OswcOMMentary issue 48 | 29.02.2011 | ceNTRe fOR eAsTeRN sTudies Croatia: accession negotiations with the EU overshadowed by parliamentary elections NTARy Me Marta Szpala ces cOM In 2011 Croatia entered the final stage of its accession negotiations with the EU. The completion of these negotiations will probably coincide with the parliamentary elections which should be held in November or December tudies this year. The elections are likely to bring about a change of government, s as public support for Jadranka Kosor's cabinet and her party, the Croatian Democratic Union (HDZ) has been declining; the left-wing opposition is astern likely to take power. Therefore, the government’s main goal is to complete e the accession negotiations in the first half of the year, in order to sign the accession treaty and hold the EU membership referendum before the par- liamentary elections. The HDZ believes that only the successful completion entre for c of the accession negotiations could increase its chances of a good result in the upcoming elections. At the same time, fearing a further fall in support, the government will avoid any decisions and reforms that would be contro- versial for the public, especially in the sphere of the economy; such deci- NTARy sions could also increase Euroscepticism among the Croatian public, and Me result in the rejection of EU accession in the referendum. The government in Zagreb hopes that the currently implemented anti-corruption strategy and reform of the judiciary, as well as the advanced process of adaptation ces cOM to EU conditions, will be enough to complete the negotiations. This strat- egy has a serious chance of success, considering that there is considerable support for Croatia's membership among the EU countries and institutions. tudies Another reason is that further prolongation of the negotiations could ag- s gravate hostility towards the EU among the Croatian public, and would be a bad sign for other Balkan states with membership aspirations. However, astern subordinating Croatian policies to the completion of negotiations in the first e half of the year could prove to be adverse for Croatia itself in the longer term, as it would put off the necessary structural reforms. entre for c Internal factors Jadranka Kosor's cabinet enjoys modest public support (about 24.1%1) because of the per- 1 http://www.tportal. NTARy hr/vijesti/hrvat- sistently bad economic situation and serious corruption allegations against members of the ska/94833/Kosorici- Me HDZ, the ruling coalition’s main party. Moreover, the government is weakened by internal na-vlada-nepopular- conflicts within the HDZ. Due to its weak position, the government has limited capacity to nija-od-Sanaderove. html OSW.WAW.PL ces cOM 1 Osw cOMMentary issue 48 | 21.02.2011 | ceNTRe fOR eAsTeRN sTudies implement radical reforms; moreover, the opposition is seeking to undermine the demo- cratic legitimacy of the cabinet and to hold early elections. The main factor undermining support for Kosor's cabinet is the bad economic situation and Croatia's slow recovery from recession. So far, the government has pursued a conservative policy and avoided taking radical economic reforms in the face of the global economic crisis. The cabinet assumed that the situation on global markets would get better soon, which was supposed to return Croatia to the path of economic growth. This strategy has proved to be ineffective. On the contrary, Croatia is currently one of the region’s few countries which has noted a renewed decline in GDP in 2010 (it fell by 5.8% in 2009, and 1.5% in 2010). This has also triggered a significant rise in unemployment, from 9.7% in 2009 to 18.2% in December 2010. Neither has the Croatian government taken any steps to consolidate public finance, such as reducing the extremely high expenditure on the extensive state sector, or introducing reforms to the health care and welfare benefits system. To decrease the budget deficit, the govern- ment has confined itself to increasing VAT and introducing the so-called crisis tax on per- sonal income (under public pressure it soon withdrew from the latter decision). This did not significantly improve the budget balance, and was followed by Standard and Poor lowering Croatia's credit rating to BBB- level in December 2010. Other problems that make it more difficult to overcome the economic crisis are the unfavourable investment climate, Jadranka Kosor's cabinet enjoys modest public support because numerous barriers to doing business, and sizeable para-fiscal charges for entre- of the persistently bad economic situa- preneurs. These factors have accelerated tion and serious corruption allegations the decline in foreign investments during against members of the HDZ, the crisis2, and are currently discouraging 2 In 2009, the value of foreign di- rect investments fell by 55.2% the ruling coalition’s main party. new investors. compared to 2008, and totalled The government's position is also affected €1.87 billion; by the anti-corruption campaign initiated in 2009 under pressure from the EU, which re- http://daily.tportal.hr/63031/ FDI-in-Croatia-reduced- sulted in the arrests of many HDZ members in late 2010, including Ivo Sanader, the long- by-55-2-to-EUR-1-87-billion- standing chairman of the party and Prime Minister in 2003-2009, the ministers of economy in-2009.html and defence in his government, and the party’s treasurer. Also, arrests were made among people linked to the party who had sat on supervisory boards and the boards of directors of major state-owned companies. This has shaken public support for the government, which 3 According to the Gallup Balkan 3 is widely regarded as corrupt . Monitor survey conducted The numerous arrests are supposed to demonstrate that the government is fighting corrup- in June/July 2010, 89% tion at the highest level. It cannot be ruled out that the ongoing investigation and testimony of respondents consider the government to be corrupt. by the former Prime Minister will result in extending the circle of suspects to other members Gallup Balkan Monitor. of the government. These actions may even shake the position of Prime Minister Kosor, ‘Insights and Perceptions: Voices of the Balkans’; who was a close associate of Sanader and a minister in his cabinet for years. On the other www.balkan-monitor.eu hand, there are suppositions that the campaign carried out by Prime Minister Kosor is an instrument of political struggle, aimed at eliminating people associated with the former PM from the HDZ and the government, and as a result, at strengthening her control over the party. Apart from a few cases, the spectacular arrests have not led to specific people being charged. Moreover, no investigations have been initiated against certain other members of the government whom the media accuse of corruption. This gives rise to doubts whether the government is determined enough to break the ties of corruption, or whether it is only simulating such activity in order to eliminate its political adversaries, while at the same convincing the EU that Croatia is making active efforts to fight corruption. OSW.WAW.PL 2 Osw cOMMentary issue 48 | 21.02.2011 | ceNTRe fOR eAsTeRN sTudies The government’s failures and mistakes are being efficiently exploited and publicised by the opposition, who themselves are being supported by President Ivo Josipović, the most popular politician in Croatia. For over a year, the opposition parties have demanded the resignation of the government and early elections. So far these demands have been merely a political game, as taking power would oblige them to confront the bad economic situation and the problems in the accession negotiations. However, if – as the government expects – the recovery of the global economy improves the economic situation in Croatia and the accession negotiations head for rapid completion, the opposition will make intensive efforts to remove the government and hold early elections. The coalition of left-wing parties, led by Zoran Milanović, currently includes the Social Democratic Party, the Istrian Democratic Assembly, the Croatian People's Party, and the Croatian Party of Pensioners. At the mo- ment it enjoys the support of 43.7% of voters, while support for the ruling coalition is cur- rently standing at 27.8%. However, the left-wing coalition is afraid that the ruling party may take advantage of the successful completion of the negotiations and the improvement of the economic situation. They would thus The government’s failures and mistakes prefer the government to collapse before are being efficiently exploited by the its term is out. It can be expected that left-wing opposition, which is currently the opposition will publicise all the gov- supported by 43.7% of voters. ernment’s failures and the corruption al- legations against its members. However, the left-wing parties are con- Considering the escalating criticism of the cerned that the ruling party will take government and its falling popular support, advantage of the success related to Prime Minister Kosor decided to reshuf- the completion of negotiations and the fle her government in December 2010. improvement of the economic situation. The ministers of finance and construction were dismissed and a Ministry for Invest- ments was created. These decisions were supposed to improve the government's image, while the nomination of professionals respected in the business community to ministerial posts associated with the economy was intended to demonstrate that the government is determined to overcome the consequences of the crisis. However, these actions have not yielded the expected results, and the cabinet's economic policy is still receiving criticism from the public. No radical change in the government's economic policy should be expected in the pre- -election period.