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Croatian Premier Rejects Tax Increases, Promises Budget Cuts

Sept. 27 (Bloomberg) -- Croatian Premier Jadranka Kosor rejected tax increases as part of her plan to slash the budget deficit, keep family benefits intact and create new jobs should her Croatian Democratic Union party win December elections.

Kosor, who’s led the party since July 2009, reiterated that she would cut the budget shortfall to 2.6 percent of gross domestic product by the end of 2013. She also said she won’t fire any state employees even as she imposes “fiscal discipline.”

“All this we can achieve with hard work,” she told a gathering of party members and journalists in Zagreb today, without elaborating.

Croatia is preparing to become the European Union’s 28th member in July 2013. The winner of the December elections, pitting the Croatian Democratic Union and an opposition coalition called the Alliance for Change, would inherit an economy emerging from the longest recession since the breakup of Yugoslavia.

Foreign direct investment declined to $583 million in 2010 from $6 billion in 2008. The economy grew 0.8 percent in the second quarter from a year ago, after declining 0.8 percent in the first quarter and 1.2 percent in 2010.

Kosor also said her party will continue to fight corruption.

Anti-Corruption Campaign

The Balkan country is struggling with a corruption scandal that led to the arrest of dozens of ruling-party officials including former Prime Minister Ivo Sanader, who resigned in 2009 and handed the reins of government to Kosor, his former second-in-command.

A lack of foreign investment and deteriorating global conditions will limit economic growth to about 0.6 percent, Hrvoje Stojic, chief analyst at Hypo Alpe-Adria-Bank d.d, a local unit of Austria’s Hypo Alpe-Adria-Bank International AG., said on Sept. 5. The government forecast 1.5 percent.

The opposition Alliance for Change had 37 percent support in a Sept. 26 IPSOS-Puls survey of 1,000 people. The ruling Croatian Democratic Union, that led Croatia for 16 of the last 20 years, had 20 percent. No margin of error was given.

The Alliance for Chance, led by the Social Democrats, said it will offer tax incentives to companies and investors to create jobs, lower taxes on reinvested profit, keep the kuna stable and seek lower interest rates, according to the bloc’s first policy statement on Sept. 15.

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

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

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