Cause and Effect in European Politics and Law

Zoran Milanovic Does Not Want More Europe

Adelina Marini, March 3, 2014

One of the disadvantages of the process of EU accession is that it prepares for the fundamentals, yet not always successfully, but it does not prepare for membership itself. In this way, all member states from the big bang enlargement (mainly from Eastern Europe) joined completely unprepared for the European political stage. They had to begin learning after accession that they are equal participants in the political process, to get acquainted with what was currently on the Union's agenda, to analyse it and consider what position to take. May be the only member state from the "new" group which has realised its place in the EU is Poland. The Union's newest member - Croatia - is not an exception from the general rule. Half a year before its accession to the EU on January 1st last year, there was no talk at all about the European Semester and even less about a key component of it that directly concerns the country - the excessive deficit procedure.

Although Croatia ever signing its accession treaty in December 2011 until its very membership attended all levels of European politics as observer, it was hard to find politicians or even analysts in Zagreb who can explain what the European semester would mean for the country after accession. That is why the government seemed as if unconscious what it has to do to reduce the budget deficit and the public debt, in spite of the fact that these were among Zoran Milanovic's main priorities ever since the beginning of his cabinet's term. But not in the EU context.

Just like in many of the other "new" members, in Croatia, too, the EU is reduced mainly to absorption of EU funds. Probably this is the reason why Prime Minister Zoran Milanovic was not prepared to answer euinside's question about the currently debated in the old part of Europe changes of the treaties with the aim to enhance the euro area integration and a possible redefinition of the freedom of movement of labour, as this website wrote many times. In front of students, professors and diplomats at the London School of Economics (LSE), Zoran Milanovic answered, after a brief moment of consideration, that he is not in favour of fundamental or any changes. Why? Because the country has just closed the accession negotiations and has agreed to a framework. Moreover, there was a referendum on Croatia's EU accession which means that if there were serious changes of the treaties, another vote should take place. As if thinking out loud, Mr Milanovic continued saying that there is enough Europe, but, still, he admitted some corrections were possible.

He recalled that even 15 years ago it was known that a monetary union is impossible without some kind of fiscal discipline, but in the same time he sincerely responded that he does not know whether it would be good for his country to join the euro area, although it has committed to in its accession treaty. The Croatian prime minister started his lecture at LSE with a question and it was obvious that he was still looking for an answer - is the EU a goal or a means? He said the EU was the main factor for many of the key reforms in the country which are still ongoing. Croatia is almost entirely consumed by its own problems and by a conservative revolution, as Zoran Milanovic described it, that has been taking place in the country in the past months. He means the wave of demands for referenda after the success of the opponents of gay marriages at a referendum last year, supported by the opposition Croatian Democratic Union (HDZ).

Milanovic's short lecture in London also made it clear that Croatia still is fighting the legacy of the war and former Yugoslavia, that it is yet facing the consequences of its decisions. For instance, that it had invested own money (in fact, huge loans) in the construction of, may be, one of the best motorway networks in this part of Europe. But now, the revenues from toll fees do not suffice to cover the loans. Or, as the premier described it in numbers, we are a country of four and a half million people and we need 80 million to pay for the motorways. In the same time, the state guarantees for the loans are regarded by Brussels as state aid, which puts the Croatian government in a difficult labyrinth to find the right exit. And that, in fact, is another proof that something significant is missing in the accession process. That seems to be realised in Brussels where last year the enlargement commissioner announced a significant shift in the approach with the decision to introduce the European semester in the enlargement process.

What kind of a member of the EU is Croatia?

Zoran Milanovic spoke in London entirely withoutn the support of a prepared speech which did not bring much clarity among the audience at LSE what kind of a member Croatia is and what positions does it defend at EU level. The prime minister was much more specific in the Sabor (the Croatian parliament) in the end of January in his report [in Croatian] about his participation in the EU summits in 2013. As a matter of fact, an initiative worth praising - to report participation and the decisions being made on behalf of the Croatian citizens. Zoran Milanovic admitted that the knowledge that Croatia is an equal member state does not yet have deep roots in the Croatian political and public life. There are attempts citizens to be scared by sanctions which constantly come from Brussels because of "this or that fabricated reason". All this, however, is due to ignorance. "Croatia did not join the Union to be silent and listen", Milanovic added.

Croatia, he continued, gained equality, responsibility and mutual trust during the long and tough process of accession negotiations. There is nothing without these things - "neither democratic society nor modern economy and trust is, first and foremost, based on rationality and individual possibilities and interests". Alas, Milanovic did not mention the Perkovic case which put Brussels in a very awkward situation and led to a significant loss of trust between Brussels and Zagreb.

Regarding one of the most intensively discussed issues last year in the European Council - the eurozone debt crisis - Zoran Milanovic, often presenting himself as an austerian, said that this topic is usually reduced to finding a balance between two contradictory processes - consolidation of public finances and cutting budget spending on the one hand, and conducting measures for recovery and growth, on the other hand. The countries that succeeded in finding this balance are just a few, he said. Those are mainly countries that implemented reforms and consolidation in times of sensitive growth of the gross domestic product and of cheap money. When times were good in Croatia, however, he told Croatian MPs, no reforms were implemented and the outcome is visible.

In this sense, the Croatian prime minister's vision of a successful country in the EU was very interesting. During his lecture in London, he said that the only member state that had managed to gain from its membership in the Community was Ireland. All the others demonstrated serious problems and are paying a high price, especially Greece. And here, it is important to recall the opinion of Wolfgang Schäuble, the German finance minister, according to whom the most successful countries in the EU at the moment are those who were forced to implement structural reforms. And, again, the winner is Ireland. Will Croatia be such a successful example, is still not yet clear. In the Sabor, the premier said that the implementation of reforms is a political decision.

Will Croatia join the banking union?

This is a question to which Zagreb still has no answer, but visibly no debate is taking place. Before the Croatian parliament, the premier reported that this was one of the leading topics at the European Council meetings, but at this stage Croatia is not ready with an answer. The country is yet to consider various options, starting from the Croatian interests and most of all the facts. And they are that Croatia is highly exposed to the euro, as 90% of the banking sector is owned by euro area banks. But when there will be an answer to this question as well as an answer about eurozone membership was not clear neither in the prime minster's report before the deputies nor before the LSE audience. What is clear, though, and the premier articulated it several times in London, is that the Croatian society will grow old before it gets rich.

In London, he said another very important thing and it is that EU and NATO have sinned in the Balkans. He specifically mentioned Bosnia and Herzegovina, which recently stretched the nerves of everyone in the region with the social rebellion all over the country. According to Zoran Milanovic, the international community and the EU in particular lose interest the minute the situation has calmed down. Currently, all the attention is focused on Ukraine, he said, which is quite normal. However, there still are unresolved problems.

Croatia is a new wonderful lesson for the European integration. The European Commission applied what it had learnt with the accession of Bulgaria and Romania unprepared on the EU fundamentals - democracy, rule of law, media pluralism, independent but accountable judiciary, fight against corruption and organised crime. Along the attempts to correct these mistakes, however, the Commission missed the economic reforms. And this is a lesson that has to be very carefully applied to the next candidates. Because, if Croatia, in parallel with the negotiations was discussing its positions on the fiscal compact, the banking union, euro area membership and Schengen, Zoran Milanovic would have hardly said "enough Europe". He knows very well that he has to do painful reforms, but that this could cost him the premiership. A fact we can call the "Juncker's dilemma".

In conclusion, we can summarise that the EU's newest member has a self confidence, it is reforming itself, although not quite convincingly, it is protective in terms of its own interest, although the country has not articulated it specifically yet. It does not know if it is good to adopt the euro nor if the banking union is something good for the country. But it knows that the EU is rather a means than a goal, but is not certain and is not discussing how exactly to use that means. If it opens a little bit more the process of decision making about EU issues, Croatia could seriously increase the interest toward the EU and thus respond to many of the issues on its agenda.

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