months they have destroyed even the little good economy they inherited! And, who said the ex-commies can’t keep their word!

  10. Tomislav Marinic says:

    I think that the old guy at the entrance of Employment Center in the cartoon reminds of the head of the Croatian Reconstruction and Development Bank, Anton Kovacev. The guy has been there for about 20 years – you wonder why!? Political elitism, power play … bugger the consequences

  11. Spectator says:

    It’s so hard for the government – you can see it on the Prime Minister’s face – Zoran Milanovic looks half-asleep and half-detached from his surrounds all the time. Is he on medication?

  12. Michael Silovic says:

    Many things need to change In Croatia before we are able to become successful.We need to change the constitution to reflect the will of the people and to empower them. It will only be then that they understand they are in control of our country and not bureaucrats that reward only family and friends for their own financial well being.We must help Croats to become entrepreneurs in the filed of creating business to use our natural resources as a means of getting our country on track.We have massive amounts of natural gas and oil in our country. We have great lands for farming and wood products in forestry that we ignore and Croats have the will and ingenuity to create manufacturing jobs if given the proper lead way and guidelines. The monies from the EU is not going to save us if we do not attach a Croatia First Policy to it.If monies are not invested in the people then it does not matter who comes to Croatia to build anything because they will always bring in their own people and suck out all of the wealth from our country leaving nothing but us having large debt with no way to repay it. A Croatia first policy must be had so that we do not get left behind.Everyone that invests in Croatia should be forced to hire a minimum of 70% of Croatian people before they are allowed to bring in others from outside the country.You can not keep taxing people that have nothing to begin with.If we do not change course we will not have Croats left in Croatia to call it a country of our own.Our government needs to work to let all Croats world wide be able to return with ease and cut the red tape to repopulate and bring their wealth and ideas to our country to help prosper.We have to get rid of the so called red tape and start working to better our country. The EU is not our savior but our demise and as soon as we all recognize this the better off we will be.

    • Once again, Michael, you put forward Croatia First idea and plan and. like many others, you might say: I’m doing this for the nth time and things are not shifting forwards, is there any use? I think there is and your determination is admirable – it means I believe that you know that for an ex-communist country where ex-communists still rule the roost in many ways, same things must be repeated and repeated again. And judging from following the news and events out of Croatia there is growing demand there for real change in democracy, in citizen rights and responsibilities…Croatia First.

  13. Velebit says:

    I am not a lone voice in the wilderness! I am so glad that commenters are truly questioning Croatia’s motives and expectations in regards to EU membership. As I have repeated time and again, I was/am skeptical about this headlong rush into the EU as if it was the answer to all our poilitical, social and economic woes. As commenters are underlining – the EU windfall of financial support is the HUGE carrot that is being dangled in front of us and every successive govt. from the 1990’s to today is bending over backwards in an attempt to grab it- at times to the detriment of our own national best interests. Unfortunately, it is a proven fact that throwing money at problems does not solve anything- a deeper examination is required- to get to their roots and thereby, their required solutions.As and aside, while we are all in agreement that the present SDP govt. can be rated as the WORST of the worst, I can think of NO administration throughout the last two decades that has opened up any dialogue with the people they are representing- in the form of public meetings, question and answer sessions, debates etc. Especially for such a young democracy, this is unacceptable. HDZ -being the first democratically elected administration should have initiated a citizenry education program somewhere along the line of their tenure(1990-2000 or 2003-2011)so that both citizens and those representing them would be aware of their mutual rights and responsibilities to each other and to the country as a whole. As a result, people have relied on daily living experiences to teach them what democracy was and evidently, they learned that it was not too far removed from the former communist system. They saw that their ‘new’ leaders are actually their ‘old’ leaders who did not truly adopt any new ideologies- just underwent a name change, that their ‘old’ civil servants are their ‘new’ ones who unfortunately did not adopt any new methodologies/technologies- their red tape and resulting lack of productivity causing a real impediment to both the business and the private sector. But, most importantly, they saw no one held to account for the last 45 years of brutal communist oppression at the hands of Tito and his elite.To the contrary, that group was never disbanded, they were awarded and incorporated into positions of power within HDZ and govt. et al. It doesn’t take much digging to realize that from the outset the cards were stacked against any real change. If anyone has any doubts – just read the Croatian Constitution – its right there within the first few lines.- apparently all forms of govt upon which Croatia’s sovereignist lineage has been established continually throughout history is acceptable – including Tito’s bloody regime in which hundreds of thousands of Croatians were killed – all, except Croatia’s Independent State (1941-45). …..”establishing the foundations of state sovereignty during the course of the Second World War, by the decisions of the Antifascist Council of National Liberation of Croatia (1943), as opposed to the declaration of the Independent State of Croatia (1941) and subsequently in the Constitution of the People’s Repubic of Croatia(1947) Again a continuation of the Communist rhetoric that had served them so well in the past and would serve them for the future! How ironic- for a totalitarian , communist, anti-nationalistic regime to take credit for being the basis upon which a nationalistic democratic form of govt was established.( I doubt that anyone would dispute that at the very least the Pavelic govt. was nationalistic) Out of whose warped mind did that come out of? I can guarantee that if the Croatian diaspora of the 1990’s had known for a certainty then what they know now -that it was all smoke and mirrors, wolves in sheeps clothing – that the financial tap would have come to a full stop – but as it was, we along with domestic Croatians were hoodwinked -even though they (HDZ)presented us with cause for concern, we gave them the benefit of doubt .We did so out of our love for our country and our feeling of responsibility and duty to our people – not for reasons of personal profit or recognitiion- a foreign concept to many in govt. today. Unfortunately Croatian govts. have not set the bar too high to date and as a result the level of expectation from voters is minimal – thereby resulting in low voter turnout and ….the cycle feeds on itself until it results in people feeling disenfranchised and marginalized.
    So, yes, pound your fists on the table Croatians, and say “enough”! Recognize that the power is in your hands to change your futures – how committed are you to work towards a better tomorrow?

  14. Brave New World says:

    Zoran Milanovic’s crony (Zeljko Lovrincevic), no doubt, says in Jutarnji List: “Don’t pop the Champagne open yet … but things are sure to improve because we have hit the bottom so economy can only move upwards…”–/1102114/

    This guy says that unemployment will remain at around 20% over the next year …things can only get better according to him… Well, he doesn’t know his numbers or he is just trying to pour water on fire to lighten the criticism against the government’s pathetic record… Percentages of unemployment will increase unless something is done urgently to improve the opportunities for job creation, to cut red tape and inflexibility of it for private business etc etc Keep the pressure on against these nut jobs in government

  15. Računovodstvo says:

    I am Croatian, born and raised in the US, educated in US schools and a Certified Public Accountant by profession. The economic news out of Croatia depresses me. The government is so bloated with public servants when considering 10% of the population works for the government. The number is unsustainable. Firing public servants is an option however, there is no private sector to absorb them. I’m afraid that the Croatian government is just waiting for money from the EU. Unfortunately, this money is not free and will come with strings attached. I really don’t want to read about Croatia in the news with similar comparisons drawn to Greece–a Southern Mediterranean country with a bloated public sector lazing away its days in the bright sun. The bright spot is that Croatia was named as a destination in the top 25 countries for frontier investing, which is basically starting from the ground up. These types of countries are attractive to investors as they provide great portfolio diversity and actually minimize risk. All that is needed is someone willing to show interest and for someone to tell the government to knock it off as Croatia’s situation could be so much better.

    As a member of the Croatian diaspora, I always look for opportunities to promote its beauty and encourage travel to the area. I am very proud of my Croatian heritage, and I hope that I can one day use my knowledge and experience of living in a business-oriented economy to bring Croatia up to speed with the Western European countries in the EU.

    • Good one Racunovodstvo! I agree totally that Croatia could be so much better – effort is needed rather than seeming complacency or blaming the world’s economic trends etc like the government is doing, leaving the impression that it’s OK to be down. Well it’s not and yes it would be a big shock to cut public servants down in numbers – there too many. Western countries have cut down and survived because people are people and if you promote optimism rather than defeatist attitude – something will turn up/new opportunities etc

    • Michael Silovic says:

      Računovodstvo you are correct in what you are saying. The problem with cutting work off from those in the goverment sector will not happen very quickly and if it does it will be the lower paid Croatians that suffer not those with family and political ties because they make more money within then they would if in private sector. These people all were put in place to get rich because they knew of the timing of the EU FUNDS. Once they steal everything they can then they will begin to leave. It is the same over and over again and one of the reasons I was against taking funds from the EU and the IMF at this time. The reality of it is that the ordinary Croat is not any better off financially now then they were under communist socialist policies after 18 years of so called manipulated democracy.our goverment needs to open the gate for all generations of Croats and diaspora to come home so we can rule since we have a better understanding of what we need to do.Trust me I am ready to go home and do my part.Just let me in.

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  17. The die-hard Communist political elite are up for a challenge.

    In a democracy – MAJORITY RULES

  18. Thanks for reblogging my drawing, and for liking my post “Eurofarse”. But I had to remove this last one because I made some few changes.
    Thanks, anyway, and good luck!


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