Cause and Effect in European Politics and Law

Croatia Is Worried - Romania and Bulgaria Are Catching Up!

Adelina Marini, September 2, 2016

“We should wake up from the winter slumber – the Romanians have caught-up with us and now the Bulgarians too are catching up! We should speed-up growth!” This is the sub-header of a thorough article [in Croatian] in Thursday's (September 1st) issue of one of the most prominent Croatian national daily newspapers Jutarnji list

Leading news in Croatia on Wednesday was that the country’s economy has grown faster than expected – 2.8% -- in the second quarter of 2016. And although the information of the Croatian statistics institute was cause for pride, but also arguments between leading political parties about who should get credit for this excellent economic performance, economic analysts warn that Romania will catch up with Croatia for the first time this year in terms of standard of living, measured as purchasing parity. Željko Lovrinčević, economic analyst, quotes Eurostat data, according to which last year the Gross Domestic Product per capita of Croatia was 58% of EU average, while Romania’s was 57%. This means, he thinks, that as soon as this year Romanians will come level with Croats in terms of standard of living. 

Bulgarian standard of living is at 46% of EU average. According to the Jutarnji article, the problem is that Romania and Bulgaria are developing faster than Croatia. Besides, European funds, a large contribution to this effect are sizable foreign investments, which the two states managed to draw in, claims the newspaper and dedicates a large portion of its piece on an article by The Financial Times of this week about Plovdiv’s achievement of turning from a poor town into a success story. Jutarnji also quotes Ariana Vela, owner of a school for European projects, who shares that she went to Plovdiv in 2004. “Everything there looked quite run down, but they have obviously succeeded in the meantime to determine their needs well, prepared quality projects, and utilised European funds money”

According to the newspaper, the reason for the Bulgarian success is not just utilising European money. A large contribution to the face-lift of Plovdiv and the surrounding areas comes from the business environment all over the country, which continues to be the most underdeveloped member of the European Union. Bulgarian corporate tax is the lowest in the EU – just 10%, reports Jutarnji and goes on that those low taxes are one of the reasons for the reasonably high economic growth of Bulgaria. The paper makes the comparison between Croatia and Bulgaria as well. Last year Croatia had economic growth of 1.6%, while Bulgaria’s was 3.0%. Unemployment in Croatia for June of this year was 13.2%, while in Bulgaria – just 7.2%. Young people unemployment is also considerably higher in Croatia – 30.1% in June, compared to 13.8% in Bulgaria. 

The newspaper’s conclusion is that what Croatia lacks are “investment hotspots” and the implementation of reforms throughout the country. The article is published at the peak of the snap elections campaign in the country, which will be held on September 11. Economic issues take considerable part in the election campaign, although most political powers practically offer the same to their voters, just because they tackle issues that have stood unresolved for years. It was comforting for Croatia until recently that it is not the poorest state in the EU. After joining on July 1st 2013, instead of going to the back of the line, Croatia stood in front of Bulgaria and Romania, who joined six years earlier. 

What the article fails to mention is that one of the reasons for Romania’s high economic growth from recent years is the vehement fight against corruption, which is already “paying dividends” to Romanian citizens. It is exactly because of problems with corruption and organised crime in Bulgaria and Romania, that requirements towards Croatia in its accession process were much more severe, also leading to a more stable institutional framework.

Translated by Stanimir Stoev

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