Bloomberg News

Croatia Poised to Conclude EU Entry Talks as Monitoring Begins

June 10, 2011

June 10 (Bloomberg) -- Croatia’s path to the European Union has already been longer than that of other eastern European countries. It’s about to get longer.

The European Commission will probably recommend today completing Croatia’s entry talks, almost six years after they started. It will take at least two more years of monitoring and ratification by all 27 EU states for the Balkan nation to become the second former Yugoslav republic to join the world’s largest trading bloc.

The Balkan nation aims to wrap up talks in the final four of 35 EU policy areas by the end of the month and sign its entry treaty by December. Croatian Premier Jadranka Kosor needs to persuade voters that entry is worth the cuts in government spending. She also needs to overcome scepticism among EU citizens that she is stemming crime and corruption after the 2007 accession of Bulgaria and Romania raised concern they weren’t ready to join, analysts said.

“There’s a widespread feeling that the accession of Romania and Bulgaria took place too quickly,” said Rosa Balfour, an analyst at the Brussels-based European Policy Centre. “Anything related to judiciary, corruption and organized crime is going to be monitored quite closely.” The EU is “trying to raise the standards.”

Croatia’s 6 3/8 percent dollar bond yielded 5.808 yesterday, compared with 6.529 on March 17, when it was offered. The benchmark Crobex stock index gained 7.5 percent this year, led by companies such as Koncar-Elektroindustrija d.d., Ericsson Nikola Tesla d.d. and INA Industrija Nafte d.d.

Continuing Recession

Unlike its Balkan neighbors Slovenia and Serbia, Croatia is struggling to emerge from recession and reduce its budget gap, forecast for this year at 4.2 percent of gross domestic product. The economy contracted 1.2 percent last year and an annual 0.9 percent in the first quarter. The government forecast 1.5 percent the growth for 2011.

Still, Croatians are richer and the country ranks higher in stock-market capitalization and the perception of corruption than Romania and Bulgaria.

The European Commission is expected to make its announcement at noon today as Kosor travels to London to meet her British counterpart, David Cameron, seeking his support before the open-ended state-by-state ratification process begins.

U.K. Support

“I am sure that David Cameron on” June 10 “will endorse the U.K.’s strong support for Croatia’s EU accession,” David Blunt, the British ambassador to Croatia, said in a June 8 interview in Zagreb. “This support for Croatia’s entry has been very strong, very clear and very consistent.”

Kosor will have to lobby all 27 governments. Any one of the member states can veto the bid because of expansion weariness and concerns about the consequences of the European debt crisis.

European Commission President Jose Barroso, EU President Herman Van Rompuy and Hungarian Prime Minister Viktor Orban, who holds the bloc’s rotating presidency until the end of June, have supported the Croatian bid.

France and the Netherlands last month proposed monitoring for the Balkan to ensure it stays committed to working toward complying with EU standards before the final approval, the DPA news service reported on June 6.

Croatia “shouldn’t worry” about complying with the monitoring, said Vesna Pusic, head of the country’s committee for overseeing the talks, after meeting Dutch lawmakers on June 8. “These obligations cover the minimum, not the maximum of our efforts. Our ambitions should really be greater.”

EU Funds

Croatia would gain access to at least half the 1.5 billion euros ($2.2 billion) allotted to it in the EU’s 2013 budget by joining the bloc on July 1, 2013, Pusic said.

The country has completed talks in policy areas including agriculture, environmental protection, fisheries and trade. It improved competition by selling its state-subsidized, unprofitable shipyards and started reforms in education, government administration and health care.

Unlike Bulgaria and Romania, Croatia also had to overcome the effects of the Balkan wars during the breakup of Yugoslavia that devastated the region’s economy and led to the creation of the United Nations war crimes Tribunal for former Yugoslavia in The Hague.

Risking backlash from its constituents, the government extradited to the court three generals that most Croats regard as heroes. Two of them, Ante Gotovina and Mladen Markac, have been convicted of war crimes against Serbs. The third, Ivan Cermak, was acquitted.

Corruption Fight

Croatian authorities investigated hundreds of corruption cases, targeting government officials and ruling-party members, including former Prime Minister Ivo Sanader, who is awaiting extradition from Austria on suspicion of abuse of power and corruption.

“One of the reasons why the talks have lasted so long was that Croatia was the first modern postwar candidate, unlike Romania or Bulgaria, and that brought along a whole bag of issues,” Pusic said by phone on June 8.

Croatians will vote in a referendum on EU membership within 30 days of signing the accession treaty. About 62 percent of citizens support entry, according to a Nov. 6 poll by IPSOS Puls d.d., commissioned by the Foreign Ministry. The independent polling company surveyed 1,000 Croatian citizens.

--With assistance from James G. Neuger in Brussels. Editors: James M. Gomez, Balazs Penz.

To contact the reporters on this story: Jasmina Kuzmanovic at jkuzmanovic@bloomberg.net James Neuger in Brussels at jneuger@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net James Hertling at jhertling@bloomberg.net.


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