Prime Minister Zoran Milanovic said on Wednesday the cuts the government was proposing in this year's budget revision were the maximum possible in relation to the European Commission's demands and recommendations as part of the Excessive Deficit Procedure, adding that bigger cuts would prevent the possibility of growth and badly impact the social situation in Croatia.
Addressing a press conference, Milanovic recalled that the Commission and the European Council gave Croatia three years to cut the budget deficit to three per cent of gross domestic product, adding that in the 2014 budget revision the government achieved cuts of 1.8% of GDP.
He said that was the optimum which could be achieved without having a negative effect on the social situation in the country and growth prospects.
Milanovic said the government would continue talks with the EC but that the government felt it had made quite a step forward and reached the limit.
He said any further cuts this year would affect social relations and growth prospects, all the more so because state consumption was important in the structure of Croatia's GDP.
Milanovic said the EC was "relatively flexible" in giving Croatia three years to cut the budget deficit, although as a new member state Croatia had certain liquidity issues. He said the Czech Republic was given EUR 1 billion to deal with the budget deficit, whereas Croatia received EUR 70 million because of the crisis.
He said the Commission would certainly see to that and that Croatia would cite that as the reason why it "almost completely" complied with the recommendations, "not quite fully," because "we have some bills to pay."
Reporters asked if the sale of the Croatia Osiguranje insurance company had hurt the state budget and if the sale had been necessary in the wake of a criminal complaint filed against the participants in the privatisation of the company.
Milanovic said the privatisation was very transparent and that it seemed to him the buyer had offered "very much." He said it was financially perhaps one of the most successful partial privatisations, and that "unfortunately" there were no sanctions against unfounded criminal complaints.
Asked if the government planned another attempt to sell the Postal Bank, he said the government was not satisfied with the offer that was submitted and that repeating the invitation for bids was quite a demanding process.
Reporters wanted to know if the government, in talks with the EC on the excessive deficit, would use the International Monetary Fund's assessment that one should not cut as much as the EC recommends.
Milanovic said Croatia was an EU member and that it would not "wave" the IMF's assessment in front of the Commission, although the assessment felt good.
Asked if the EC would view the transfer of money from the second to the first pension pillar as a structural measure, he said the measure was not structural but that it was imperative for liquidity at this moment.
Asked what Croatia was doing about its energy prospects, Milanovic mentioned amendments to the law on hydrocarbons, tenders to be invited in April for oil and gas exploration in the Adriatic, an agreement signed on the Trans Adriatic Oil Pipeline, and activities to build an LNG terminal.
Croatia's position is good and it has the chance to be one of Central Europe's energy gateways, but also a gateway for the probable sale of US liquefied gas in Europe, he said.
Asked if a potential Russian partner in Croatia's oil and gas company INA was unacceptable, he said the question should be asked "in Budapest" because the Hungarian oil and gas company MOL announced the possibility of selling its stake in INA and not the Croatian government.
(Hina)
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