EC recommends no corrective procedure against Croatia

The Commission decided that there was no need to take corrective action against any EU member state, including Croatia, as part of the procedure to correct macroeconomic imbalances.

The European Commission on Wednesday released recommendations to member states on economic policies for this and next year as part of the European Semester, including six to Croatia for reducing the excessive deficit, discouraging early retirement, aligning wages with productivity and macroeconomic conditions, rationalising the system of state agencies, and reducing parafiscal charges.

Based on the national reform plans, the Commission has assessed that all countries announced sufficiently ambitious and clear measures on the basis of which we estimate that at this point there is no need to take stronger measures, Commissioner for Economic and Financial Affairs Pierre Moscovici said while presenting country-specific recommendations for all the member states.

The Commission's first recommendation to Croatia for this year and the next says that it should ensure a durable correction of the excessive deficit by 2016 by taking the necessary measures in 2015 and reinforcing the budgetary strategy for 2016, publish and implement the findings of the expenditure review, improve control over expenditure at central and local level by establishing a sanctioning mechanism for entities breaching budgetary limits, adopt the Fiscal Responsibility Act and strengthen the capacity and role of the State Audit Office, introduce a property tax, and reinforce public debt management, in particular by publishing on an annual basis a debt management strategy and ensuring adequate resourcing.

The second recommendation says Croatia should discourage early retirement by raising penalties for early exits, improve the adequacy and efficiency of pension spending by tightening the definition of arduous and hazardous professions, and tackle the fiscal risks in healthcare.

According to the third recommendation, Croatia should tackle the weaknesses in the wage-setting framework, in consultation with the social partners and in accordance with national practices, to foster the alignment of wages with productivity and macroeconomic conditions, strengthen incentives for the unemployed and inactive to take up paid employment, and reform the social security system based on a 2014 review.

The fourth recommendation says Croatia should reduce the extent of fragmentation and overlap between levels of central and local government by putting forward a new model for functional distribution of competencies and by rationalising the system of state agencies, and increase transparency and accountability in the public corporate sector, in particular as regards managerial appointments and competency requirements.

According to the fifth recommendation, Croatia should significantly reduce parafiscal charges and remove excessive barriers for service providers, and identify and implement steps to improve the efficiency and quality of the justice system, in particular commercial courts.

The sixth recommendation says Croatia should reinforce the pre-insolvency and insolvency frameworks for businesses in order to facilitate debt restructuring and put in place a personal insolvency procedure, and strengthen the capacity of the financial sector to support the recovery in view of challenges from high non-performing corporate loans and foreign currency mortgage loans.
 

(Text: Hina) 

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