Croatian economy – Croatia, the War, and the Future

Schengen Zone and Euro For Croatia

January 14, 2023 by inavukic 13 Comments

It is done! As anticipated in my article dated 5 November 2022 it’s a double windfall or double whammy, depending on your vantage point on the matter! The start of this year brought very big changes for Croatia. To pro-European Union political elites and to quite a few Croat ones the entry into the single currency among 20 other countries and the entry into free travel, no borders zone among 27 other countries are considered a major landmark in Croatia’s modern history. For others it is taken with a pinch of salt and lots of distrust.

Certainly, at the time of Dr Franjo Tudjman’s speech at the inauguration of Croatian Parliament 30 May 1990 the European Commission (EC) was very young within the so-called European Community, EU as we know it was to be founded later, and the euro not even on the horizon of the EC but Tudjman had put Europeanisation of independent Croatia as one of Croatia’s major goals in its planned exit from communist Yugoslavia. What a paralysing tragedy for Croats who fought for independence from communism to know that the European Union Parliament had over a decade ago condemned all totalitarian regimes, including communism, and the Croatian governments since his death in late 1999 not only have not in effect condemned communism but in practice glorify it more and more including its mass murderer Josip Broz Tito!

Schengen Zone and the Euro – a perfect match??

January 1, 2023, marked Croatia’s shedding of its kuna currency and the shedding of its sovereign borders in favour of the euro and Schengen Zone. Some say this is a great thing for Croatia, some say it spells a catastrophe for self-determination and a thousand-year proud identity. It is, however, most disappointing that Prime Minister Andrej Plenkovic did not in any way, shape or form express the country’s gratitude to all (not just HDZ Party ones) Croatian Homeland War veterans and activists who fought for Croatia in 1990’s, its exit from communist Yugoslavia, its self-determination, paving the way for its European existence with blood, sweat and tears. Andrej Plenkovic’s government continues its coalition with the Serb political minority that was either through direct family lines or political allegiance part of the aggression against Croatia in 1990’s; his government almost does not even acknowledge the part of Serb minority in Croatia that fought shoulder to shoulder with Croats to defend Croatia amidst the brutal Serb and Yugoslav Army aggression.

Asked recently about the implications of open borders with Croatia’s neighbours, Plenkovic said: “People are really thrilled that there are no more border controls on the crossings between Croatia and Slovenia; between Croatia and Hungary. Seventy-three border crossings are now police-free and customs-free. That means people going freely to the west or to the north of Europe. It means less costs, and more tourists coming to Croatia. 82 percent of overnight tourist stays in Croatia are made by people who come from the Schengen area. So this is going to be a huge economic benefit for us.”

Prime Minister Plenkovic and all his government ministers scandalously omitted to mention the rivers of Croatian blood sacrificed by all not just members of his political Party HDZ and the unprecedented harnessing of the Croatian patriotic diaspora in achieving the goal of Europeanisation of Croatia that was so critical from the start of Croatian independence movement from communist Yugoslavia in 1989/1990.

Plenkovic said: “We have no reason to be afraid to say that we are from the HDZ Party, we should be proud, satisfied and happy. Being a member of HDZ means being part of the politics of the party of direction, leadership, achievements, those who made the greatest contribution to an independent, free and internationally recognised Croatia, those who made an immeasurable contribution to the defence against Great Serbian aggression in the Homeland War, those who made a huge contribution the development of Croatian institutions, those who have contributed to the development of democracy, the improvement of the economy, Croatia’s membership in NATO, the European Union, the euro area, the Schengen area…”. Plenkovic did not say that his HDZ Party of today is a mere shadow of what it was when Croats fought for independence, when Croats needed to defend their bare lives from Serb aggression. Independence was a national matter then and Schengen and euro are now – they are not political party matters because they encompass all Croats.

Most activists and fighters have left the Party during the past three decades mostly out of disappointment with the Party’s growing pro-communist Yugoslavia mindset. But hey, 2024 is an election year and Plenkovic is not likely to say anything that would reduce the Party’s chances for re-election.

They omitted to quote relevant parts of Dr Franjo Tudjman’s, First President of modern Croatia, speech at the 30 May 1990, inauguration of Croatian Parliament that afterwards suffered terrible consequences of the genocidal Serb aggression. Franjo Tudjman among many other things said: “… allow me to endeavour and put forward, in the briefest of points, some of the most urgent and immediate tasks that stand before the new democratic government of Croatia…Inclusion into Europe and Europeanisation of Croatia. Simultaneous with democratic transformation we need to undertake all necessary steps for Croatia to be included into the European Union as soon as possible. For centuries, Croatia has been a constituent part of the Western European (Mediterranean and Central-European) culture. Even when it did not have a full political state subject status, Croatia was inseparably connected to the Western European civilisation. The contribution to European life several centuries ago as well as through later history by Croatian Latinists bears loud witness to that fact. The return to that cultural tradition must be multilayered. In European integration Croatia must secure its independence and faster progress…”.

Judging from all said from the Croatian government side during the past two weeks regarding the matter of entry into Schengen and adopting the euro one finds it difficult to avoid the ominous and painful feeling that Prime Minister Plenkovic is peddling the idea that his government, his HDZ Party, are singlehandedly responsible for and should be accredited with Croatia’s entry into the Schengen Zone and the adoption of the euro. Yet, he himself and most of his government ministers had avoided fighting to defend Croatia from Serb aggression, avoided fighting to realise the Croatian dream Franjo Tudjman was voicing in parliament on 30 May 1990, most likely covertly if not overtly vying for communist Yugoslavia to survive the 94% Croatian vote to secede, to leave Yugoslavia and turn freely towards Europe as sovereign country. One finds it difficult also to avoid the feeling that this is so to enable further pandering to the 1990’s rebel Serb associates in his government’s coalition, who fought against such a path for Croatia and killed and ethnically cleansed Croats mercilessly in the effort to try and stop Croatian independence.

Travel the Schengen Zone – carefree

All said above the fact remains that being within the Schengen Zone and being a citizen of Croatia, even with dual citizenship, the gates within the zone are wide open, care free, and easy – for travel to or from any of its country members, to live and work. Third country nationals, carrying a non-Schengen country passport, who have not needed a visa to enter Schengen countries will be able to stay for 90 days and for longer stays visas are required. Border and customs checks will be removed at the borders between Croatia and other Schengen member states for people crossing the borders by road, rail or water. Checks at internal air borders will be lifted from 26 March due to the International Air Transport Association’s (IATA) summer/winter schedule. That is a good thing especially for younger generations as it gives them more opportunities to succeed in life.

With the euro, economy in Croatia has no immediate fix

As for economic advantages of Schengen Zone Plenkovic is talking about for Croatia the jury is likely to be out for quite some time in delivering a verdict. Only days into the euro Croatia is faced with unjustified price rises in food, petrol and energy. So much so that the government is setting up a price watchdog with plan to implement sanctions against all those who increase prices of goods and services, disrespecting relevant legislation. Croatian production, for instance, would need to significantly increased in order to benefit from possible easy cross-border trade (the old fashioned export concept). For the time being Croatia’s production of goods has no capacity to benefit from easy cross-border trade because it hasn’t got much to trade with; its agriculture, fishing etc have been severely curbed by European Union quotas since it became member of the EU in 2013. Contrary to what the government is saying it seems that planting into the national mind that Croatia will become rich because it is in Schengen will certainly not become a reality. A country does not become a wealthy country just because it keeps company with rich countries within Schengen! Much needs to change in Croatia’s labour market and productivity before Croatia sees real advantages of this new big market it is a part of; nepotism and corruption must go, at least to high degrees, if Croatia will succeed in this field.

While favouring being a part of the Schengen Zone Croatians have and are exhibiting mixed sentiments towards adopting the euro. According to last year’s European Commission survey only 55 percent of Croatians are in favour of the euro, while others fear a potentially increased cost of living; 80% in fact thought price hikes that will accompany the use of euro in Croatia would put a stress on living that will be difficult to bear.

„We tasked the State Inspectorate, the Tax and Customs Administration to monitor prices on the ground. The goal is to identify those who unjustifiably raised prices. Fines are foreseen for that…Part of businesses have unjustifiably raised the prices. If we observe a further violation of the Government’s regulations, we have a number of mechanisms, from the return of prices to levels prior to introducing the euro to the cancellation of subsidies. I would like to remind you about the subsidised prices of energy for economic entities and more than 1 billion Croatian kuna in subsidies. All competent services receive a large number of complaints from citizens, who we invite to continue sending their complaints about unjustified price increases. We continuously strive to reduce the inflation rate, it is important to avoid irresponsible price increases, which directly reduce purchase power and citizens’ living standard. Businessmen’s responsibility and social solidarity are elements that cannot be bypassed,“ said Croatia’s Prime Minister Plenkovic Friday 13 January in response to the price hikes and chaos occurring.

More than 30 percent of shops and service providers in Croatia have raised prices unjustifiably, some up to 43 percent in the lead up to and transition into euro. This gives a most concerning picture as to how poorer the life of ordinary Croats and pensioners may become. Quite soon! Ina Vukic

Filed Under: Uncategorized Tagged With: Andrej PLenkovic, Croatia, Croatia part of Schengen Zone, Croatian economy, Croatian Homeland War, Croatian kuna, Croatian war of independence, Euro, Franjo Tudjman, HRK, New currency in Croatia, Schengen Zone

Zeljko Glasnovic – Launching Real Croatian Economy Changes Campaign

December 17, 2017 by inavukic 18 Comments

Zeljko Glasnovic
Member of Croatian Parliament for the Croatian Diaspora
Pakovo Village, Drnis region ,Croatia
Photo: Screenshot

Saturday 16 December 2017, Member of Croatian Parliament for the Croatian diaspora, has launched a campaign evidently with a view to accelerating changes needed for a robust economic growth in Croatia, which process, according to this campaign, needs to bring in real changes in legislation and economic stimuli that favour increased productivity and investments (particularly from the Croatian diaspora) and hence, creation of new jobs. While the video released for the campaign (see below) is in the Croatian language these are the words spoken in it by Glasnovic, translated into the English language:

“Here we are in the Drnis region, on a family agricultural enterprise and we are with people who work every day. They’ve preserved the Croatian tradition and they need stimulus, state tax reliefs … also, they need simple laws, transparency and security for their investments…Communism has destroyed not only the souls and the intellect of people but also the agriculture. Today, in Croatia, we have half a million hectares of uncultivated agricultural land and that is an embarrassment, We have all the potentials needed to work at what needs to be done, to move forward, but, unfortunately, the socialist bureaucracy inhibits us … The time has come for us to take advantage of the whole of the global potential of Croatia – Croatian diaspora, the homeland and Croats of Bosnia and Herzegovina. The rule of law needs to be established. Someone needs to start governing by decree and above all leadership and courage are needed; that have been missing from Croatian politics up till now.

Launching the campaign on his Facebook page also, Glasnovic writes:

”It is time to move away from the hollows of the Balkans, it is time to create a functional state. Instead of being Singapore of Southeast Europe, the state has been transformed into a country resembling the bad social experiment called SFRY (Socialist Federative Republic of Yugoslavia). Same people, with same mentality lead the country. The transition of society from socialism into a modern society was stopped because of war, and after the war a partial transition of part of state administration was carried out. The pension, health and school systems remained in the socialist framework (“cost-free”). Freedom of the labour market has remained within a socialist framework of political prerequisites (obedience) because of the public servants within those sectors. There can be no democracy and free society. We are in a semi-socialism – Croslavia. God and Croats”

Campaign video:

Reflecting on the above it needs to be said that Croatia has so far failed to implement seemingly forever urgently necessary structural reforms (which undoubtedly depend on tailored to market needs legislation) that could boost its competitiveness and growth potential. An obstructive bureaucracy, cumbersome legislation, and rigid labour markets undermine the country’s business climate. The habits and mindset of the former communist come socialist regime has meant that procedures as well as paraphernalia of doing business inherent to those failed regimes is still poisoning real progress. In spite of ongoing deleveraging efforts by companies and households, largely foreign currency denominated debt levels remain elevated, depressing domestic demand and exposing the private sector to refinancing risks. Public debt dynamics remain worrisome, as the government after government failed to rein in budget deficits. Absent successful structural reforms, which would improve the competitiveness of Croatia’s private sector, growth is therefore likely to remain modest at best and insufficient to stop the exodus of people looking for work elsewhere around the world.

Croatia’s governments have in the past two decades, at least, pledged to boost the investment climate and yet nothing much has really changed. Legal uncertainties and administrative burdens continue to deter foreign firms from pouring in money; continue to deter its very own diaspora from pouring money in as well. It is beyond a shred of a doubt that the problem lies in the fear of being swallowed and stifled by the communist mindset instilled in much of the public administration. It is beyond a shred of a doubt that successive governments in Croatia over the past two decades have not addressed this fear objectively nor embarked on uprooting it with view to opening up impediment-free the foreign investment pathway.

Croatian business and economic environment suffers from legal uncertainty and frequent changes of the regulatory framework an investor is faced with, foe example. Despite the several reforms which have eased the pressure on businesses, the tax take is still high, while many non-taxation fees bring an additional burden, and stimulus to business growth and maintenance is in many cases inadequate or nonexistence. Croatia’s business growth will remain meagre and inconsequential unless business-friendly changes, to which pivotal ones Glasnovic’s campaign refers, are swiftly ushered, with no mercy to those who occupy the relevant public administration and service positions with their stubborn business unfriendly customer approaches as well as to hostile to healthy business growth processes and procedures. Ina Vukic

Filed Under: Uncategorized Tagged With: Croatia, Croatian economy, integritas, Investing in Croatia, legislative changes stimulating business growth, Pakovo selo, Zeljko Glasnovic

Croatia: HDZ Sets Entrepreneurial Tone For Reforms To Drive Economy

July 1, 2015 by inavukic 6 Comments

Tomislav Karamarko
Leader of HDZ/Croatian Democratic Union

Croatia’s largest political party in opposition – HDZ (Croatian Democratic Union) – had Monday 29 June released its platform or program for economic recovery (employment growth and investments …) and that, in itself, one could say is nothing special – we’ve seen it all before, especially during pre-election times and Croatia is heading for elections either end of this year or early 2016.

However, although all details have not been presented at this time, this particular initiative by HDZ contains the contours of very promising elements, placed at the helm of the program, that could noticeably revive the sluggish, dying economy to a buzzing atmosphere of doing business in Croatia. In particular, propping up and supporting small and medium size business, as a priority, through new avenues of financial subsidies and sources, and de-institutionalising and reforming public administration and government front-line services – making them more user-friendly – are two elements that stand out as promising! While the current Social Democrat led government had in its election campaign of 2011 relied on the so-called Plan 21, which contained some of the elements of HDZ’s economic platform, it would seem that HDZ’s platform has a better chance of achieving real outcomes as goals are more focused and better defined while the similar goals put out by Social Democrats were in fact too generalised and lost among too many goals and aims.

Current Croatian Government’s
Failed Plan Of Economic Recovery And
Public Structure Reforms

When the Social Democrat led, Zoran Milanovic government came to power in December 2011, it held a fairly progressive, albeit too wide to my thinking, policy aim to rekindle economic growth and create a more equal society. For this, a vibrant investment program was to be created to raise capacity and improve productivity, as well as some redistribution to the lower wage earners that would boost consumption and demand. But the government went about achieving fiscal consolidation as a priority (sacked its finance minister Slavko Linic, mid-stream, who preferred structural reforms to fiscal consolidation) and most of the economic growth goals fell by wayside and weren’t getting picked up by anyone, not in any sense that would produce noticeable results. Hence, in the atmosphere of persistent recession, this approach added to increasing loss of production capacity particularly through company winding downs or bankruptcies. The danger of continuing with the current government’s policy in that the resulting lower level of output and productivity engendered by the long recession coupled with an incompetent government may become a permanent feature of the Croatian economy and Croatia will never get on stable and solid feet economically.

The bright point in HDZ’s newly released economic platform, which gives priority to stimulating small and medium business growth, is that such a path can not only preserve the existing capacity to produce but also cause growth in production capacity which, in turn, would respond positively to a path of resumption of economic growth in Croatia and the EU. Zoran Milanovic’s government simply did not offer adequate attention to developing the small and medium business sector but let that idea slide. Perhaps because that is not in the left-wing ideology or belief (?).

Small and medium business enterprises are seen as agents that stimulate domestic demand through job creation, innovation, and competition, which makes them a driving force behind a resilient national economy. Access to finance is a critical factor in the development of small and medium business enterprises upon which a country’s economy relies. HDZ seems to have recognised this challenge and in their economic platform address new sources of financial stimulation and support for small and medium business, including smart and invigorated path in the usage of available EU funds.

Overall, the current centre-left government has had a dismal record in managing the Croatian economy, which has continued to drag in recession for over six years, far longer than most European countries. One would have thought that the recession itself would have been motive enough to get up and work harder at bettering the Croatian economy – but this did not seem to be the case with the government in Croatia. So, the picture we have now is this: an increasing number of young people are neither in education, employment nor training, leaving Croatia in search of work, while the proportion of people at risk of poverty and social exclusion has increased to levels significantly above the EU average. During the last six to seven years Croatia has lost above 13 per cent of its gross domestic product. Unemployment is above 17 per cent of the workforce, and among young people the rate is close to 50 per cent.

This is a social disaster enveloped in an inefficient public sector that keeps people in jobs that serve no obvious public purpose beyond disguising true levels of unemployment. Not much different to what it used to be under former Yugoslavia – multitudes of jobs without real purpose, without real productivity, without earning the wage through sales of products produced. This is a problem that is magnified by a severe shortage of private sector companies capable of creating jobs by competing successfully in EU markets.

The objective of the economic program of the Croatian Democratic Union (HDZ) is to launch employment, instigate a serious economic growth and deal with everyday problems Croatians are faced with. According to HDZ the backing for this enviably bold platform includes new investments and new finance sources for entrepreneurs. The German Munich-based IFO Institute was reportedly engaged by HDZ to contribute in the drawing up of the program.
“If we win government, our tax policy will be directed towards stimulating small and medium business, that is, stimulating the creation of new jobs,” said Tomislav Karamarko, leader of HDZ.

HDZ thinks, it seems, similarly to Carlos Pinerua, head of the World Bank’s office in Zagreb, who recently said that the main problem was the poor business environment, stifled by frequently changing regulations and red tape, particularly on the local level, which made it difficult to set up businesses.

“Such an unfavourable climate especially hurts small- and medium-sized enterprises and they should become the main growth and employment driver,” Pinerua said.

It’s blatantly clear that the Social Democrat led, centre-left, government lacks the energy, desire, ideology, self-belief and self-confidence to carry out essential reforms such as shaking up the state-owned sector in such a way that it becomes the true servant of the public, propelling a strong injection of opportunities for the development and establishment of private sector small to medium businesses and making business conditions attractive for foreign investors. Privatisation programs are going nowhere and suffer terrible history of corruption, which breeds increasing distrust and unrest among the working people. The conservative opposition, HDZ, had been in government before, just like the Social Democrat, centre-left, had been and each have and will blame the other for any and every economic woe that comes our way. But one and only one thing is for certain: it is most strongly in the conservative blood that driving private business and entrepreneurship runs, not in the left wings of economic politics. Hence, if it raises its front-lines with more truly professional and experienced managers and public administrators and ditches the “I-know-everything-and-I-know-best” personalities (more often than not inherited from the old communist-socialist power-wielding Yugoslav atmosphere) from its establishment, HDZ may yet deliver the breath of fresh air that Croatian business environment so badly needs. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)