Munich Personal RePEc Archive Croatia: Integration Perspectives and Synergic Effects of European Transformation in the Countries Targeted by EU Enlargement and Neighbourhood Policies Economy Boromisa, Ana-Maria and Knezović, Sandro CEU June 2008 Online at https://mpra.ub.uni-muenchen.de/23971/ MPRA Paper No. 23971, posted 21 Jul 2010 06:06 UTC Integration Perspectives and Synergic Effects of European Transformation in the Countries Targeted by EU Enlargement and Neighbourhood Policies Croatia Sandro Knezovic Ana-Maria Boromisa June 2008 CROATIA INTEGRATION PERSPECTIVES AND SYNERGIC EFFECTS OF EUROPEAN TRANSFORM ATION Authors: Sandro Knezovic Ana-M aria Boromisa Edited by Péter Bilek Paper prepared in the framework of the project: „Integration Perspectives and Synergic Effects of European Transformation in the Countries Targeted by EU Enlargement and Neigborhood Policies” November 2008 TABLE OF CONTENTS CHAPTER 1 - THE POLITICAL TRANSFORMATION PROCESS IN CROATIA ............................ 7 Introduction .................................................................................................................................... 8 1.1 The creation of democratic institutions and their functioning ................................................... 11 1.1.1 Difficult path towards independence and democratic state-building .................................... 11 1.1.2 The Croatian democratic tradition and the post-communist political transition.................... 15 1.1.2.1 The first free multi-party elections (1990)..................................................................... 20 1.1.2.2 The period of HDZ domination (1990 - 2000)............................................................... 23 1.1.2.3 Croatia on a new political track (2000 – present)........................................................... 26 1.2 The implementation of the EU’s democratic requirements: Transparency, decision-making processes, the role of civil society actors, minority rights, the rights of the political opposition.... 33 1.2.1 Co-operation with the ICTY............................................................................................... 34 1.2.2 Regional co-operation........................................................................................................ 36 1.2.3 Minority rights................................................................................................................... 42 1.2.4 Religious freedoms ............................................................................................................ 51 1.2.5 Media freedoms ................................................................................................................. 54 1.3 The functioning of the Parliament and parliamentary control ................................................... 55 1.3.1 The evolution of the parliamentary practice in Croatia........................................................ 55 1.3.2 The New Constitutional Arrangement ................................................................................ 58 1.3.2.1 Parliamentary committees............................................................................................. 58 1.3.2.2 Other forms of parliamentary control over the activities of the government ................... 60 1.4 The restructuring of the political power relations (confrontations and consensus-building)....... 63 1.4.1 Political power relations in the former Yugoslavia ............................................................. 63 1.4.2 Political power relations during the 1990s .......................................................................... 65 1.4.3 The era of coalitions (2000 – present)................................................................................. 67 1.5 The changes of the political pParty-preferences, the struggle for power, and political populism72 1.5.1 The background of political preferences during the 1990s .................................................. 72 1.5.2 Conformity with the EU 27 public opinion on the main trends in contemporary societies ... 76 1.5.2.1 Attitude towards the EU*.............................................................................................. 76 1.5.2.2 Attitude towards membership in the EU*...................................................................... 77 1.5.2.3 The perception of the potential benefits from the EU membership................................. 77 1.5.2.4 Attitude towards the future of the EU............................................................................ 78 1.6 Conclusions ............................................................................................................................ 78 References to Chapter 1 ................................................................................................................ 82 CHAPTER 2 - ECONOMIC DEVELOPMENTS ............................................................................... 84 2.1 The economic history of the transition between 1990-2006...................................................... 85 2.1.1 Macroeconomic aspects: The development of the main indicators ...................................... 85 2.1.2 Transformation and privatisation........................................................................................ 87 2.1.3 Liberalisation and economic integration............................................................................. 88 2.1.4 Developments of the monetary and fiscal policy................................................................. 89 2.1.5 Main economic challenges ................................................................................................. 90 2.1.6 Development in a broader sense......................................................................................... 91 2.2 Macroeconomic aspects........................................................................................................... 93 2.2.1 Economic growth............................................................................................................... 93 2.2.2 Prices and monetary conditions.......................................................................................... 97 2.2.2.1 Inflation and interest rates............................................................................................. 97 2.2.2.2 Exchange rate............................................................................................................. 100 2.2.2.3 Ratings ....................................................................................................................... 103 2.2.3 Fiscal conditions .............................................................................................................. 105 2.2.3.1 The development of public debt.................................................................................. 108 2.2.4 Trade developments ......................................................................................................... 111 2.2.5 Factors affecting trade and current account developments ................................................ 117 2.2.6 External assistance........................................................................................................... 117 2.2.6.1 Remittances................................................................................................................ 117 2.2.6.2 Foreign aids and loans ................................................................................................ 118 2.2.6.3 Relations with the main international financial institutions.......................................... 119 2.2.7 Foreign direct investment................................................................................................. 121 2.2.8 Labour market developments ........................................................................................... 124 2.2.8.1 Labour market regulation............................................................................................ 124 2.2.8.2 Demographic composition and activity rate ................................................................ 125 2.2.8.3 The development of employment................................................................................ 126 2.2.8.4 Unemployment........................................................................................................... 128 2.3 Structural developments ........................................................................................................ 131 2.3.1 Monetary policy............................................................................................................... 131 2.3.1.1 Inflation factors and disinflation ................................................................................. 131 2.3.1.2 Exchange rate regime ................................................................................................. 132 2.3.1.3 Monetary regime ........................................................................................................ 134 2.3.1.4 Central bank regulations ............................................................................................. 136 2.3.2 Fiscal policy .................................................................................................................... 137 2.3.2.1 The tax system............................................................................................................ 137 2.3.2.2 The welfare system and funding