Bloomberg News

Croatia Alliance Plans Energy, Tourism Investment to Create Jobs

November 24, 2011

Nov. 23 (Bloomberg) -- Croatia’s Alliance for Change, which leads in polls before Dec. 4 elections, wants to cut waste from the pension system and lure investments in energy, transport and tourism to create jobs, its top economist said.

Expanding the hydroelectricity and tourism industries, which account for more than a fifth of the Balkan country’s economy, and using European Union funds to build rail lines and roads would help quadruple growth to 2 percent next year, said Radimir Cacic, the head of the opposition Croatian People’s Party -- Liberal Democrats, in a Nov. 21 Zagreb interview. The October jobless rate, at 17.4 percent, is more than double compared with Germany and the Czech Republic.

“The key problem in Croatia is that too few people work here,” said Cacic, 61, who would become the economy minister because of his position as the alliance’s chief economist. “Our first task is to create jobs.”

The Alliance for Change, a four-party coalition that includes the Social Democrats and the People’s Party, had a 37 percent rating in an Oct. 26 IPSOS-Puls survey of 1,000 people. Support for Premier Jadranka Kosor’s Croatian Democratic Union was at 20 percent as it struggles to overcome a widening probe into alleged party-sanctioned corruption. The next survey is due on Nov. 26.

The alliance would inherit an economy emerging from the longest recession since Yugoslavia’s breakup and usher the nation into the European Union in July 2013. The central bank on Oct. 21 forecast GDP growth of 0.5 percent this year.

Corruption Probes

The Democratic Union lost public support after party officials, including former Premier Ivo Sanader, were accused of fraud, bribery and other offenses in a probe supported by Kosor.

Sanader is on trial for allegedly taking a bribe of 10 million euros ($13.6 million) from Hungary’s Mol Nyrt. in 2008 and 2009, when he was the head of the government.

The alliance wants to sell non-controlling stakes in state companies, abolish the 20 percent tax rate on reinvested profit and add a tax on dividend payouts, Cacic said. It also wants to sell or lease about 21 million square meters (69 million square feet) of former military properties along the Adriatic Sea coast worth about 4 billion euros ($5.3 billion), he said.

The measures would cut the budget gap, now at 6.2 percent of GDP, in half over the next four years as the country integrates further into the EU, Cacic said.

Jobless Rolls

Croatia’s labor-force participation rate, a ratio between those working and the total civilian population, is at 50 percent, compared with 58 percent in the Czech Republic and 60 percent in Germany, according to the International Labour Organization in Geneva.

In the country of 4.3 million, 1.4 million working people support 1.1 million retirees and fund benefits for welfare recipients and war veterans, according to September data released by the national statistics office.

“We have a system where people retire too soon, where they receive benefits not according to their needs, but according to entitlement,” he said. “We plan to change that.”

Cacic said he “doesn’t rule out” seeking funding from the International Monetary Fund to lower financing costs, though Croatia would have more maneuvering room with it.

The next government would also continue efforts to bring INA Industrija Nafte d.d., Mol’s Croatian unit, back under state control. Mol owns 47.47 percent, with an option to buy 1.6 percent. The government has 44.84 percent.

“We see INA as a Croatian company, not as a unit of Mol, and we will seek all the rights pertaining to our ownership of 44.84 percent of the company,” Cacic said.

--Editors: James M. Gomez, Hellmuth Tromm

To contact the reporter on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net

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


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