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Croatia’s government said it is canceling collective contracts stipulating benefits for public workers to the year-end after negotiations with unions broke down over cuts proposed by the Cabinet.
“The basic collective contract for officials and employees in the public sector is being canceled,” the government said in a statement on its website. The decision will take effect three months from today, it added.
Prime Minister Zoran Milanovic said in January the government will trim costs by 4 billion kuna ($710 million) to narrow the 2012 budget deficit to 2.9 percent of economic output from 4.2 percent in 2011. Fitch Ratings on Sept. 5 revised Croatia’s outlook to stable from negative, citing progress in sticking to budget targets.
The World Bank, Fitch and other credit-rating companies have urged the government to press on with a reduction in the size of the bloated public sector and revamp collective contracts that give vast benefits to public workers.
The Adriatic Sea nation, which is struggling to revive its economy after three years of recession or stagnation, is set to join the European Union in July 2013.
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