Croatia Signs EU Accession Treaty to Be Bloc’s 28th Member

Croatia clinched an agreement to become the 28th member of the European Union in 18 months as the world’s largest trading bloc expands further into the Balkans region.

Croatian President Ivo Josipovic and Premier Jadranka Kosorsigned the treaty in Brussels today with leaders including EU President Herman van Rompuy, German Chancellor Angela Merkel and European Commission President Jose Barroso.

The ceremony caps a six-year effort to follow Slovenia, a former Yugoslav federal partner, into the EU and puts Croatia closer to full integration two decades after the region was engulfed in a civil war. Western investors including Germany’s Siemens AG and Sweden’s Ericsson AB count on expansion into the Balkans as EU growth stalls over the sovereign debt crisis.

“It is a day of joy for Croatia, a day of joy for the EU as a whole,” van Rompuy said. “Croatian achievements show everyone in the region that with hard work, persistence and courage, membership in the EU is within the reach.”

Membership, which will provide Croatia with hundreds of millions of euros in EU regional development subsidies, needs to be approved by a popular referendum, which will probably be held in February. The next step is ratification by all EU countries. A single veto could derail membership.

‘Crowning Achievement’

EU entry is a “crowning achievement” for Croatia, said Kosor and she is “very optimistic” the referendum will pass.

The nation got the final nod as Montenegro, another former Yugoslav republic, was told it will start entry negotiations in June. At the same time, Serbia’s application for official candidacy status was delayed until March because of concerns the government hasn’t done enough to quell violence in Kosovo from local Serbs living in the breakaway province.

“Croatia had to overcome war to join the European Union, and that is not only a Croatian triumph, but the triumph of European peacemaking,” Croatian President Ivo Josipovic said.

Croatia, which is scheduled to join on July 1, 2013, concluded the talks in June after almost six years of negotiations. Van Rompuy said the commission will continue to monitor Croatia’s progress in making reforms.

Accession is “the proof of the transformative power of our policies,” said Barroso. Croatia has met the strict conditions of the enlargement process and is today a “very different country” from the one that applied for accession 10 years ago, he said.

Turning Over Power

Premier Kosor will not be in power to see the country ushered into the bloc. Her ruling Croatian Democratic Union lost elections to an opposition bloc on Dec. 4, giving the responsibility to the Social Democrats and Premier-Elect Zoran Milanovic.

The country of 4.2 million is taking longer than its Balkan neighbors to emerge from a recession and reduce its budget gap, forecast for this year at 6.2 percent of gross domestic product.

Central bank Governor Zeljko Rohatinski said the economy will grow 0.5 percent this year, while analysts Zdeslav Santic of Soc-Gen Splitska Banka d.d. and Hrvoje Stojic of Hypo Alpe- Adria-Bank d.d. forecast for the next year a contraction of 2.1 percent and 2 percent, respectively.

Milanovic said on Dec. 6 he will introduce fiscal measures within 50 days of taking office to bolster the country’s credit rating and avoid seeking international aid.

Croatia had its credit rating reduced a year ago to BBB-, one step above junk at Standard & Poor’s, which cited a “deteriorated fiscal position and continuously weak” external financing. Fitch Ratings said on Dec. 5 it will review its assessment in the first quarter in 2012, by which time it “expects to have more information regarding the government’s fiscal and economic program.”

To contact the reporter on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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