Cause and Effect in European Politics and Law

For Now Croatia Does Not Need To Be Included in the Imbalances Procedure

Adelina Marini, February 27, 2013

Croatia will take part in the European Semester in 2013 together with the other member states, but on a voluntary basis. The semester is an essential part of the reform of the economic governance of the EU caused by the debt crisis and includes enhanced surveillance and coordination of economic and budgetary policies. The beginning of the semester is marked in the autumn by the launch of the Annual Growth Survey of the European Commission, which pin-points specific recommendations for the member states. The case of Croatia, though, is different because the country is scheduled to become a full-fledged member of the Union on the 1st of July 2013, right in the middle of the semester.

The final recommendations of the Council of the EU under the semester will not be binding for the country for which, as the Ministry of Finance explains, will be valid several specific arrangements this year. What Croatia will work upon until it begins the full-fledged participation in the semester from next year will be to create a framework for implementation of its economic programme with a special focus on including in the process the regional and local authorities and the civil society. Secondly, a convergence with the elements of the pre-accession economic programme will be sought which includes special monitoring of the budgetary deficit and the public debt as well as taxation. Croatia will also have to bind its structural reforms and the goals in its national reforms programme with the strategic guidelines in the Annual Growth Survey and the Europe 2020 economic strategy.

The government already is in a dialogue with the Commission which is closely following the economic developments in the country. The expectations from the partial participation in the European Semester are Croatia to gain valuable operational and methodological experience, to open a new channel of work with the Commission and to prepare to implement the European policies before the full-fledged membership. But the issue of the European Semester is almost entirely absent in the public domain, although on a political level it is not quite alien.

Croatia is facing tough challenges, again underscored strongly by the winter economic forecast of the European Commission which foresees the economic activity in the country to remain subdued in the first half of 2013. The Croatian economy is highly influenced by the poor economic perspectives in the eurozone and the neighbouring countries in particular - Italy and Slovenia - which will continue to put pressure on the attempts of the country to exit the crisis. If the trend remains unchanged, 2013 will be a sixth year in a row of recession. The Commission expects a gradual recovery in the second half of the year due to the government programme for public investments, notably in the area of energy and transport.

Private investments are expected to be boosted by the country's accession to the EU on July 1st. It is expected in the second half of the year the external cyclical problems to begin declining thus allowing a slight acceleration of exports. The big question, however, is how will the participation in the European Semester help the country better understand what measures it needs to undertake in view of its entry into the internal market. According to Zoran Aralica, an economic analyst with the Zagreb Economic Institute, the government's capacity to respond to the challenges and the opportunities of supranational character are limited. The lack of a board of economic experts in this government, unlike previous cabinets, is also a problem.

The challenges the country is facing are huge, especially in response to the effects of the crisis - those are debt restructuring which is currently happening through the business sector, the high share of non-performing loans in the financial sector and most of all the lack of a recovery plan. All this does not create appropriate conditions for optimism, the analyst believes. His opinion, however, is not shared by Andrej Plenkovic. He is a member of the Croatian parliament (Sabor), member of the European Affairs Committee from the opposition Croatian Democratic Union (HDZ). He is also an observer in the European Parliament in the Budgets Committee. He took part in the inter-parliamentary week on the European Semester in Brussels in January when he only marked Croatia's participation in it.

I talked to Mr Plenkovic in Zagreb. In his words, the European Semester will help the country exit the crisis. He paid special attention to the need of stronger democratic legitimacy to avoid the budgets on national level to be ex-ante coordinated in a non-transparent way between the government and the Commission and then served to the national parliaments for approval. What needs to be done is to create a complex mechanism for interaction between the authorities on national level, especially on such a key law as the budget, and separately - between the government and the Commission.

A key element of the European Semester is the imbalances procedure in which currently 14 EU member states are included, among them Bulgaria too. Mr Andrej Plenkovic is of the opinion that for now Croatia does not need to be included in it because at the moment the current account balance shows some surplus. Foreign debt is also stabilised, he says. In its winter forecast, the Commission, too, reports of a decline of the long-standing current account deficit of Croatia in 2012. The primary surplus in the third quarter of 2012 was supported by the record high achievements in tourism, the analysis of the Commission shows. Andrej Plenkovic sounded confident that the country will tackle the challenges and pointed out as well that although on a voluntary basis, the European Semester will be a useful exercise for the country.

But to what extent is that true given the upcoming elections for local authorities and European Parliament?

Until very recently, the issue of partial elections for Croatian members of the Europarliament was entirely absent on the agenda of society. Since very recently, however, it started gaining speed as with the accession date approaching so with the date for the local elections which under law take place on the third Sunday of May. But the opposition and the government are divided in their vision about when the European elections should take place. Without being determined, the prime minister hinted on a number of occasions that it will be better the voting to send 12 representatives of Croatia to Strasbourg to be separate from the local elections because this would allow more European issues to be raised.

But Andrej Plenkovic and his party do not share that opinion. He pointed several arguments in support of 2 in 1 elections. The main one being that thus maximum voter turnout will be ensured. Usually the local elections have two rounds. In the first, for sure, much more people will cast their vote. Besides, the citizens should not be forced to vote several Sundays in a row. On February 22nd, the first deputy prime minister and minister of foreign and European affairs, Vesna Pusic, suggested that it is not impossible the European elections to be held in April, although President Ivo Josipovic is still silent on the issue and it is him who should point a date. Political consultations with the president are currently under way.

According to Plenkovic, it is not serious not only the European elections to be on a separate date, but to be held as early as April because on March 1st new changes of the electoral legislation will come into force which introduce for the first time preferential voting. There will not be enough time neither for the people to be better informed about that novelty nor to hold a reasonable campaign, he says. May 19th is a more appropriate date, according to the MP, because this will ensure sufficient time for the procedure of electoral complaints and also for the future MEPs to prepare for their new offices. And last but not least, costs will be saved especially given the fact that Croatia will have to vote twice in a year time for members of the European Parliament - once now and another time next year when the regular European elections in the EU will take place.

Andrej Plenkovic is confident that the too many events that are about to happen before Croatia's accession - solving the dispute with Slovenia about the old savings in Ljubljanska banka, the local and European elections, the economic woes and the upcoming revision of this year's budget - will not hamper the country's efforts to complete its work on the remaining tasks until accession.

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