Croats Split on EU as Government Fights to Pass Referendum
Croatia’s drive to join the European Union may stall as citizens are split over whether accession will drag the former Yugoslav republic into a debt crisis and erode its sovereignty.
Croatians will head to the polls on Jan. 22 on whether the Balkan country should proceed with its planned July 2013 entry into the 27-nation bloc. Support was at 53 percent in a poll published last night by IPSOS-Puls, making it possible a re-vote will be needed before EU members begin ratification.
Two decades after the country won independence in the bloody breakup of Yugoslavia, the government counts on EU entry to boost investment and economic growth and cement its break from a communist past. Enthusiasm for EU unity is waning among its eastern states, including Hungary and the Czech Republic, as the continent risks a return to a recession and politicians increasingly oppose efforts to merge fiscal policies.
“They are angry because of corruption and distrustful of the political elite,” said Damir Grubisa, a political scientist and head of the European Studies Center in Zagreb. “There are also those who fear they will lose some of the widely cast state benefits, or are simply afraid of change and new challenges.”
Polls open on Jan. 22 at 7 a.m. in Zagreb and close at 7 p.m. with results expected later in the evening.
“Croatia would lose its sovereignty and would be governed by neo-liberal capitalists,” said Tomislav Kosic, 32, an unemployed laborer. He also said Croatia’s farmers may not be able to compete in the larger agricultural community in older EU nations.
EU Benefits
Still, membership in the world’s largest trading bloc is expected to provide Croatia’s 4.2 million people with hundreds of millions of euros in regional development and infrastructure subsidies. Companies such as Germany’s Siemens AG (SIE) and Deutsche Telekom AG (DTE), and Sweden’s Ericsson AB are counting on expansion into the Balkans as EU growth stalls over the debt crisis.
“A decision to join the EU will bring qualitative progress to Croatia, it will give us an opportunity to make decisions with the biggest players in Europe on equal footing,” President Ivo Josipovic said today at a forum in Zagreb. “The EU will not govern us. The EU will give us a huge opportunity, but how we will fare, it depends only on us.”
Central bank Governor Zeljko Rohatinski said in December that the Adriatic nation, which emerged from a two-year recession in 2011, may slide into another contraction this year because of faltering demand for Croatian exports and waning tourism.
Elections on Dec. 4 voted out the government and the new prime minister, Zoran Milanovic, has said his budget proposal expected in February will trim the deficit, currently forecast at 7 percent of GDP this year, trimming the country’s extensive social welfare system and bloated public sector.
Opposition Organizer
“An independent and sovereign Croatia is the only framework that can guarantee Croats freedom, cultural progress and material wealth,” said Milovan Sibl, the head of Only Croatia -- Movement for Croatia” a group that is organizing opposition to approval.
Croatia’s credit rating was 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.
Croatian five-year credit-default swaps, which are used to insure bondholders against the risk of non-payment, were at 530 points at 9 a.m. in Zagreb, up from 523 points on Dec. 5, the day after the elections. Croatian debt is the third-most expensive to insure against default in eastern Europe after Hungary and Ukraine and compares with Italy at 469 points.
‘Positive Element’
“In the context of the credit rating, EU membership is regarded as a positive element when it comes to investment security,” Standard & Poor’s analyst Marko Mrsnik said in a phone interview on Jan. 16. “Rejecting the entry could slow investment and the loss of EU funds intended for infrastructure would further hinder investment and slow economic growth.”
The government is campaigning for passage in the final days, with Foreign Minister Vesna Pusic warning that rejection “would be like shooting yourself into the foot” as neighbors clamor for membership.
Montenegro, another former Yugoslav republic, will start entry negotiations in June, while Serbia will hear in March whether the EU accepts its application for official candidacy.
“What other strategic alignments are there in the world for Croatia, if it rejects entry,” said Hongjoo Hahm, the World Bank’s country manager in Zagreb.
Croatia is culturally and politically aligned with Europe, Hahm said and the “most convincing argument for entry is economic, as you see a rapid convergence of income in all the countries that have joined.”
To contact the reporter responsible for the story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net
To contact the editor responsible for the story: James M. Gomez at jagomez@bloomberg.net
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