Slovenia, Croatia Close to Ending Dispute Before EU Entry

Croatia and Slovenia took a step toward solving a 270 million-euro ($365 million) dispute dating back to the split-up of Yugoslav bank assets, easing the risk Croatia’s European Union entry will be blocked by its neighbor.

“We have cleared all the obstacles on the expert level, and now we need to find a political solution from our governments,” Slovenian Foreign Minister Karl Erjavec told reporters after meeting his Croatian counterpart, Vesna Pusic, yesterday in Otocec ob Krki, 70 kilometers (43.5 miles) east of the Slovenian capital Ljubljana. No details were disclosed.

Slovenia and Croatia have been haggling for years over claims of former deposits owed to Croatian savers by the Yugoslav predecessor of Nova Ljubljanska Banka d.d. Slovenia, an EU member that controls NLB, has threatened to veto Croatia’s accession if the claims are not withdrawn, while Croatia counts on 10 billion euros in EU grants through 2020 to help it pull out of a two-year economic slump.

“I cannot say at this stage if we will withdraw lawsuits at our courts on the bank matter,” Pusic said. “We need a solution that isn’t harmful to any party and its acceptable for both sides.”

Follow-up Meeting

It was the third time the two held talks as Slovenia considers ratification of Croatia’s membership, set for July 1. They will meet again Feb. 19, Pusic said.

“It’s a promising framework, while the final version of the solution has yet to be formed and I expect some additional explanation from the meeting with the Croatian Premier Zoran Milanovic that will determine the timeline of our approval,” Slovenian Prime Minister Janez Jansa told reporters in Brussels today ahead of an EU summit. “Croatia’s membership is in our interest and everybody will benefit from it, but there are still some hurdles which I hope can be overcome.”

Of the 27 current EU members, 22 have ratified Croatia’s accession, while Germany, Denmark, Belgium and the Netherlands have started procedures, according to the Foreign Ministry in Zagreb. That leaves only Slovenia, Croatia’s former Yugoslav federal partner. to begin ratification, which may take as long as two months to complete, Rok Srakar, a Slovenian diplomat in Zagreb, said.

Upper Hand

Slovenian party leaders will meet at the end of next week to discuss how to approve Croatia’s EU entry, President Borut Pahor said in an e-mailed statement today. Erjavec said yesterday he expects lawmakers to pass the move in March. A two- thirds majority in Parliament is needed for consent.

“Both countries need to reach a solution, each for its own reasons, with Slovenia having a slight upper hand,” Viseslav Raos, analyst at Political Science Research Center in Zagreb, said. “They need to reach a compromise, and neither side will be completely happy with it.”

The row over ratification comes as Slovenia’s government is crumbling under corruption allegations against Prime Minister Janez Jansa.

Political Turmoil

Erjavec said Feb. 5 he will step down as foreign minister on Feb. 22, after his Pensioners Party decided to leave the government, the second coalition member to do so. The Citizens List stepped down on Jan. 24, leaving Jansa with a minority Cabinet short of the 46 votes needed to pass legislation in Parliament.

Slovenia needs to approve laws that would strengthen the economy and the banking system, including a 4 billion-euro bank recapitalization plan, to avoid being the sixth euro-area member to require a bailout.

“This may be a difficult negotiating time for Slovenia’s politicians, who are already seeking to strengthen their positions in case of early elections,” Branko Caratan, a political scientist at the University of Zagreb, said.

An agreement would allow NLB, Slovenia’s largest bank, to start operating in Croatia, after being banned over the issue.

Another 130,000 Croat savers, who after the breakup of former Yugoslavia chose not to transfer their claims to the Croatian government, are separately seeking about $204 million from the Ljubljana-based bank.

To contact the reporters on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net; Boris Cerni in Ljubljana at bcerni@bloomberg.net

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

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