Croatia’s Government Unravels as Premier Demands Resignations

  • Leader of biggest ruling party says cabinet is crumbling
  • Croats to see parliament rejig or snap vote, Karamarko says

Croatia’s four-month-old government has begun to collapse, the head of the biggest ruling party said, in a rebuke to technocrat Prime Minister Tihomir Oreskovic’s call for him to resign from the cabinet.

Deputy Premier Tomislav Karamarko, leader of the governing Croatian Democratic Union, said the country of 4.2 million people was facing a reconfiguration of parliamentary alliances or early elections and that Oreskovic had lost his party’s trust. Karamarko stopped short of saying his party would leave the ruling grouping, but he expressed “surprise” at the prime minister’s demand that he and Bozo Petrov, a fellow deputy prime minister and leader of the smaller ruling Bridge party, step down.

“The process of the dismantling of the coalition has started,” Karamarko told reporters on Friday. “Oreskovic doesn’t have our trust.”

Oreskovic waded into a dispute between the two factions earlier over an opposition-led no-confidence vote against Karamarko based on allegations of conflict of interest linked to the Hungarian refiner Mol Nyrt.’s management takeover of Croatian INA Industrija dd. With the government on the verge of collapse, the standoff is threatening to derail a plan to introduce measures including cost cuts and state-asset sales to streamline the economy and provide more room for growth.

No-Confidence Vote

Bridge lawmakers have agreed to vote against Karamarko in the ouster motion, while the Croatian Democratic Union, known as HDZ, pledged last week to back Karamarko and rule without Bridge if necessary. The dissenters from Bridge would give the opposition a majority in the 151-seat parliament. Before Karamarko’s comments, Oreskovic said the only way for the coalition and its reform plan to continue was for the two parties leaders to step down.

“Without them we can continue with reforms and keep the stability we need,” Oreskovic, the country’s first prime minister who isn’t aligned to a political party, told reporters.

For his part, Petrov said he may resign if that was the “only option in order for Croatia to stabilize and turn to a better future.” He said in a phone interview with N1 TV the final decision will be made by his party. Petrov also renewed his calls for Karamarko to quit.

The yield on the Eurobond maturing in 2025 declined 2 basis points to 3.752 percent at 3:26 p.m. in Zagreb. Oreskovic said he withdrew an offer for a Eurobond earlier this week because the disagreement in the coalition prompted investors to ask for higher yields.

Withdrawn Eurobond

Karamarko has been under pressure to resign since last month, when newspaper Nacional reported a lobbyist for the Hungarian refiner paid Ana Saric for consulting services beginning in 2013 before she married the HDZ leader. Karamarko acknowledged the contract exists, though he argued it doesn’t represent a conflict of interest.

With the dispute threatening to torpedo the cabinet and potentially trigger early elections, Oreskovic said a fresh vote could cost Croatia 1 billion to 2 billion euros ($1.1 billion - $2.2 billion) in lost EU development funds. The crisis could also threaten the reform plan, which includes cutting government spending by 2.5 billion kuna ($372 million) this year, in part by trimming the public administration and reducing payments in health care and pensions.

“The crucial time for reforms and debt refinancing will be lost,” Zeljko Lovrincevic, professor at Economic Institute in Zagreb, said by phone. “Also, there is no guarantee that new elections would result in a majority government.”

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