Brexit – Croatia, the War, and the Future

Warning: Eurozone Turbulence Ahead For Croatia

November 1, 2017 by inavukic 22 Comments

Croatia’s Prime Minister
Andrej Plenkovic

According to Prime Minister Andrej Plenkovic’s words on Monday 30 October 2017 at an economic conference devoted to the introduction of the euro in Croatia, Croatia aims to become a Eurozone member within the next seven to eight years.

So now what? Can the madness of Eurozone failure and struggle be stopped from infecting Croatia? The United Kingdom’s 2016 shock referendum vote for Brexit was a warning about the gap between angry voters and pro-immigration, pro-globalisation élites. Globalisation in the eyes of those that voted for Brexit would rather apply to spreading ones country’s interests across the globe than being a part of a melting-pot of countries tied by a union, such as the EU, in which pot some countries suffer while others, particularly the bigger ones, benefit. As Jean-Claude Juncker, the president of the European Commission, has memorably said in 2014 on Eurozone economic policy and democracy, “We all know what to do, but we don’t know how to get re-elected after we’ve done it.” That doesn’t sound like a prediction of radical reform. It’s a dangerous moment for Europe.

In 1992, the European Union made what the Nobel Prize-winning economist Joseph Stiglitz in August of 2016 called “a fatal decision”: the choice “to adopt a single currency, without providing for the institutions that would make it work.” In “The Euro: How a Common Currency Threatens the Future of Europe” (Norton), Stiglitz lucidly and forcefully argues that this was an economic experiment of unprecedented magnitude: “No one had ever tried a monetary union on such a scale, among so many countries that were so disparate.”

When Lehman Brothers collapsed, in September, 2008, and the global financial crisis hit, all Western economies went into recession, but the Eurozone countries suffered the most and for the longest. The U.S. unemployment rate hit ten per cent for a single month in 2009 and is now below five per cent; the Eurozone unemployment rate hit ten per cent around the same time, and it was only in July 2017 that it fell just below that figure while in individual countries there it still lingers in double digits. The Eurozone’s economy is smaller than it was when the crisis hit and many world’s top economy experts, including Stiglitz, the euro is to blame for all this underperformance. But let’s say the euro can’t be blamed for everything economically grim in the Eurozone and if it’s not only the euro then one can safely argue that the economic politics attached to it certainly complete the picture of failure causes. Eurozone takes away the two main monetary tools a country can use to manage its economy. The first is to cut interest rates in order to stimulate demand and the second is to reduce the value of the currency in order to stimulate exports.

In Europe, the first thing that happened after the crisis was that all the bubbles popped. The “peripheral” countries suffered dramatic economic contractions, compounded by bank implosions, and had to appeal for financial assistance to avert complete collapse. To make things even darker, a complex mixture of international politics, economics, and law meant that the body that stepped in to help the crisis economies was a triple-headed entity, the Troika, made up of the European Commission, the European Central Bank, and the International Monetary Fund.

The Troika had strong views about how the afflicted economies should be fixed. They rolled into town demanding austerity, meaning severe cuts to government spending, and structural reform, meaning changes to the way a country’s economy works. They doled out money on the condition that these policies were implemented, and accompanied the package with fancy charts showing how the economy was going to recover after the austerity medicine took effect. It is, if you have a twisted sense of humour, just possible to see the funny side of these bailout-and-austerity packages, especially the ones concerning Greece. The numbers are grim, and the human realities are worse—joblessness, hopelessness, forced emigration, spikes in the suicide rate.

The pendulum swings no differently in Croatia. It has not all this time been a member of the Eurozone, but has since 2013 as member state of EU been affected by the Troika medicine, or should we say – infection.

And now we have Croatia revving to jump into the Eurozone disaster zone! One wonders how much of the revving fuel is contained in a wild notion of romanticising about the saving power of Eurozone amidst current threats of bankrupting Croatia that are unfolding in dealing with “Agrokor” disaster and corruption has been poured into the political plights to save Croatia’s government from falling – yet again!

“We don’t want to specify the exact dates, but we want Croatia to become a euro zone member within two government terms in office,” Plenkovic said during the conference on 30 October 2017, continuing: “We have two key aims – one is to join the Schengen area, or rather be ready for the political decision in 2019, and the other is to join the Eurozone.”

EU members that have not yet adopted the euro are expected to spend at least two years in the Exchange Rate Mechanism (ERM) II, a mechanism aimed to ensure currency stability before joining the eurozone.

Plenkovic’s centre-right HDZ government came to power in 2016, three years after Croatia joined the EU. Croatia is still one of the poorest member states and its economy contracted steadily from 2008 to 2015, with a mild rebound in the last two years. The Croatian central bank already keeps the kuna currency in a narrowly managed float, with minor fluctuations during the year, and steps in to prevent sharp changes by intervening on the local exchange market.

The toughest challenge for Croatia to join the Eurozone will be bringing the public debt level to below 60% of GDP. It is slightly above 80% of GDP now. “Our goal is to reduce the public debt to 72% of GDP by 2020 … We are undertaking a major fiscal consolidation and this year the budget gap will be even lower than last year’s 0.9% of GDP,” Plenkovic said.

Central Bank Governor Boris Vujcic said Croatia was the most “euroised” EU country of those that had not yet adopted the euro (Czech Republic, Poland, Hungary, Croatia, Romania and Bulgaria).

“Some 75% of local deposits and 67% of local debt is denominated in the euro. Some 60% of Croatia’s trade exchange is related to the euro zone, while 70% of tourism receipts comes from the euro zone countries,” Vujcic told the conference.

It is, however, crystal clear that over time the EU has no longer been pursuing the route of a free trade area but it became increasingly politicised, and the idea was to set up a centralised power structure in Brussels to transfer national sovereignty rights on to the supranational decision making structure. Now the EU policy is about interventionism, they try to interfere in all sorts of economic and social fields to push through all kinds of political concepts and that’s a very dangerous idea. This being so, one cannot quietly and compliantly accept Prime Miniser Andrej Plenkovic’s statement from 30 October 2017 in which he said: “We said yes to the Eurozone when we joined the EU. The reason we’re not there yet is that we still have to meet all the criteria and not because we need the political decision.” This only gives muscle to the EU political battle for survival while living standards in Croatia keep plummeting and working-age people keep emigrating in droves. What a mess! It’s a mess that can possibly be sorted to benefit Croatia, rather than the EU, by people political power. If Croatia’s government keeps referring to the EU referendum of 2012 as something Croatian people committed themselves to then the reality and people-legitimacy of that referendum needs to be re-examined. It was, after all, a referendum at which barely 29% of Croatian voters turned out for voting! Ina Vukic

Filed Under: Uncategorized Tagged With: Andrej Plenković, Boris Vujcic, Brexit, Croatia, Croatia to join eurozone, Eurozone, failure of eurozone, Jean-Claude Juncker

Croatia Testing Brexit Waters

July 25, 2017 by inavukic 9 Comments

From Politico – David M. Herszenhorn

Senior Croatian officials, including Prime Minister Andrej Plenkovic, have asked the EU’s top Brexit negotiator to ensure that Croats can live and work in Britain starting next July and thereby benefit from any deal on the rights of EU citizens in the U.K. once it leaves the bloc in 2019.

Unlike citizens from the other 26 remaining EU states, Croats do not have an automatic right to live and work in the U.K. because of temporary restrictions imposed after the Central European state joined the EU in 2013. The restrictions, which currently run until June 30, 2018, can be extended by London for another two years. If that happens, as expected, then Croats would not be able to benefit potentially from Prime Minister Theresa May’s offer of “settled status” in the U.K. after Brexit.

“Rights of citizens is an especially important area for Croatia, bearing in mind our specific position in relation to freedom of movement for workers,” Maja Bogdan, deputy foreign policy adviser to Plenkovic, told POLITICO.

The fate of Croatian workers was a major topic when the EU’s Brexit negotiator, Michel Barnier, visited Zagreb last fall — a visit made famous when he tweeted a photo of himself outside the city’s Museum of Broken Relationships. But the issue has been raised repeatedly in Brexit consultations since then, officials said.

The Croatian démarche, for now limited to diplomatic conversations behind closed doors, is an early signal that specific priorities of individual countries are bound to emerge during the talks — possibly complicating, if not derailing, a deal on the U.K.’s orderly withdrawal. It also suggests that the vaunted cohesion shown so far by the 27 remaining members of the EU may not last.
On paper, Croatia cannot block a deal with the U.K. over the issue, as only a so-called qualified majority of EU countries are required for approval of an agreement, according to Article 50 of the EU treaties.

So far, Zagreb has not threatened anything of the sort, EU and Croatian officials said. But disunity among the 27 could carry a political price for the EU, and may give London an opening to exploit this or other divisions that could bubble up in the next year-plus of negotiations.

Barnier has insisted that any Brexit accord should treat all EU citizens equally. “There must be equal treatment between all EU and U.K. nationals in the U.K.,” Barnier said in a speech in Florence in May,“Inversely, equal treatment between U.K. citizens and the nationals of the 27 member states must also be the rule when U.K. citizens live in those 27 states.”
But Croatian officials, including Plenkovic, have told Barnier that it is impossible to claim such equal treatment unless London agrees to lift the restrictions on Croatian workers, which the U.K. can legally extend until July 2020. That is more than a year after the end of the two-year Article 50 process when Britain is expected to formally leave the bloc.

“In order for our citizens to have the same rights as other EU citizens, it is imperative for the U.K. not to extend the transitional period,” Bogdan said. “That way, our citizens would be able to attain ‘settled status.’”

Natasa Owens, the president of European Movement Croatia, a pro-EU nonprofit group, said that Croatians were at risk of losing out.
“As we were the last country to join the EU before Brexit and as we are still under the restrictions,” Owens said, “we might might find ourselves in the unique and undesirable position of our citizens having a different status than all other member states. We require clarification.”

She added, “While the number of Croatian citizens who work in the U.K. is not significant [about 4,000, according to the U.K. Office for National Statistics], we would want to avoid being in a disadvantageous position.”

Owens said she recognized that Croatia was asking for special consideration. “EU strategy is to negotiate as a block with the U.K. but all members thoughts and concerns are constantly canvassed,” she said.

Under the EU treaties, restrictions on the freedom of movement of citizens of new EU states are permitted for up to seven years if a country anticipates a “serious disturbance” in its labour market.
The U.K. imposed such restrictions on Romania and Bulgaria after they joined the EU in 2007, for the full seven years allowed under the EU treaties. And while London has not signalled its intentions, officials in Brussels and Zagreb said they expected the U.K. would seek to keep the restrictions for Croatia in place as long as possible.
EU rules require the U.K. to notify the Commission if it intends to extend the restrictions on Croatian workers, but officials said Brussels cannot stop London from prolonging the ban.

The EU and the U.K. have each said they want any withdrawal agreement to protect the rights of EU citizens who live in the U.K., and U.K. citizens living in the EU27 — as of the U.K.’s withdrawal date.

Croatia’s position is that an extension of the restrictions to 2020 would effectively turn the temporary measure into a lifetime ban, though the U.K. could adjust its future immigration policy at any time.

European Commission officials said that Barnier and his negotiating team were aware of the importance of the issue to Croatia, but declined to comment further.

“The Commission is well aware of this particular situation,” an official said. “This is something we are also discussing as part of the discussions with the 27 and we will work closely with the Croatian government.”

The first full-round of Brexit negotiations last week ended with the sides still deadlocked on all of the core divorce issues, including citizens’ rights.

Until now, EU officials have tried to limit discussion of individual needs to two particularly unusual cases: the border situation between Ireland and Northern Ireland, and the special status of Gibraltar, an issue of contention between the U.K. and Spain.

But there are numerous other priorities that individual countries could start to push, as negotiators begin to delve into nitty-gritty details, such as the concerns in the Netherlands over protections for dockworkers, or the status of U.K. military bases in Cyprus.

Equal treatment

Ironically, it was the absence of such restrictions on workers after Poland and other Central European states joined the EU during Tony Blair’s government in 2004 that led to a huge influx of immigrant workers into the U.K. Some analysts say the backlash against that wave of immigrants served to galvanize the British movement to leave the EU.
Bogdan, the Croatian foreign policy adviser, said officials in Zagreb had faith that Barnier would uphold the principle of equal treatment for the EU27. “We are confident,” she said.
Ireland, which has by far the most complex issues at stake in the early stage of Brexit negotiations, has expressed support for resolving Croatia’s concerns. Irish officials are eager to maintain unity among the EU27, so as not to endanger efforts to secure a special border regime and safeguards for the Good Friday Agreement, as part of any Brexit accord.

Filed Under: Uncategorized Tagged With: Andrej Plenković, Brexit, Croatia, Michel Bernier, Theresa May, working rights after Brexit

EU, Croatia and Brexit

July 6, 2016 by inavukic 46 Comments

The European Union has seen numerous crises come and go and some staying stubbornly put – e.g. last year’s rejection by many member states to take in EU-stipulated quotas of refugees/migrants, but the 23 June 2016 Brexit vote in the United Kingdom has perhaps forced upon the EU the biggest crisis yet – bigger than was possible to imagine, perhaps? Brexit vote had within days of its results count heralded far-reaching consequences not only for the UK and the EU, but also for the countries seeking EU membership from the Balkans, Turkey etc.

Never before have citizens of an EU member state voted against remaining part of the Union and after more than four decades of its existence the problems of untangling many matters and connections within the EU network of member states are emerging as almost impossible to solve without causing serious damage to one or the other side and to individual people from both sides. By June 2016 UK had grown into and fused with EU flesh and the future of separating that EU flesh appears to entail serious repercussions for all involved.

Prior to Brexit vote the EU has been THE club to join particularly because of UK being its member. UK had been a draw-card for many from Eastern and Southeast Europe to vote “Yes” to EU membership at their own referendums. Arguably, many people from all countries of Eastern Europe and Southeast, such as Croatia in 2013, had held EU membership as an ideal club to aspire to precisely because UK was there, waiting in its desired modernity to embrace them as its own and lobbying for EU expansion. Now that Brexit vote assures UK’s departure from the EU these multitudes of people in these countries are bound to be asking themselves if it was worthwhile for their country to join the EU after all. The repercussions of Brexit vote will remain unclear for many weeks and months to come, as the implications are far reaching. Much will depend on decisions taken by British and EU leaders on a number of issues that will extend beyond the Brexit itself.

The EU, without the UK, is likely to see strengthened campaigns for it to become a union of sovereign states, rather than a federation of nation states that Brussels wants at this stage. Following Eastern European countries’ (e.g. Hungary, Slovakia, Poland…) stance in rejecting the housing of refugees and illegal migrants and in protecting their borders and the ever increasing height of the “national interests” (which by the way was at its highest in Wales and England, in particular, at the time of Brexit vote) suggest that the push for union of sovereign states is about to get heartier in EU.

dr Franjo Tudjman at UN on 22 May 1992

A quarter century after Croatia declared its independence from Yugoslavia, British voters have decided, albeit by a narrow margin, to leave the European Union. Throughout various media outlets in Croatia, Croats are currently pulling out of drawers president Franjo Tudjman’s words, even as far back as 1968 when as scientist and historian he wrote that “the European community in the shape of a union between European states could represent the most advantageous framework for a true revitalisation of the idea of co-existence in today’s world”.

“European politics can only be purposeful if it brings about the creation of such a European community which will have the capacity of free itself from intolerable tutelage under both super powers (USA and USSR) and become an independent actor within the international life. Such a community in Europe can only be achieved as a union of states of independent European nations who would retain their own national quintessence, the right independent socio-political development within their own borders and to sovereignty in international life. The fundamental European politics that aim towards European community joining its European people’s material and intellectual powers into the idea of active co-existence and unity of diversity are the only politics that have real prospects of success,” wrote Franjo Tudjman way back in 1969 and retained these opinions as to the dynamics and make up of the European community/union well into the 1990’s when he championed Croatia’s independence from communist Yugoslavia.

The largest political party, Croatian Democratic Union/HDZ, is currently preparing for its own leadership elections since Tomislav Karamarko resigned as leader last month; and, in the aftermath of the recent fall of government, snap general elections are due mid-September. Croatian political analysts and journalists are already asking the question: which leader of which party is likely to support an EU Federation of Nation States centrally governed from Brussels and which leader is likely to support an EU as Union of Sovereign States.

European Union is currently shaking from the rubbing of two tectonic plates against each other: the Euro-federalist one and the Euro-sovereignty one. Germany’s Angela Merkel and Brussels’ corridors of power are championing the former while the latter is strongly the agenda of Eastern Europe’s countries particularly the Visegrad Group (Czech, Hungary, Poland, Slovakia) to which Croatia has been aspiring for a while, at least since Kolinda Grabar-Kitarovic’s presidency took power in January 2015. Traces of leanings to a union of sovereign states in EU, or leaving the EU if membership means stripping of national sovereignty of state, can also be seen in Austria’s and Greece’s recent speculations as to a possible exit from the EU; Italy’s, Netherland’s and France’s conservatives increasing anti-EU sentiments and so forth…

The likely candidate for Croatia’s HDZ leadership elections in July, EUP Andrej Plenkovic, appears to support the EU Federation option and hence, the Visegrad Group lobby for a union of sovereign states would pose a problem for Croatia and lingering divisions and dissent. One cannot sit on both stools at the same time, as it were. It’s hard to imagine that majority Croats would want the European super state of federation where government is centralised in Brussels and sovereignty of each state erased as seems to be what Plenkovic as HDZ leader might support. It’s been said that such may be the case because EU protects its smaller member states but not all agree with such a view. While attaching oneself to a bigger and wealthier body might provide certain securities it certainly risks losing ones identity or much of it.

The remaining EU 27 members have been seeking a quick resolution, asking the UK to trigger Article 50 of the EU treaty that would manage the process of leaving the EU. However, the British government has been reluctant to trigger this ‘clean’ way out. Indeed with Prime Minister David Cameron resigning, with leaders of the Brexit campaign – Boris Johnson and Nigel Farage – leaving the Brexit train, not only does there seem to be no exit plan but also Brexit supporters are left holding the baby, looking down a “what now” abyss.

This puts the union in a state of uncertainty and Germany seemingly stepping up into the lobby for enlargement role UK played before – as exemplified by Angela Merkel’s swift statement on 4 July 2016 that Serbia may open its EU membership negotiation on Chapters 23 and 24 and that Croatia had agreed to this. Croatia had been stalling Serbia’s progress in opening Chapter 23 for EU membership negotiations with view to several important legal and judicial issues and missing persons matters outstanding from the 1990’s war against Croatia. The fact that these were issues to clear before Serbia is given a green light for Chapter 23 negotiations, and that green light to Serbia has now been given without adequate explanations in public as to what happened with Croatia’s issues, leaves one asking many distressing questions, particularly regarding justice for victims of Serb crimes in Croatia and Bosnia and Herzegovina. A logical and obvious explanation here is that the EU is working very hard to show the world that Brexit will not stop EU enlargement! However, the cost of such moves as opposed to the cost of nurturing the existing EU member states and leaving enlargement for a later time, could well prove to be too high for EU’s ambitions for the creation of a superstate of itself; member states may retaliate against such centralist decision-making as are those demonstrated this week regarding Serbia’s negotiations for EU membership. I mean, every “Tom, Dick and Harry” stood in Croatia’s way to negotiate its membership over many years and now, only three years after it achieved membership, the EU seems to have parked its criteria at an open town-market where EU membership desirous states can barter their way into membership whichever way and with whatever they want. So much for reasonable and needed criteria that guarantees at least some grassroots homogeneity in EU!

Whether Croats will fall into a position from which they’ll be happy to blindly and mutely listen to everything that comes out Brussels is the most burning question now. This week’s events that gave Serbia green light to open negotiations in Chapters 23 and 24 for EU membership have completely omitted to explain to the Croatian public why that is so and what happened with the issues of protests or requirements Croatia had put before the EU in this regard. I do not believe the Croatian public will wear this lightly and will want explanations. The wounds of the 1990’s War of Independence are still very raw, sacrifices made for freedom and sovereignty and self-determination – still felt heavily and deeply. No politician in Croatia is likely to survive for very long if he/she forgets this fact. EU or no EU. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)