Croatia Joins EU With History Lesson, Appeal for Peace

Croatia became the 28th member of the European Union, capping a decade of judicial and economic overhaul to shed the remnants of communism and its wartime past.

Tens of thousands celebrated the entry of the second former Yugoslav republic into the EU with fireworks, five-story projections of its history and technology, concerts, dance performances and street parties across Zagreb. European Commission President Jose Barroso and other EU officials gathered at the central square as Croatian and blue-and-yellow EU flags fluttered in the evening breeze above revelers’ heads.

The Adriatic country, which emerged as an independent state in 1991 during the bloody breakup of Yugoslavia, is looking to EU membership to help solidify peace throughout the Balkan region as tensions still smolder in Bosnia-Herzegovina and Kosovo. Leaders are also counting on EU ties to lure foreign investors to the $63 billion economy and end four years of recession and stagnation.

“It is up to us to reach out to the countries in the region and assist them in the fast adoption of the European criteria,” Prime Minister Zoran Milanovic told citizens in the capital before the stroke of midnight. “There are unbreakable bonds between us and these countries and nations. We are also tied together by upholding together the values of solidarity and love of freedom, which we want to imprint strongly on the fundamental concept of the European Union.”

Infrastructure Upgrades

The country of 4.2 million, best known for its 3,600 miles of beaches, islands and harbors, is joining the trading bloc as Europe suffers from its longest economic contraction. As much as 10 billion euros ($13 billion) in EU funds may flow in through 2020 to upgrade communist-era railways, sewers and bridges, diversify domestic industry and bring living standards up to those of eastern EU members such as the Czech Republic, Slovakia and Poland.

The kuna, which is managed by the central bank, strengthened 2 percent in the second quarter, the fourth-best performance among about 170 currencies tracked by Bloomberg. The currency traded little changed at 7.4460 per euro at 4:04 p.m. in Zagreb, the strongest in nine months.

At midnight, EU flags were hoisted and customs posts were removed from Croatia’s borders with EU neighbors Hungary and Slovenia as joint border controls were put into force.

Schengen Zone

Croatia still has to fulfill more criteria to be allowed into the bloc’s passport-free Schengen Zone. Deputy Premier Vesna Pusic said yesterday that Croatia has met “a lot” of conditions to take part in the system and expects to be a member in about two years.

While membership will not solve all of Croatia’s problems, the country can look forward to benefits from EU structural funds, Barroso told the Croatian public broadcaster on July 29.

“German taxpayers, or any other taxpayers, don’t need to fear that they will have to spend money on Croatia,” Pusic said at a press conference in Zagreb yesterday. “The only thing we need to worry about is that we don’t absorb EU funds fully, but that depends on us alone. Croatia is a great place for investment.”

Croatia over the past century has been part of the Austro-Hungarian monarchy, the Serb-dominated Kingdom of Yugoslavia and its communist incarnation ruled by Josip Broz Tito after World War II before it was engulfed in violent ethnic strife in the 1990s.

War Legacy

On its road to the EU, Croatia had to surrender suspects to the war-crime tribunal in The Hague, overhaul its judiciary and eradicate political corruption that sent a former prime minister to jail.

It now belongs to a union of sovereign states that stretches from the Atlantic Ocean in the west to the Black Sea bordering Turkey, Ukraine and Russia in the east.

After completing its membership process, Croatia is turning to help sponsor EU aspirations of its former Yugoslav partners, including Serbia, its chief foe during the wars of the 1990s, as well as Montenegro, the Republic of Macedonia and the former Serb province of Kosovo.

The presidents of Serbia and Kosovo met their Croatian counterpart today in Zagreb, while EU President Herman Van Rompuy held talks with the Serbian premier in Belgrade. Serbia will begin membership talks by January, EU leaders decided last week, after it showed “progress” in reaching a settlement with Kosovo.

‘European Values’

“Croatia has changed enormously over the last decades,” EU’s Barroso said to screams and applause from the crowd. “Croatia is also an example to others in the region. As a European Union member state, you have made clear that you will help others follow your path. I welcome this commitment as our union is open to those who share our European values.”

Hours before the celebration began, civil engineer Darko Petrak and his two young sons checked out the main square as workers put finishing touches to blue-bunted stages and risers.

“We can’t wait to be part of the European Union,” said Petrak, squeezing the shoulders of his 10-year-old son, Karlo. “The times are hard, but there is hope we will do better in the EU.”

The night’s festivities were marked by concerts of Croatian artists, including the 2CELLOS, and folk dancers. The country was celebrated with projected images of historical events, science and culture including the electric coil invented by scientist Nikola Tesla, giant hands knitting traditional lace patterns and aerial views of ancient cities along the seacoast, such as Dubrovnik and Split. Black-and-white clad folk dancers wearing paper-mache animal heads trundled away from the square in a street car.

Jelacic Square

Pictures were projected onto the Neoclassical and Art Deco buildings of the central square dominated by the equestrian statue of 19th-century statesman Josip Jelacic.

Some locals expressed skepticism. Law student Diana Milosevic, 27, sat outside of a local espresso shop outlining the pros and cons of EU membership. She said she’s concerned that negative perceptions of Croats abroad may not easily be overcome.

“I’m afraid we are not prepared enough, and that competition will destroy us,” said Milosevic. “But I hope that I will get the possibility to work abroad, that I as a Croatian will be accepted.”

While EU membership gives citizens the right to work in other countries, that is being phased in gradually by some older members, similar to what happened to former East Bloc countries that joined in 2004.

Jobless Rate

Croatia’s unemployment rate stood at 19.6 percent in May. The economy has failed to grow since 2008 and rising labor costs make it harder to attract investment into export industries. Foreign direct investment plummeted to almost one-fifth of the $4.2 billion registered in 2008.

Since then, the economy has shrunk by a combined 10.9 percent, according to Eurostat data compiled by Bloomberg. Gross domestic product contracted 1.5 percent from a year earlier between January and March, government data show.

The country counts on its seashores and vineyards to boost tourism, which makes up about a fifth of the economy. Croatia markets the medieval towns and emerald bays of the former Roman province as “the Mediterranean as it once was.”

Dalmatians, Zinfandel

Croatia also promotes itself as the home of the Dalmatian dog, Zinfandel wine and the necktie -- cravat -- first worn by Croat mercenaries in the Middle Ages.

It’s the home country of Wimbledon winner Goran Ivanisevic, Alpine skiing champions Janica and Ivica Kostelic, former National Basketball Association players Drazen Petrovic and Toni Kukoc, as well as a national soccer team that won the bronze medal in the 1998 World Cup, led by Davor Suker and Zvonimir Boban.

Mattie Cobb, a tourist from Kentucky, chanced into the EU’s newest member during a trip across the former Yugoslavia and to Venice, Italy. She first visited Zagreb in 1968 with a U.S. musical group during Tito’s reign.

“We arrived last night and then we found out that this is the day they are joining the European Union, and I said, wow,” Cobb said as her tour group gathered at the central square. “It’s so exciting.”

(Updates with kuna price in sixth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE