Croatia Set for More Political Wrangling After Weekend Vote

  • Social Democrats lead in polls, may fall short of majority
  • Two main parties poised to vie for support from upstart Bridge

Croatia’s snap election may fail to resolve the political crisis in the European Union’s newest member, which has derailed measures aimed at bolstering the economy’s recovery from a record recession.

Former Prime Minister Zoran Milanovic’s Social Democrats, looking to retake power after less than a year in opposition, are set to fall short of an outright majority in the Sunday ballot despite their lead over the ruling Croatian Democratic Union, or HDZ, polls show. Such a result would force them either to ally with each other or a third partner such as the smaller Bridge party, whose ruling coalition pact with HDZ collapsed in June after six months in power.

“No party will have an easy task in trying to form a government,” said Nenad Zakosek, a political science professor at the University of Zagreb.

Weeks of political wrangling may ensue, potentially leading to an unstable coalition or even a third general election in a year. The prolonged turmoil would make it difficult for any cabinet to address Croatia’s rising debt burden and follow through on an economic program to nurture the economy after a six-year recession wiped out more than a 10th of gross domestic product.

Inconclusive Polls

The Social Democrats are set to win 55 seats, with HDZ in second place at 53, according to a survey by Ipsos Puls published by Nova TV late Thursday. Bridge, which has pledged to fight waste and corruption and to shrink the state administration, was projected to win 12, seven fewer than in last year’s election. The survey, conducted among 4,200 respondents Aug. 16 to Sept. 4, looked at 140 of parliament’s mandates, excluding the 11 allotted to minorities and diaspora.

The Social Democrats, who lost power last year, are promising to change the tax system and the judiciary and reduce state spending in the Adriatic state of 4.2 million people. They’re also pledging to improve the business climate and lure foreign investors with tax holidays. Newly appointed HDZ leader Andrej Plenkovic has pledged to cut public debt and lower Croatia’s value added tax rate.

Both platforms are thin on the specifics of how they would address the country’s widening public debt, now at 87 percent of gross domestic product, while also further nurturing an economic recovery.

“There’s not that much clear blue Adriatic water appearing between the two main parties,” Nomura strategist Timothy Ash said. “No one seems to be willing to talk about some of the more obvious, less popular but pressing issues which remain: pension reform and administrative reform, plus the continued need for fiscal retrenchment to further help cut high levels of public sector indebtedness.”

Plenkovic is trying to shore up support for HDZ, a party that was censured for corruption earlier this decade after its former leader Ivo Sanader was convicted of bribery and abuse of power in cases that are now being retried. He replaced Tomislav Karamarko, who torpedoed his own government with a June no-confidence vote while he was facing conflict-of-interest allegations tied to state refiner INA Industrija Nafte d.d.

For more on Mol and INA’s role in Croatian politics, click here

Plenkovic said this week he may seek a new coalition, if needed, with Bridge, whose leader Bozo Petrov said he will work with either of the bigger parties if they agree to his conditions. The HDZ leader proposed leading such a tie-up if his party wins more seats, however, a potential sticking point for negotiations. While Plenkovic said his political force would reject a grand coalition with the Social Democrats, some analysts see that as a potential outcome if the election doesn’t produce a clear winner.

“For now, there is only a low probability of a complete breakdown of talks and an immediate return to the polls,” Otilia Dhand, an analyst at Teneo Intelligence in Brussels, said in an e-mailed note. “The main parties seek to limit the appeal of emerging alternative parties and would therefore likely opt for a grand coalition as a last resort.”

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