Grcic and Maras: Reform measures will be decided in Croatia

Deputy Prime Minister Branko Grcic said on Friday that regardless of the European Commission's control mechanisms as part of the Excessive Deficit Procedure and the European Semester, measures for the implementation of necessary reforms would be decided by the Croatian government.

Responding to questions from the press during a closing conference on grants aimed at increasing the competitiveness of small and medium-sized enterprises, financed from the EU's Regional Competitiveness operational programme, Grcic said that over the last year Croatia had been implementing reforms within the European Semester just as it had before, when it was not subject to the European Semester.

"We have been implementing reforms all along. What is based on the eight areas of the EC's recommendations from the first phase of the European Semester has been implemented to a large extent. But there are still a few segments where progress needs to be made," Grcic said when asked if he expected that the Commission would positively assess Croatia's performance so far.

He cited the business environment, the reform of the healthcare and pension systems, and monitoring the work of municipal companies owned by local government units as areas where more progress was needed.

"We will continue to discuss all of these issues and over the next month or month and a half we will try to establish a good framework that will be acceptable to the European Commission and first and foremost to the Croatian government and citizens," Grcic said.

The government has until the end of April to submit a package of measures to the European Commission to correct macroeconomic imbalances, which will then be considered by the Commission in May. Last month the Commission found that Croatia had excessive macroeconomic imbalances for the second consecutive year, which required resolute political action and specific monitoring.

Asked if he feared possible monitoring by the EC, Grcic said that that possibility had been mentioned some time during talks but that he thought this would not be necessary because Croatia would do its job properly.

"We are covered by the Excessive Deficit Procedure and the European Semester, which in fact is a control mechanism used by the EC for other EU countries as well. However, I have to clearly say that our government's policy is that it is us who define measures and their nature," Grcic said.

Maras said that a lot had been done in the reform process. "If you compare the deficit in 2011 and 2015, you'll see a difference of 10 billion kuna, including the interest we paid for that period. Serious steps have been taken and people in Brussels respect that," he said.

"We are not Greece. We are duly servicing our debts. We know where we are going and will not make the same mistakes that countries like Greece did, lowering their people's living standards and cutting their wages by 30-40 per cent without achieving growth, even though the EC troika and monitoring were involved there. We know very well what happened there and that won't happen in Croatia. Decisions concerning Croatia will be made in Croatia ... and not in Bavaria or in Brussels," Maras said.

Grcic said that the national reform programme, which is to be submitted to the EC by the end of April, would not include measures to reduce public-sector salaries, pensions or welfare allowances. "That has been this government's policy from the outset and that's what distinguishes the Croatian government from many EU governments, because we did not succumb to pressure to cut the incomes of the most vulnerable citizens of Croatia, in particular pensions and welfare allowances. They won't be touched during the term of this government, you can rest assured," Grcic said, adding that it was yet to be seen whether cost-cutting measures would be proposed for some other areas.

One of the measures from last year's reform programme was to monetise the portion of public debt generated by the state-owned motorway operators, which should have been completed by the end of 2014. Grcic said that this process was taking its course, but that the government was taking into consideration the opinion of citizens calling for a referendum on the matter.

"Negotiations are under way. These are complex talks, with huge amounts of money at issue, between 2.5 and 3 billion euros, which cannot be resolved overnight. We also take into account the views of our citizens who signed a referendum petition. We'll see how it will end because we are also expecting an opinion of the Constitutional Court," he said.

Grcic reiterated the possibility that either citizens acquire a stake in the HAC ONC company directly through an initial public offering or that this is done indirectly through pension funds.

(Hina) vm

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