Croatia Economy On A Wing And A Prayer

Croatian Finance Minister Slavko Linic  Photo: HRT

Croatian Finance Minister Slavko Linic Photo: HRT

Croatia’s finance minister Slavko Linic has not learned it seems from his failed step where he published the names of tax evaders – the Pillar of Shame – in order to drive significantly more taxpayers into compliance with tax laws.

It’s been just over a year since then and he is at it – again!

This time he has announced publishing the names of employers who do not and have not for months paid wages to their employees!

According to a fresh Croatian HRT TV report, employers who do not pay their employees are, in addition to tax evaders, to be placed on minister Linic’s public Pillar of Shame.  Croatia’s tax administration has recently published on its website the proposal of changes and amendments to the taxation law – and it’s about to add another category to this very public cyberspace: a new list of debtors – those who do not pay for the work done for them.

Special rules have introduced several measures in order to reduce the number of employers who do not pay wages to their workers.  The legislation on mandatory contributions provides that Tax administration may publish the list of employers not issuing wages to their employees; information needed to place a name on this new pillar of shame is reportedly easily visible in companies’ filed reports to the tax office.

Ministry of finance keeps emphasising that in order to strengthen financial discipline it’s decisive to ensure that all employers meet their obligations towards their employees in a timely manner.

Our job at the ministry of finance is not actually a penal procedure nor an implementation of measures in that part, but to make it clearly known to the citizens of Croatia who these employers are and which heads of those corporations are involved. We consider that every head of every corporation that cannot pay its workers knows what the law on bankruptcy says,” said minister Slavko Linic at a press conference in Zagreb on 22 July.

There are no reliable figures as to how many workers in Croatia are not being paid for their work. A figure of 100,000 was bandied around in Spring of 2012 when regulations came into force, which stipulated that wages cannot be paid out without also paying mandatory contributions and taxes.  Since then, a number of companies have declared bankruptcy so this number of working people without pay has most likely fallen to perhaps 80,000, increasing with that the number of the unemployed.

This translates to about 8% of the employed in Croatia who are not receiving pay for their work!

It’s estimated that there are about 27,000 companies in Croatia unable to meet their payroll obligations. In most, the workers turn up for work every day – hoping to recoup what’s owed to them, praying they won’t need to join the endless queues of the unemployed along the road that’s paved with economic hopelessness. They linger in anger, bitterness, disappointment, protests … after all it has become illegal for companies not to pay their workers, but not a single company or its head has been processed under the force of that penal matters law.

Indeed one cannot but conclude that minister Linic keeps introducing cosmetic, ridiculous measures through which hope for economic recovery can be detected but, in reality, the roots of economy’s dynamics are rotten to the core.  Dialogues between the government and the workers’ unions seem to be taking an increasingly antagonistic form as the government lashes out with unyielding resolve that often includes punitive measures (such as this new pillar of shame).

Linic hopes to introduce financial discipline among employers by forcing them to act in certain ways:

pay up or die!

But if the companies die – what then? Will there be another wave of privatization for cheap money?

Why doesn’t minister Linic create a pillar of shame with the names of public servants and other well-paid entrepreneurs and development bankers who have for years squandered public money, grants … without achieving a single positive outcome in the strengthening of trade environment within which companies could survive, and be able to pay their workers.

If you’re looking for a personification of the idiom “on a wing and a prayer” you’ll find it in Croatia’s minister of finance, or, indeed, in the whole of the Cock-a-doodle-doo government coalition.  The punitive, intimidating measures once seen under the communist regime are back with a vengeance in Croatia. Times of consultation and regard for all stakeholders’ needs when it comes to the know-how about economic recovery have still not arrived in Croatia it seems. That’s a pity for that lovely nation of working people who know how to and love to work; be productive.  Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)

Comments

  1. You are correct in regard to the propensity of employers to avoid their obligations to their workers, it is shameful and nobody is sure how many do this because they can get away with it or really are de facto bankrupt. I don’t agree this is a party political matter in that HDZ were no better when they had the power to fix it. I suspect the truth is that Croatian business is largely bankrupt for all the same reasons that cause companies in the developed world to cease trading trading and close down. The difference here is that the walking dead are still walking and, as you imply, there is no real emphasis on forcing companies to increase efficiency or shut up shop. The hoards of unproductive workers are still there, the ancient machines still grind on with 10% efficiency compared to a company who regards renewal and investment as a necessity, this is most true in the plethora of public bodies where nepotism and unaccountability is the norm.
    We can do what Mrs Thatcher did or we can stumble on until we achieve the same status as currently “enjoyed” by the Greeks. There is a large bomb here, it hasn’t quite exploded yet, but it will.

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    • I agree with you Pavao with regards to HDZ government as well – I did write in my concluding paragraph about years of ineffective operators who were paid great money to produce positive outcomes and did nothing – their names should be put of a pillar of shame. Current government has been in power for under 2 years and prior to them the HDZ and prior to them those related to the current … none of them did much but all lined their pockets with big money.

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  2. The Croatian governments have actually encouraged businesses to lie, steal and scam people to accumulate wealth for themselves, and as results they have now Swiss accounts, yachts, real estate’s etc. If you can’t pay your workers, you have to give them at list shares of your business, or just default, but business should not be allowed to take advantage of the workers, the evil people that make money for their masters.
    In the Western world, I don’t know of any government that would allow this,,, they’ll go after these well-to-do people and throw them in the dungeons and throw the keys.

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    • Yes Roko it seems Croatian business exists for the rich to get richer and the workers to become poorer and more dependent on handouts. The minister of finance should go after the rich, dig into their background and see how come they’ve amassed so much wealth in such a short time. Corruption runs deep indeed and that should make it to a pillar of shame.

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  3. Zdenko Z. says:

    From Facebook: Znamo kako prolaze Hrvati u domovini. Znamo kako prolazi dijaspora u domovini. Nedajmo da cijepaju Narod. Hrvatski narod je jedan jedini ma gdje bio. Vrijeme je da Domovinu uzmemo u svoje ruke i da je uredimo da bude oaza svih Hrvata.

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    • Translation of Zdenko Z. comment: We know how Croats in the homeland fare. We know how diaspora fares in the homeland. Croatian people are one nation no matter where they are. It’s time we took the Homeland into our own hands and to make it an oasis for all Croats.

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  5. prayingforoneday says:

    This a worldwide trend here. This story is slightly different. But I don’t know more that 2 countries (Finland are ok) who can say they are ok with money.
    It will get worse!

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    • It will get worse I’m afraid too prayingforoneday – the trick might be in who is clever enough to avoid total disaster; disaster meaning people living without hope and without courage to better themselves because opportunities to better oneself get scarce or barely existent.

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  6. Računovodstvo says:

    I just returned from a trip to Croatia and Bosnia. The trip was wonderful, yet I left feeling appalled, angry, and sad due to the economic state of the country. The infrastructure is deteriorating, people are not maintaining the apartment buildings they live in, and tourism, while the only bright spot for the country, is not up to the task for enticing large numbers of Americans and wealthy foreigners to the country. Frankly, I felt as if I was visiting the third world version of Europe.

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    • Heartbreaking, Racunovodstvo. I can’t shake the feeling that that is exactly what the international powers want so they can deal new cards/maps of Bosnia and Herzegovina.

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  7. Will I or Wont I says:

    Its too easy for companies in Croatia to go into bankruptcy and siphon money out of those companies and transfer assets into other companies they may have opened up. There is little in terms of protection for the workers. The unions are compromised. That being said, I just see too much of the Diaspora shouting from the side lines. Why dont you come back and challenge the logic and system or our absurdities.

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    • Will I or Wont I – there are many who had returned to Croatia since early 1990’s, took with them quite a lot of money, tried to start new business or invest but little if anything positive has come out of that; for those many I know personally, they have lost quite a lot. And its not shouting from side lines either, many have or still want to invest, many have returned and prop up the Croatian economy with their foreign pensions etc. The diaspora has tried and is still trying in many instances to offer ideas and constructive advice but regretfully much falls on deaf ears. Perhaps the future will be better when this is concerned but not without the genuine will from within Croatia, one often gets the feeling that Croatia wants diaspora’s money but not the people … and that money was not easily earned and so I think it won’t be easily parted with either…To keep to the point of the article I think it’s the Croatians living in Croatia that should be the ones to pressure minister of finance to create a Pillar of Shame with names of all the thieves and incompetent but highly paid “business development advisers”

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      • Will I or Wont I says:

        i was born in the diaspora and have returned. what mr. linić is doing is absolutely spot on. the column of shame for companies that own tax, the column of shame for companies that owe their workers money, fiksalisation its all necessary … i fully support what he is doing and let him create more transparency… I am naturally a right winged voter, but i see that the current government is doing some things that are important that the previous government was too “chicken” to do. not everything that this government is doing is bad. slinging mud is very easy to do in this current economic environment. what this government should do is to go after the directors of these companies and have the ability to cease personal assets and also not allow them to open a new company for at least 5 or 10 years. this raping and pillaging has gone on for far too long.

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      • Will I or Wont I – the government to my opinion has no other ideas but to create these sweeping pillars of shame, and strict rules re fiscalisation etc but they fail and failed to create a climate of partnership with the business world – finding ways to also educate people in their fiscal duties and taxes and not just charge forth with rough punitive measures that sometimes boil down to the ridiculous. I agree that Linic has a hard line which can also be good but you cannot expect optimal positive results with such a hard line approach in Croatia at this time. The patterns of behaviour towards taxes, mandatory contributions etc is appalling because I think of the long time under a different system in Yugoslavia where personal responsibility for the common good wasn’t the strongest point – given this, the transition into democracy and free trade should have involved community education as well. Let’s wait and see what happens out of Linic’s pillars of shame etc but I doubt they will bring real changes any time soon; you can’t get blood out of a stone – you need to prime the stone first then you might have some chance. And if I were the minister of finance in Croatia I would have firstly gone about investigating the riches many had amassed there in suspect ways and confiscated wrongfully acquired ones.

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      • Računovodstvo says:

        When I was in Croatia, I made a list of items that I saw which puts Croatia back in the ice ages of business. Sure the diaspora can and will scream about this, but it looks like the government is still in the Communist mindset, the one where friends are protected and enriched at the expense of others. It’s almost useless shouting about this because you know whoever is in control really doesn’t want to change anything. It’s a shame because there are diaspora that have moved to economically advanced countries who can and would lend their knowledge. Only, why bother when no one cares to listen?

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      • True racunovodstvo, one often finds that many people in Croatia think they know everything and then fail – they are not made responsible for their business failures because that how it was under communism etc

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      • Will I or Wont I says:

        with regards to the diaspora that came back and invested their “hard earned” cash and failed … its their own fault. i have not invested in this country, in fact it has helped me pay my debts abroad!. what kind of an idiot would invest in a country that has such a large disparity between the earning capacity of its population and market prices. take for example the prices of housing. In some parts of Croatia the price of housing skyrocketed in 2007. Dubrovnik was on average €4,500 /m2 Zagreb was on average €3,000 /m2 … now they have fallen to half of those prices. It would be a life mistake if you invested in something in 2007 and 2008 for it to crash hard. How can the price of housing be so high when the average wage is under €1,000 per month (or more exactly €700). A loan for a family with 2 kids can borrow for 25 years at 6% only €50,000 .. So what can you buy with that? How can the price of housing be so high with such a high unemployment rate??? IF the diaspora that came back and could not see this, then the western world taught them nothing… They came back to Croatia with rose coloured glasses and not with the intent of making Croatia a better place or better Country.

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      • Will I or Wont I, you’re wrong, the business investment failures and losses were all due to red tape and corruption and market sabotage from Croatian side; there were some successes – situation has changed a bit but not much as evidenced by relative lack of investment. As to the prices of real estate I often think they are obscene especially in areas where infrastructure and other utilities one finds around expensive real estate are missing. Oh no rose coloured glasses just a will to make Croatia a better place, to create jobs and of course make some profit and profit is what business is about too so nothing wrong with that, because if investment can make you money elsewhere why invest where it doesn’t. It’s not the diaspora that has rose coloured glasses, it’s the attitudes often found in Croatia and often these verge on resenting those that return as if they’ve picked their earning from the trees. But this is an issue that is huge and won’t be solved here and it’s not sitting on sidelines when you show interest in Croatia including criticism, last time I checked criticism is positive if taken on board and analyzed instead of fobbing it off

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  8. Will I or Wont I says:

    Croatia is a kleptocracy. People must realise what it is before we can start managing it. I am not wrong. The hyena’s are pretty easy to handle, just be the wolf, at the end of the day they will run away because they are inherently weak (ie. the corrupt politicians and public officials). But this is getting less and less.

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    • So Will I or Wont I, the next hard line Linic should take is fall upon the corrupt public officials like a ton of bricks for there are the roots of manifold “evil” that holds progress back and maintains a mass depression and hopelessness among the masses for a better future.

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  9. Will I or Wont I says:

    Konstruktor 2,2 bn Kunas
    EPH Media 600 m Kunas
    Ingra, Stipic Group, and so on, there are many many more
    the debts these companies are extra ordinary … did konstruktor go into every job at a loss???
    how on earth did EPH get so far into debt, it charged the most for advertising space …
    Directors in Companies are not liable. In fact they go unpunished even the public listed companies.

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    • Exactly my point Will I or Wont I – no accountability, no responsibility pursued you get what you have in Croatia now. Times for drastic changes in the way business is done if we;re to see positive trends on the employment scene.

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      • Will I or Wont I says:

        Yes.. changes, reforms… and Linić is trying his best. so why so hard on the man?

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      • Because he appears to be quick to introduce measures that will fail or not be effective because of inadequate preparation and priming of “community”. To give you simple example of this the government is only now talking about sending proposed legislation, bills etc out for public consultation before its brought into the parliament. Hello – this should have been done years ago, but while this gov is at least proposing to do it (and I’ve written about the lack of public consultation on proposed legislation on this blog before) from now on this does not provide a redeeming element for their failure to prepare the relevant elements in society for the drastic changes etc. Linic seem like a determined man and I like that about him but many moves are rushed etc doomed to failure, doomed to achieve expected goals. So, Linic need better advisers, Linic needs a complete change in the leadership of the Croatian reconstruction and development bank that has squandered billions in past twenty years on propping up corporate environment and business opportunities that should have died the day Croatia declared its independence from communist Yugoslavia.

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  10. Where I seat, I think the Croatian government should start fresh, and privatize everything under the sky, cut tax rates, stop (wasteful) spending, and institute comprehensive industrial tax to stimulate business. Propping any industry with government funds will not help, instead, they should spend money retraining workers and everybody will benefit….Ina you should run for high office in Croatia, I am sure you will make a big difference

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  11. Will I or Wont I says:

    The government is there to govern, which is done poorly in some respects here in Croatia. Let the privatisation happen, the government should be collecting the taxes and not running businesses.

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  12. I am wishing better economy and more freedom to all Croatians. My grandfather’s last name was Fanta. I think he changed/ or shortened it. Hugs, Barbara

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