Cause and Effect in European Politics and Law

Slovenia, Austria and Croatia Are Sceptical about Juncker's Investment Plan

Adelina Marini, December 12, 2014

The prime ministers of Croatia, Slovenia and Austria - Zoran Milanovic, Miro Cerar and Werner Faymann - gave a torpid support for Jean-Claude Juncker's investment plan at their trilateral summit in the Croatian town of Opatija, on the Adriatic coastline. In their joint declaration, the three premiers state their expectation the investment plan to generate "smart, sustainable and inclusive" growth. However, they do not mention even a word about a possible participation in the future fund the initial capital of which will consist of money from the common European budget (8 bn euros) and a capital injection by the European Investment Bank (5 bn euros). Moreover, Croatia and Slovenia, which experience economic hardship, emerge as the countries that will rather participate with "wish lists". This is precisely what MEPs spoke against during the first debate on the plan on 26 November in Strasbourg.

So far, the member states have presented some 2000 projects worth 1.3 trillion euros. Croatia and Austria have focused predominantly on energy projects but Croatia relies heavily also on transport, regional development, digital economy, whereas Slovenia has still not presented its projects but Prime Minister Miro Cerar said that the country is intensively working on them. Many of the presented projects are trans-border and affect the three countries. But although Croatia and Slovenia said they were intensively working on preparing projects for the new plan, their prime ministers were sceptical. Slovenian Premier Miro Cerar said that there were still too many uncertainties about the investment plan and that it should be seen how will it unfold. Austria's Chancellor Werner Faymann was more reserved saying that he did not believe that the plan would deliver any major change in Europe because the EU's economic weaknesses are due to many reasons one of which is the lack of common economic policy.

For example, he said, there is no common national bank in the EU which could stimulate economic growth. The member states are left on the mercy or disgrace of the capital markets. The plan is a step toward a more common Europe but this step is too small to instigate a significant change, he said. Croatia's Prime Minister Zoran Milanovic said that he wished the plan to succeed but underscored that they (probably he meant the member states) did not draw it as a concept, "which is why we can only comment on it". "I comment it as something that is welcome", he added. To him, however, it seemed much more important Croatia to succeed to take the best possible advantage of the funds allocated to it in the multiannual EU budget for the period 2014-2020. But every euro is welcome, he concluded. The European Commission expects the member states to support the plan and to involve themselves actively.

Europe has been in stagnation for 6 years and the reason is that too much attention is paid on cutting spending at any price, Milanovic said and recalled that he is not against austerity and that his government even proposed a rather tight budget but more consumption is needed. We need a different view on spending because, Mr Milanovic explained, today the Croatian motorways are a very big debt burden for the budget, but without them there would not be the 12 million tourists who visit Croatia each year or one billion euros in the budget from toll fees. "Everything has a price, investments are needed because without investments there is no development. Every billion is welcome", he concluded.

The three did not comment on the main message of the investment plan which is that it is only a part of the triangle representing the economic concept of Juncker's Commission - structural reforms, fiscal consolidation and investments. In this regard, although the three countries differ significantly, they have much in common and one such thing is the need for reforms. It is obvious, however, that they have not yet found the common denominator that would allow them to cooperate at EU level, although they have stated their desire to continue the already established tradition of trilateral summits. They started right after Croatia's accession in the EU on 1 July 2013 as their first meeting was in August in the Austrian city of Graz. Then, the prime minsters of the three countries met in the little Slovenian town of Brdo at Kranj in June this year. The meeting in Opatija is the third in a row. In their joint declaration, it is pointed out that the three sought a common approach on several issues that will be on the agenda of the European Council on 18-19 December in Brussels. From Milanovic's words it became clear that this format is still far from coordination. "These are not negotiations, not structured talks but simply a trialogue", he said.

And there is a huge field for possible coordination even in a greater format by including Italy, for instance, whose Prime Minister Matteo Renzi is the author of a significant change of the EU's economic concept. Slovenia and Austria are members of the euro area, whereas for Croatia the perspective is too distant. What is common between them is that the three have very high public debt - above 80% of GDP. Austria is in the best economic condition of the three. It is among the big EU economies and is one of the few with the lowest unemployment rate - below 5%. Slovenia is in the middle with an unemployment level of around and below 10%  whereas in Croatia the problem is huge - the unemployment here is above 17% and the country lines up right after Greece and Spain in terms of a share of young people among the unemployed. As member states of the euro area Austria and Slovenia are subject of budget coordination.

According to this year's review of the budget plans, Slovenia is among the five good performers, while Austria is among the seven whose budget plans are at risk of non-compliance with the provisions of the stability and growth pact. Moreover, the Commission sees a risk of a "significant" deviation from te mid-term budget objective and calls on the Austrian authorities to undertake significant measures to ensure compliance with the fiscal rules. Austria has a problem with the public debt which this year is expected to be 87% of GDP. In its autumn forecast, the European Commission expects a decline of the Austrian debt to 86.1%, but this level still is much higher than the ceiling in the stability and growth pact of 60% of the GDP. And although it is one of the countries that have positive growth in the eurozone and the EU the Austrian economy has expanded slowly. This year the economic growth is expected to be 0.7% and next year 1.2%.

Of Slovenia the European Commission says that its budgetary plan is broadly in line with the pact, but as there is a risk the recommendations for structural reforms not to be implemented the Commission urges the Slovenian authorities to be ready to undertake relevant measures. Slovenia, which managed to overcome on its own the economic crisis and avoided an adjustment programme, now has stable economic growth. This year it is expected its economy to expand by 2.4%. Next year, the Commission expects growth of 1.7% and in 2016 of 2.5%. The Slovenian debt, however, is a burden. This year it will be 82.2% and next year it is expected to slightly increase to 82.9%.

Croatia is not part of the euro area but is the only one (after Greece) with continuous recession - six years in a row. The country's debt has bubbled up significantly in the past years and this year it is expected to be 81.7% and next year 84.9%. The meeting of Milanovic, Cerar and Faymann did not make it clear whether they share common views regarding the European Commission's economic policy and its already tangible change - France, Italy and Belgium, which are in one group with Austria in terms of risky budget plans - received more time under the budget procedure until March, and Greece received a two-month extension of its adjustment programme. This puts to a serious test the motivation of the other member states to stick to stricter reforms and measures and most of all to the fiscal rules. In a rather general perspective the three leaders support the new Commission's priorities.

The philosophy behind the investment plan is to boost investments in strategic and common European projects. For the purpose, a website is going to be developed with a list of appropriate projects for investments as the aim of the future fund is to provide guarantees for the more risky projects. This means those the investors see not sufficient returns from but which are strategically important in the context of Zoran Milanovic's statement that the motorways are difficult to be paid back because of the insufficient revenues from toll fees but without them the situation would have been much worse.

The three countries urge Serbia to condemn Seselj

Much more unity there was in the three premiers' views regarding the EU enlargement toward the Western Balkans. The three support the enlargement process, as Slovenian Prime Minister Miro Cerar used another term - Europeanisation of the region. In their joint declaration the changed situation in the region is very clearly reflected. The purely protocolistic statements of support have given way to very specific criticism. They underscore the importance of the process of reconciliation and demand an "adequate reaction" in cases of "unacceptable hate speech" because, according to them, the consequences of the war in the region are still there. This is a very clear message to the authorities in Serbia who continue to refuse to publicly condemn the violent and xenophobic statements of the former Serbian leader Vojislav Seselj, a defendant in war crimes who was surprisingly released by the war tribunal in the Hague due to health reasons.

Zoran Milanovic, Miro Cerar and Werner Faymann also supported entirely the new approach of the EU toward Bosnia and Herzegovina inspired by the British-German initiative, which was based on a proposal by Croatia earlier this year. According to the three, it is very important not to lose sight of Macedonia and "the need for a discussion on the possible way forward". According to unofficial information, there is a process of deliberation on a possible plan similar to that of Bosnia and Herzegovina but as the situation there is very different, there are still no specific proposals. It is important, however, that the three countries commit to Macedonia, which would otherwise remain the only country in the region without any support and which has had for five years green light from the European Commission to begin accession negotiations but is blocked by Greece and since recently by Bulgaria because of unresolved bilateral issues.

The leaders of Slovenia, Austria and Croatia also discussed energy projects, especially in the context of the cancelled by Russia South Stream project with which the three countries are directly engaged. Austria was one of the ends of the pipeline and actively insisted on the realisation of this project, whereas Slovenia and Croatia would have only received deviations from the pipeline. Zoran Milanovic spoke the most on the issue but not in very specific terms. He said his country could take advantage of this new opportunity to become an energy hub for Central Europe. One of the 77 projects Croatia sent to the Commission for funding through Juncker's plan is the construction of an LNG terminal on the island of Krk, very near the place the three leaders met on 9 December. Croatia is also very actively working on the realisation of the Ionian-Adriatic strategy which foresees the construction of a gas pipeline and a motorway.

All issues the three leaders discussed in Opatija will be among the leading topics at the December EU summit.

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