Bloomberg News

EU Commission Recommends Completing Croatia’s Entry Talks

June 10, 2011

(Updates with comment, stocks in eighth, ninth paragraphs.)

June 10 (Bloomberg) -- The European Commission recommended that European Union nations complete accession talks with Croatia, paving the way for the Balkan country to become the bloc’s 28th member in July 2013.

EU Commission President Jose Barroso said the decision is an “important step forward” for Croatia, which has been in talks for almost six years to be the second former Yugoslav republic to join the world’s largest trading bloc.

“The commission has negotiated hard but fair over the last years, applying strict conditionality and making sure that all EU criteria and benchmarks are fulfilled,” Barroso said today in an e-mailed statement from Brussels. “This firm commitment has paid off: Croatia is now ready to move ahead.”

Croatia aims to wrap up talks 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 skepticism 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.”

Remaining Challenges

Croatia has other challenges as it forges ahead with entry. Unlike its Balkan neighbors Slovenia and Serbia, it’s 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.

“Just the fact we have concluded the talks will signify a new era in our relations with foreign investors, whose first question is always how far we have gone,” Deputy Prime Minister Domagoj Milosevic, who is in charge of investment in the government, told reporters in Zagreb today.

Croatian stocks gained for a fourth day, with the benchmark heading for the highest close in more than two months, as the European Union moved closer to accepting the Balkan country as a member in July 2013.

Lobbying London

The CROBEX gauge of stocks advanced 0.7 percent to 2,285.67 by 1:01 p.m. in Zagreb. A close at that level would be the highest since March 31.

Premier Kosor is in London today to meet her British counterpart, David Cameron, seeking his support before the open- ended state-by-state ratification process begins.

“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.

Support for Croatia

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.”

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.

Policy Areas

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.

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.

--Editors: James M. Gomez, Balazs Penz.

To contact the reporters on this story: Jasmina Kuzmanovic at jkuzmanovic@bloomberg.net John Martens in Brussels at jmartens1@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net Angela Cullen at acullen8@bloomberg.net


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