Party Moves to Torpedo Own Government in EU’s Youngest State

  • Ruling Croatian Democratic Union files for no-confidence vote
  • Opposition backs motion, calls for early elections in July

Croatia’s biggest ruling party launched a no-confidence vote against technocrat Prime Minister Tihomir Oreskovic, a move that will probably torpedo its own government, end a drive to retool the economy and trigger early elections in the European Union’s youngest member.

Already facing dismissal himself in a parliamentary no-confidence vote backed by both the opposition and his ruling partners, Deputy Premier Tomislav Karamarko mounted a counterattack Tuesday, with his Croatian Democratic Union filing for a similar vote against Oreskovic. The vote, which the opposition Social Democrats said they may help push through, can take place on June 15 at the earliest and will bring down the Adriatic state’s four-month-old government if the premier is defeated.

“With this shock, we want to create something positive,” Karamarko told reporters in Zagreb. “The situation is not good, and we still have time for a more serious, reconfigured government. A new election will cost us time.”

The coalition’s disintegration means lost time for a country trying to kindle an economic revival after it lost 12 percent of output in a six-year recession that ended in 2014. It also underscores the trouble that Croatia, which joined the EU in 2013, and the other countries that split in the bloody breakup of Yugoslavia are having in overhauling their economies and building political consensus for measures including the sales of state assets and trimming public spending.

While Karamarko said there’s “still room” for his conservative party, known as HDZ, to muster a new majority, the faction and its parliamentary voting-bloc partners control only 59 of the assembly’s 151 seats. Its ruling partners, Bridge, a party comprised mostly by city mayors and independents, and the opposition Social Democrats have rejected joining it in a new administration.

Trust ‘Battle’

Oreskovic, picked to lead the cabinet as the country’s first-ever non-aligned prime minister, has struggled to guide the two bickering ruling parties from the start. After demanding that Karamarko and Bridge leader Bozo Petrov ease the tension in the coalition last week by resigning, he appealed to Karamarko’s party to defy their leader.

“This is a battle for trust, a battle for Croatia,” Oreskovic, a former pharmaceutical executive, told journalists on Tuesday. “I will fight to win that trust. Karamarko is an enormous burden for this government, and for HDZ, and I hope the HDZ makes the right decision on the day.”

Oreskovic faces almost certain defeat, however, as Social Democrat leader Zoran Milanovic said his party will push for fresh elections by the middle of next month.

His party will vote according to “how best we want to achieve our goal, and that is early elections,” Milanovic said. “That’s the only solution for this crisis.”

While the dispute prompted the government to withdraw a planned Eurobond last week, investors have largely brushed off the political crisis. Bonds have gained since Bridge lawmakers agreed to support the opposition-led no-confidence vote against Karamarko. The yield on the country’s euro-denominated debt maturing in 2025 was virtually unchanged at 3.705 percent at 2:37 p.m. in Zagreb.

HDZ, which counts parliament’s agenda-setting speaker, Zeljko Reiner, among its members, can push through the vote against Oreskovic before the June 18 deadline of the no-confidence motion against Karamarko. If the vote succeeds against the premier, that will trigger the government’s demise, forcing parties to either create a new majority-backed coalition or march toward early elections.

“This was a desperate move by the HDZ, as it is very unlikely that they will be able to form a new coalition in this parliament,” said Zarko Puhovski, a political science professor at the University of Zagreb. “New elections are now the most likely outcome.”

Dead Heat

The crisis emerged last month after newspaper Nacional reported a lobbyist for Hungarian refiner Mol Nyrt. paid Karamarko’s wife, Ana, for consulting services beginning in 2013 before they married. Karamarko has argued the contract doesn’t represent a conflict of interest. The Hungarian refiner is fighting an arbitration suit against the government over its management takeover of Croatian INA Industrija Nafte d.d.

The cabinet’s collapse will end a series of planned reforms that include cutting the budget deficit and public debt and selling state assets to provide more room for growth and help climb out of the credit-rating junk bin. The government projected the budget gap to narrow to 2.6 percent of gross domestic product this year from 3.2 percent in 2015. The country of 4.2 million people projected its public debt will decline to 86 percent of output, from 87 percent last year.

An early election may not solve the standoff, however, as it may become a repeat of the inconclusive November ballot that produced a hung parliament and the uneasy alliance between Bridge and HDZ. The latter party is now in a dead heat with the opposition Social Democrats in opinion polls at 29 percent support, according to an Ipsos Puls poll published by Nova TV on May 26. Bridge was a distant third with 7.9 percent in the poll of 962 likely voters, with the margin error estimated at 3.6 percent.

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