Croatia: Price Rise Despair On The Final Stretch To Eurozone

Food market Dolac, Zagreb Croatia. Photo: visitzagreb.hr

Croatian residents and companies and organisations have faced a rude shock when recently their new gas/energy bills arrived with sharp and unexpected spikes compared to the previous ones, many expressing absolute inability to pay the new energy costs with the government finding itself in the position of having to subsidise some organisations so they could survive their energy bills. It has all been put down to some generalised energy crisis in EU and the world that is sure to cause price increases in all goods and services. Prime Minister Andrej Plenkovic noted during the past month that vulnerable energy consumers, about 91,000 of them, are currently receiving vouchers of EUR 27 each to pay electricity bills. The program will be expanded to 5,700 beneficiaries of the national compensation for the elderly. Also, a voucher for gas will be introduced, and the amount doubled to EUR 54. A special one-time fee is envisaged for 721,000 pensioners with pensions lower than EUR 531, which will require a total payment of EUR 62 million. Not much help when one hears that energy bills have risen by double or triple amount from previous ones!

Prime Minister Andrej Plenkovic has also during the past month presented a plan for households, businesses, and farmers that would mitigate the rise in prices and pointed out that without the package the electricity bills would rise by 23 percent from April 1, compared to 79 percent for gas. The measures will become operational on April 1 and will be valid until March 31, 2023.  Plenkovic pointed to the wave of rising prices in Europe caused by the global energy crisis as the main reason for the adoption of the package. Still, the rise of energy costs in Croatia appears much higher than in other countries, especially the West. He did not refer to any possible correlation between prices increases and Croatia’s transitioning into the Eurozone, that is, swapping its kuna currency with the euro in 2023!

According to the government’s plan the increase of electricity costs will be limited to lower the expected price increase. Goods and Services TAX (PDV) on natural gas will be reduced from 23 percent to 5 percent and a subsidy of 1.3-euro cents per kWh will be introduced. The Ministry of Economy will reimburse power suppliers from April 1 until March 31, 2023. There will be PDV tax reduction on many food items or products. Micro, small, and medium entrepreneurs with an average annual consumption of up to 10 GWh are eligible for subsidies. The amount of aid is 2-euro cents. It will be paid through vouchers.

General price rises have been known to occur in countries of the European Union as they approached admission into the Eurozone and the introduction of euro as their official currency. Croatia is set to introduce the euro in 2023 and while the current astronomic rises in energy prices are said to be associated with world energy crisis the increases in all prices may indeed be at least partially due to possible fallout from exchange rate fluctuations between the kuna and the euro; to achieve a softer fall of purchase power so to speak once entering the euro monetary climate.

For Croatia to meet its goal to be admitted into Eurozone in January 2023, it needs a positive assessment by the European Commission in spring 2022 and a subsequent decision by the EU Council in summer 2022.

The Croatian National Bank has been optimistic that Croatia, whose economy relies largely on tourism and services, will meet the EU’s criteria to join. The country relies more than any other EU state on tourists, who generate a fifth of gross domestic product and find holidaying much easier when they needn’t grapple with exchange rates. Meanwhile, most private and corporate bank deposits are held in euros, along with more than two-thirds of debt totalling about 520 billion kuna (US$78 billion). Eurozone membership would lower interest rates, improve credit ratings and make Croatia more attractive to investors, according to central bank Governor Boris Vujcic last month.

Adopting the euro would reportedly formalise a large piece of economic activity that’s already carried out using the common currency — from apartment and car sales to short-term rentals for vacationers. It would trim foreign-exchange costs outside tourism to the tune of about 1.2 billion kuna a year, according to the central bank. Croatia would gain access to European Central Bank liquidity and potential bailout financing from the European Stability Mechanism during periods of crisis.

Inflation is the biggest uncertainty. Europe’s spike in energy costs alongside the Croatian economy’s rebound in 2021 have sent consumer prices surging. Inflation is set to come in at 3.5% in 2022, but what counts is how Croatia stacks up against a one-year average of the three euro-area states with the lowest rates. That calculation will be made once data for April are in.

Due to the recent surge in inflation, Croatia might breach the price stability criterion. However, as the price rises are also observable in the eurozone, the Croatian National Bank argued that Croatia should be considered as fulfilling the criterion, nevertheless.

Croatia’s Central Bureau of Statistics (CBS) released last Thursday Croatian inflation data for the month of January 2022, which went unnoticed due to the horrendous Russian attack on Ukraine, although prices did continue to rise significantly. In January 2022, prices were 5.7 percent higher than in the same month back in 2021.

There are solid indicators that the key cause of rising prices across Croatia is now not only the global energy prices but also transport prices (growth in January +10.8 percent), food and non-alcoholic beverages (+9.4 percent), alcoholic beverages and tobacco (+6.2 percent), furniture, household equipment and household maintenance costs (+5.0 percent) and at restaurants and hotels (+ 4.7 percent).

Whether global energy crisis or not, most Croatians believe the introduction of the euro will have positive consequences for the country, according to a 2021 Eurobarometer poll. However, 70% believe it could and will lead to price increases. Perhaps this is where much of price increases come from during this year that leads to Eurozone for Croatia.  And, by the way, the past year has seen about 13,000 newly poor in Croatia as standard of living continues to drop for many and indications are that multitudes in Croatia will step into the Eurozone with their feet far below the poverty line. Prices growth usually do affect the poorest and Croatia is one of the poorest countries in the EU. Bumping up economic activity, apart from tourism, has been and remains the biggest stumbling block for Croatia, euro, or no euro. Work and employment culture and practices are still heavily founded on corrupt nepotism and largely irresponsible work habits inherited from communist Yugoslavia, where accountability had been the weak point undermining economic and living standard progress. Regretfully. Ina Vukic

Croatia, Corruption, and Serb Ethnic Minority Terror

Prime Minister of Croatia Andrej Plenkovic (Front); Back row from Left to Right: Deputy Prime Minister Boris MIlosevic, Minister for Pension System, Family and Social Policy Josip Alardovic, (former) Minister for Construction and Public Property Darko Horvat (arrested), former minister for Agriculture Tomislav Tolusic

Identifying and processing corruption in Croatia that defined Croatia under communist Yugoslavia as well as all these past thirty years since the secession from communism still yields the impression of governments playing peekaboo or hide and seek game. Whether it be the HDZ (Croatian Democratic Union) or SDP (Social Democratic Party) led government, fighting corruption had not been consistent nor determined. Undoubtedly, the reason for this lies in the fact that many former communists and their family members had indulged in corruption and theft of public goods or the practice of either hiding the crimes of corruption and theft or being heavily involved in it continued. And so, every once in a while, the Croatian government had seemingly gladly permitted the processing by public prosecutor, government attorney, or anti-corruption authority of crimes perpetrated by some current or ex-high-government functionary so as to leave the (false) impression how the government is serious about fighting corruption. However, the office of public prosecutor has evidently never in the past thirty years been independent of government in its activities of pursuing processing of crimes and suspected crimes just as this was the case under the communist party regime in former Yugoslavia.

Everyone will agree that to successfully transition from communism into democracy (or any totalitarian regime for that matter) it is essential to shed habits and behaviours practiced especially by authorities and their collaborators at all levels – local, regional, and national – that were shaped and condoned under the communist regime. Croatia has failed miserably at this, and the failure appears purposeful. Too many people in important or powerful positions or their family members have had, and still have, their fingers stuck in the proverbial cookie jar. Corruption exists in all countries, however, in the developed democracies it does not define a nation and its governments like it does Croatia – still.

On Saturday 19 February, another case of corruption probes surfaced in Croatia when the police began searching the apartment of the government minister for Construction and Public Property Darko Horvat in Donja Dubrava, Zagreb. Furthermore, and at the same time, the police broke into his house in Medjimurje County (North of Zagreb) due to suspicions of his connection with the abuse of power by his former assistant, and now the suspect in crimes of corruption – Ana Mandac. According to Croatian media Horvat is suspected of 2.6 million kuna in illegal incentives. Reportedly Horvat requested funds (non-refundable) from the program ‘Development of small and medium enterprises and crafts in areas inhabited by persons belonging to national minorities’, i.e., to benefit some companies and people who were not entitled to those funds, this time of Serb ethnicity.

Soon after the search of Minister Darko Horvat’s house he was arrested and taken away by the police for further questioning. Almost immediately, Horvat reportedly requested from the Prime Minister Andrej Plenkovic that he be removed from his duties as government minister and Plenkovic did relieve Horvat of his ministerial duties late Saturday afternoon 19th February.

“If someone is arrested, he cannot be a minister, it is clear as day. Especially if he stays there,” Plenkovic said at a press conference in Banski dvori Government Offices convened over Horvat’s arrest and an investigation into several other current and former state officials. Officials, including some ministers…Someone had a motive for this timing to be right now. To me, that timing doesn’t seem neutral. Neither the State Attorney’s Office nor anyone else will overthrow the Government, but this is interesting,” Plenkovic said.

Well, it is evident that the current government in Croatia is all about timing and control of corruption revelation and processing of those crimes. Why else would Prime Minister question the timing of these arrests!? Did he, himself, in fact know of possible corrupt practices but did nothing about them because “it was not the right time”!? Or is Plenkovic so odiously arrogant that he dares to question the timing of arrests for suspected crimes or is he sinking further into a political mudslide that will see him disappear into oblivion of power-hold.

Shady and unsavoury business of politics indeed.

In addition to Horvat, the Croatian mainstream media reports that the police and USKOK (Office for the Prevention of Corruption and Organised Crime) also hold suspicions against the current Minister of Pension System, Family and Social Policy Josip Aladrovic, Deputy Prime Minister Boris Milosevic and former Minister of Agriculture Tomislav Tolusic. Aladrovic is suspected of suspicious employment in the period from 2017 to 2019, when he was the director of the Croatian Pension Insurance Institute. Milosevic and Tolusic are suspected of awarding grants to small and medium-sized enterprises in 2017 and 2018, while Ana Mandac was Horvat’s assistant, and they both allegedly lobbied for Serbian entrepreneurs who had no right of access to these funds.

Whether Prime Minister Andrej Plenkovic reaction to his minister Horvat’s arrest and suspicions of corruption being aired against two of his other ministers and a former one is associated with his fear that his HDZ-led government is experiencing fatal crumbling is not clear. There are strong indications that his, HDZ’s, coalition as minority government with the SDSS (Independent Democratic Serb Party in Croatia) is experiencing continued heavy blows from the public or voter body, including within HDZ party itself. A coalition with Serb minority party would most likely never have been a problem had that Serb party in Croatia been made up of Serbs living in Croatia who fought with Croatians (not against) to defend it from Serb aggression in the 1990’s Homeland War but SDSS is closely and personally associated with the 1990’s rebel Serbs and those Serbs who committed horrendous crimes against Croatia and its people. The fact that, say, a brother or sister or niece of a rebel and murderous Serbs are part of current government coalition in Croatia is simply unthinkable and unacceptable to most people. Besides heavily damaging and thwarting the implementation of Homeland War values such a coalition increases the chances of successful equating of victim with the aggressor. This simply cannot be permitted for a nation that lost rivers of blood in defending itself from Serb and communist Yugoslavia aggression.

Having the above bitter reality in mind, minister Horvat’s arrest pending further investigation into corruption is a heavy blow to both the government and HDZ Party; it may rattle and shatter both to the core. Reported suspicions of influencing government subsidy funding to companies owned by members of Serb minority population in Croatia who had no right even to apply for such funding, the fact that Boris Milosevic. Deputy Prime Minister of Serb minority extraction in parliament, is suspected of favouring certain persons during the awarding of grants from the program “Development of small and medium enterprises and crafts in areas inhabited by members of national minorities” – corruption and nepotism favouring Serbs associated with rebel Serb politics during Serb aggression against Croatia in the 1990’s is enough to make one both ill and angry, as well as bitter. Such outpours of corrupt politics have been known in history to ignite people to (political) arms.

Obviously HDZ as the leading political party in government will need to reinvent its governing strategies and its coalition choices very quickly if it intends on surviving this time. Post minister Horvat’s arrest some opposition parties are calling upon Prime Minister Plenkovic to disband his government and call for new general elections. It is close to mid-term in its government mandate and HDZ constantly continues to experience and/or generate scandals that have the capacity of paralysing the nation into political crises, one after another. These scandals and crises bring about not only possible new elections, shakedown of government coalitions and loyalties but also the likelihood of causing more voter fatigue, which always brings about further reduction of voters turning up at next elections. Of course, the electoral legislation in Croatia needs changes but its current and past panorama has seen an ever-decreasing number of voters turning up to cast their vote. In such a climate some party has and will always win a relative majority, but such lack of voter number strength creates significant illegitimacy of representation within the nation and deeper insecurities for livelihood and living within it. Minorities, including the Serb one in Croatia, simply do not have strong potential of contributing to increasing decisively voter numbers in Croatia. On the other hand, other “right wing” or conservative political milieu has those potential numbers which could strengthen HDZ chances at winning minority government in the next elections. I say this because it is, to the regret of many, still not possible to even imagine the “right wing” or conservative political milieu to win the next government without HDZ being a part in that winning formula, however seemingly leftward HDZ may have drifted. Relatively narrow spans and directions of political activities engaged in by these smaller patriotic political parties on the right are the reason why perhaps they scrape into the parliament with a limited number of seats that, even if joined, could not form a government, not even a minority one. If things will shift away from the current HDZ politics in government, it is essential for HDZ party itself to shift its internal politics towards working with patriotic right-wing parties and not parties that condone Serb aggression and actively engage in any form of equating victim with the aggressor.

Obviously, the Serb minority leadership in Croatia, in coalition with HDZ government is heavily compromised with these new revelations of possible corrupt and criminal activities syphoning government funds to benefit Serbs in Croatia that have no right of access to such government funds. It is a form of sheer and intolerable corruption. One would see it logical for HDZ at this time to recalibrate its weapons of ideological political values and rid itself of the coalition with the SDSS, that is so directly associated with politics against independent Croatia in recent past.

There is no doubt in my mind that HDZ would do well to consider “changing horses midstream” at this time – extinguish its coalition with SDSS and enter a new one from the pool of patriotic political parties represented in the parliament. Otherwise, all that Croatians have to look forward to, for the remainder of this government’s mandate, is more poison being fed into the values of Croatian Homeland War and standard of living generally. The imminent entry into the Eurozone in January 2023 when Croatia plans to swap its kuna currency with the euro will dawn with distressing political crises and thousands more living below the poverty line.

Certainly, the terror over the Croatian nation caused by ethnic minorities having parliamentary representation seats, needs to stop. It is unnatural, it is damaging. Instead of allocating seats in the parliament (where a seat can be earned at elections with merely a few dozen of votes) government departments/offices ensuring ethnic minority rights and services as is the practice in fully functioning democracies should be opened to cater for minority needs. Ina Vukic

Croatia: Discord Between High Places Continues to Undermine Transitioning From Communist To Democratic Mindset

If one concluded from the political events that lead to developments of a cautious, unhappy and angry significantly sized pool of people in Croatia one could easily observe that the thrust of the government’s and the president’s policies include imposition of anarchy and the public’s rolling in discord as well as the continuation of corruption and injustice. Constructive suggestions to various matters are met with antagonism and disapproval as if people and government opposition are incapable o sound decisions and constructive proposals.  

What a terrible, “knee-jerking” week it has been in Croatia again. Confusion, disappointments, anger, sarcasm…disgust! It is difficult to know who is at fault, for what seems to be a perpetual conflict between the Office of the Prime Minister and the Office of the President lasting several years. Prime Minister Andrej Plenkovic was in constant conflict with the former President Kolinda Grabar Kitarovic (and she stemmed from the same political party as he/ HDZ) and is continuing the same with President Zoran Milanovic, who stems originally from SDP/ former League of Communists.

Given that both Plenkovic and Milanovic personally stem from the communist family stock that ruined the country, suffocating it by late 1980’s in astronomical rates and runaway inflation with “Hiroshima”-type of economic devastation largely due to corruption and theft, perhaps this is their way of ensuring that the Croatian people do not enjoy their deserved peace and order and prosperity? These days anything is possible in politics, and neither is clearly steering the country to the common goal of Homeland War values for which rivers of blood were spilled.  

President Zoran Milanovic and Prime Minister Andrej Plenkovic continued with their vile squabbles, public rows, disagreements, and insults against each other on any theme that ruled the days of recent weeks. On the need for Covid-19 vaccination passes (the President is against them), on matters of defence and its Minister and the government’s purchase of used French Rafale fighter planes, on measures taken to control the spread of Covid-19 and its variants, or the measures or lack of them in the fight against corruption …

The HRT TV main news bulletin of Friday 3 December 2021 actually stated that “the system of the Croatian Public Attorney office is falling apart, which is evident when President Milanovic had said that HDZ will not punish the State Attorney Mrs Zlata Hrvoj-Sipek for her activities in trying to save the HDZ’s former Minister Gabrijela Zalac amidst serious allegations of fraud and misappropriation of EU funds (given to her ministry for purchase of computer software) and alleged bank thefts…”   Suffice to say that the Croatian Parliament experienced this week an angry and loud lot in government opposition vying for the sacking of State Attorney Zlata Hrvoj-Sipek. The ruling party, HDZ, though, will not budge it seems and one of the Party’s Vice-Presidents Branko Bacic, a die-hard perpetual politician with morals and honesty reminiscent of morals of a lizard, whose expiry date has long passed for Croatian politics and progress from communism into democracy, appears as the worst offender in protecting that State Attorney in what seems to be a coverup of deep corruption of gigantic proportions when compared to the general public standard of living.   

To clarify the issue here, the European Public Prosecutor’s Office EPPO has recently set up an office in Zagreb, Croatia – a body that will serve as watchdog over how EU funds granted to Croatia are spent. As I mentioned before in several my articles, in a former communist country where the “art” of thieving and corruption has been perfected such a body is essential and it may not be enough in tracking down and acting upon acts of corruption and fraud in Croatia.  Almost on its first day running on Croatian soil EPPO caused on 11 November 2021 the arrest of Croatia’s former Minister for Regional Development and EU Funds, Gabrijela Zalac, pending investigations into founded suspicions of corruption in the form that includes syphoning off via fraudulently blowing up the cost of computer software needed to more than a million euros, which, it is claimed, went into private pockets. This saga continues and how it will end is anyone’s guess.

Former communists have a knack for dragging their feet when it comes to criminal processing of one of their own or of those that follow them. The government is refusing to even discuss the possibility that the State Attorney breached her duties if she protected the former government minister Zalac amidst solid allegations of fraud and corruption. It is becoming evident that the State Attorney, protected by the government operatives, will attempt any which way to tear down EPPO’s case for criminal proceedings against the former government minister Zalac. It is a pity that the parliamentary opposition has not got a sufficiently loud voice in this matter and a successful fight against corruption in Croatia still appears to be in people’s currently helpless hands rather than governments’. As corruption cases emerge more and more one wonders whether there will be a need in Croatia for “Storming of the Bastille” type of a scenario. Poverty is increasing, unemployment shocking (Covid pandemic not factoring into this equation) and intolerance towards the government grows sharper and louder. Confidence for investments from foreign countries spreads ever so bleak and miserably.      

All this is happening while the United Nations expert publicly calls upon Croatia to clean its act and embark on a harder push for justice and better justice system. With former communists occupying both the Prime Ministership and the Presidentship it is, however, truly doubtful that either will make genuinely corrective steps to shape up Croatia’s justice system into a modern democracy where corruption is dealt with swiftly and mercilessly. The general perception is that all persons in powerful positions in Croatia are in each other’s pockets just as they were during the life of communist Yugoslavia. It would be a huge step in the transition from communism to democracy in Croatia if I were to be proven wrong in this.

“It is important that the Government gives an unequivocal sign to society and the international community, of its commitment towards a comprehensive and holistic transitional justice process aimed at addressing past abuses, preventing their recurrence and establishing the foundations of a peaceful and respectful society for all”, said Fabián Salvioli, a human rights expert, UN Special Rapporteur on the promotion of truth, justice, reparation and guarantees of non-recurrence, said in a 2 December 2021 statement at the end of a six-day official visit to Croatia.

While praising the “progress made after the conflict, and particularly during Croatia’s accession process to the European Union”, in prosecuting war criminals, searching for missing persons, and institutional reforms aimed at ensuring the rule of law, democracy and the promotion and protection of human rights, the UN expert observed however, that “progress appears to have stalled in the last seven years”.

The Special Rapporteur flagged rising concerns over “the prospects of effective social reconciliation, particularly as a result of mounting instances of hate speech, glorification of war crimes, and the relativisation of the decisions of the ICTY and national tribunals”.

While noting legislative measures adopted by the Government to curb the extremely worrying trend, Mr. Salvioli also pointed out that implementation was insufficient.

“I urge the relevant police, judicial, legislative and executive authorities to adopt all necessary measures to adequately respond to the raise in radicalisation and hatred expressed in certain sectors of society, to ensure that the steps taken so far towards reconciliation are not irremediably reverted”, he said.

Well, it would certainly seem that Mr Salvioli has a mind to belittle the actual truth as he criticises those who criticise the judgments delivered by the ICTY. He appears to tell us that whatever that International Criminal Tribunal in the Hague had said is the truth and nothing but the truth. That may be in some cases, but it is not so in all. And there is plenty of literature and writeups on that very issue to be had if one bothered to look.

Justice is certainly not seen as having been done in all cases processed by the ICTY and real justice depends on that “seeing”.  

Mr Salvioli talks of radicalisation and hatred expressed in certain sectors of society! What else would a level-headed person expect from a country that had defended itself from a brutal Serb aggression to be brought to the place where it is today where the pro-aggression Serb minority form a part of the government and voice deplorable threats towards Croats, trying to cover up the crimes and aggression committed in Croatia. He recalled that “for a process of transition and reconciliation to be effective” it is vital to acknowledge the suffering and dignity of all victims.

Mr Salvioli and his peers should know that the Croatian people, victims of Serb aggression requiring defending own life and self-preservation, have not had a day of deserved peaceful existence to enjoy their victory over Serb aggression since the war ended completely in 1998. They have had to live their days poisoned by the politics designed to equate the victim with the aggressor. Mr Salvioli and his peers throughout the world need to assess that process and then come out in their efforts to teach nations lessons. If Mr Salvioli of the UN has not done that, and it seems he has not, then he can go and jump in the lake for all his words are worth. Ina Vukic

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