Tag Archive | "Croatia"

Extremist Ideological Background of Croatia’s Role in the Destruction of Yugoslavia


NOVANEWS

On the occasion of 20th anniversary of the end of the civil war on the territory of ex-Yugoslavia (1991−1995) it is necessary to reassess the real causes and cardinal perpetuators of the process of Yugoslavia’s internal and external bloody destruction.

Introduction

In the western scientific literature the “liberal democracy” scholars (as journalists and policymakers) have, for the last 25 years a standard cliché which is that the cause of Yugoslavia’s destruction is the Serbs as a nation[1] and that Yugoslavia’s only destroyer was Slobodan Milosevic – the “Balkans butcher”.[2] However, the same scholars (and journalists and policymakers) paid no attention to other internal or external “destroyers” of the country. In the case of Croatia, the authoritarian and neo-Nazi (Ustashi) regime of Dr. Franjo Tudjman’s Croatian Democratic Union (the HDZ) played a central role.

To illustrate for example, Franjo Tudjman is not included into the anthology of the top-20th century South-East European strongmen, authoritarian rulers and dictators, edited by Bernd J. Fischer, however Slobodan Miloshevic is.[3] This text is to contribute more accurately to the dialogue on the reasons and causers of Yugoslavia’s death in 1991−1995, especially as relating to Franjo Tudjman’s Ustashi regime in Croatia.

The HDZ in Power

The HDZ took power in Croatia with a majority, after the spring parliamentary and presidential elections in 1990. The party (est. in 1989) had an absolute majority in Croatia’s Parliament (Sabor) with Franjo Tudjman as both Croatia’s President and the party leader – a fact which allows the HDZ to establish, in effect, a full scale dictatorship in Croatia for the decade to 2000. A direct consequence of such electoral results in Croatia, inspired also by the electoral results in Bosnia-Herzegovina, was election in Serbia of Slobodan Miloshevic and his Socialist Party of Serbia (the SPS) in December 1990. The election of Miloshevic and his SPS in Serbia was Serbia’s answer to the electoral results in Croatia and Bosnia-Herzegovina – two Yugoslav republics in which the ultra-right political parties won power at the eve of the new civil war.

The majority of the Serbs in ex-Yugoslavia feared the Ustashi regime in Croatia, followed by the Islamic fundamentalist Party of Democratic Action (the SDA) of Alija Izetbegovic in Bosnia-Herzegovina. These were, largely, the driving forces for Serbia’s electorate  voting for its own strongman and nationalist to protect their brethren Serbs in other Yugoslav republics (Croatia and Bosnia-Herzegovina) fearing a continuation of the WWII Magnum Crimen against the Serbs.[4] For Croatia’s Serbs (the “Survivors” of the WWII Ustashi-led holocaust), especially in the Krajina region, Franjo Tudjman was a new Ante Pavelic (the WWII Nazi Croat leader) with the HDZ mirroring the WWII Nazi Croat Ustashi movement.[5]

HDZ’s authorities using the propaganda of creation of a Greater Serbia, soon succeeded in introducing a state-building at absolute odds with the idea of political liberal democracy and a society of multicultural and multiethnic coexistence. The party’s policy was mainly based on traditional Croatian clerical right-wing nationalism somewhat mirroring the extreme Croat national movement and rhetoric of the 1941−1945 Independent State of Croatia (the NDH). A German Nazi NSDAP salutation was even used in the Parliament in Zagreb by the HDZ’s members during the official parliamentary sessions.[6]

Nevertheless, in the HDZ’s Croatia a new political elite was much less interested in introducing of the Western liberal model of political democracy based on the rights and role of the Parliament in the national political system, free media and speech, than in continuation of the WWII policy of the “Final Solution” of the Serb Question in a Greater post-WWII Croatia with attempts to annex a greater part of Bosnia-Herzegovina. In such political atmosphere the ultra-right and even Nazi ideologies found ground in post-socialist Croatia – a country directly supported by Vatican and Western democracies and primarily by Germany. Among all ex-socialism East European countries, Croatia was the best example of transition from a state socialism to quasi-democracy by brutal nationalism and exclusivism.

Creation of a new ideological foundation is essential in the process of making a new state. In the 1990s war-time Croatia, the new political leadership of the HDZ drawn on extreme nationalistic and ultra-right political-national ideology, broadly based on Serbophobia, in order to gain massive public support for their political goals.

An ideological framework of anti-Serbism was the main ground on which the HDZ’s Government was building a new independent state of Croatia, creating a new army, security forces, institutional framework and promoting a “democratic and pro-European Croatia”. It is of extreme importance to stress that establishing a new order was essential in the chaotic atmosphere of the final collapse of the state socialism system with its own norms and values.  Croatia’s declaration of state independence in June 1991 and the outbreak of the conflict against both the central authorities in Belgrade and Croatia’s Serb population who decisively opposed living in any kind of independent Croatia taking primarily into account their  bloody experience from the time of the WWII NDH.

Furthermore, establishing a new normative order was important to legitimize political actions of the new authorities and to mobilize the ethnic Croats for the state-building process and above all for the “Final Solution” of the Serb Question in Croatia. Thus, the new Government succeeded in directing mass actions of the ethnic Croats in regime-approved ways: a war against the Yugoslav army and Croatia’s Serbs in the mid-1991 and finally the ethnic cleansing of majority of Croatia’s Serbs in the mid-1995. The ultra-right nationalistic ideology provided the biggest part of the content of the new Croatia’s order and values, with profound ethno-political consequences.

The pravashi

The Croat ultra-right nationalism and nationalistic ideologies are mainly based on the 19th century ideology of the Croat “state rights”, favored and maintained by the pravashi (the rightists). They and their groups and political parties espouse the same ethno-political goals as the leader of the 19thcentury extremist and racist strand of the same Croat national movement and Croatian Party of Rights (the HSP, est. 1861), Ante Starchevic. They appropriated the very essential elements of the HSP national ideology:

  1. A creation of a Greater Croatia with Bosnia-Herzegovina and some other South Slavic territories.
  2. An extermination of all Orthodox Serbs from a Greater Croatia or their Croatization.[7]

Ante Starchevic urged the creation of a Greater Croatia, not recognizing the existence of any other South Slavs except the Croats and Bulgarians.[8] His ideology and the HSP party’s program and narrative were markedly colored by anti-Serb tone. Consequently, both of them became the main ideological framework for the extermination of the Serbs on the territory of the NDH, 1941−1945 and for the ethnic cleansing of the Serbs by Tudjman’s regime in 1995 (the “Flash” and “Storm” military-police operations in May and August). In 1895, the even more radical and nationalistic Pure Party of Rights (the ČSP) was established, headed by Josip Frank whose members and ideological followers took active participations in the pogroms against the Serbs in Croatia and Bosnia-Herzegovina during the WWI.[9]

The post-Yugoslav HSP, as the largest and most influential the extreme Ustashi party, was re-established in February 1990 by domestic and émigré Croat Nazi Ustashi followers. The party  soon became relatively popular with a membership of approximately 100.000 by 1992, when the party received 7 percent of the vote for the national Parliament. However, the HSP became a “favorable opposition party” of the HDZ in the 1990s and as such, in reality, unofficial spokesman of the ruling HDZ. The coalition between these two ultra-right nationalistic parties resulted in the HDZ violating the Croatian electoral law in 1995 in order to permit the HSP to cross the statutory 5 percent threshold (5.1). After 1993 when the party leadership changed, the HSP became a tool of the ruling HDZ in Croatia’s political arena. In February 1996 the HSP was cleansed of all party leadership who opposed HDZ-HSP coalition and cooperation.

Different factional struggles within the pravashi bloc led to the creation of several new ultra-right political parties in Croatia like the HSP-1861, the Croatian Pure Party of Rights, the National Democratic League and the Independent Party of Rights. All of them, including unofficial groups and movements of the Croat extremists, trying to propagate their nationalistic messages through mass media almost totally controlled by the governmental HDZ. In these media efforts only those groups who had been “approved” by the HDZ (firstly the HSP) succeeded in sending their messages to the audience.

A “Herzegovinian lobby”

One of the most important features of Croatia’s political scene in the early 1990s was the fact that the HDZ itself was gradually passing to the hands of a “Herzegovinian lobby” (like Vladimir Sheks, Vice Vukojevic, Gojko Shushak) within the party leadership, which meant that the WWII Ustashi ideology and practice ultimately won against all other options in both the Central Board of the HDZ and the Government of Croatia.[10] However, the crucial point of this HDZ’s course was that  the party and State leadership became crucially dependent on – even governed – by the Croat (Ustashi) émigré groups with whom the HDZ “Herzegovinian lobby” had extremely close relations, especially Gojko Shushak, a Minister of Defense, who was manager and owner of several firms in Canada before returning to Croatia in 1990 to become a member of the Central Board of the HDZ. Franjo Tudjman favored Gojko Shushak exactly for the reason that he was a key figure in maintaining contacts with a Croat diaspora which was giving substantial financial support for the HDZ’s policy.

This “Herzegovinian lobby” succeeded in strengthening it’s own position within the HDZ, primarily by using regional identity as a basis for establishing necessary networks of power, influence, and favors (for instance, with Herzegovinian extremist Ivic Pashalic). The HDZ’s “Herzegovinians” are usually seen as the cardinal factor which firmed Tudjman as a dictatorial strongman in the party and the state.

Tudjman’s sympathy with and support to the “Herzegovinian” extremists is unquestionable, especially in authoritarianism on the domestic front and in dealing with Croatia’s Serbs. He was driven by his personal and his HDZ party’s “historic mission” to bring State independence for (a Greater) Croatia and to finally solve the Serbian Question within her borders. He shared the standpoint of the traditional Croat nationalists, that all aspects of the transition from State socialism to (quasi)liberal democracy and market economy have to be subordinated to the State-building process. Nonetheless, Tudjman was astute enough to project a “democratic” image abroad. This prevented many  foreign observers and politicians from recognising the reality of his ultra-right views and politics, especially in dealing with Croatia’s Serbs.

A Rehabilitation of the WWII NDH

From the point of ideology of the extreme Croat nationalism, the cardinal goal of ultra-right nationalistic parties, groups, ideologists and politicians was to create, for the first time after 1102, an independent, as well as a Greater and finally “Serben-frei” Croatia. In the 1990s it was ultra-right nationalistic ideology that provided the main background for creation of the new order and values in the HDZ’s Croatia.

For all Croat ultra-nationalists, a crucial political reference in regard to the state-building process is the (1941−1945 created) NDH. They finally succeeded – with great support by Tudjman and his HDZ – to rehabilitate the NDH and even to recognize its contribution to the Croat State-building efforts. This was achieved mainly by a brutal falsification of historical facts and self-interpretation of historical events and the role and deeds of the Croat Ustashi personalities. For the HDZ’s Croatia there were at least four reasons for praising the Ustashi WWII state:

  1. The NDH gave a political-historical foundation for the post-Yugoslav Croatia’s statehood.
  2. It annexed majority of  Croat claimed South-East European territories and as such became a kind of historical realization of a Greater Croatia projected by Pavao Ritter Vitezovic in 1700.[11]
  3. The Ustashi regime showed a way of solving the “Serb Question”, thus, in regard to this historical process, became a blueprint for the coming generations of the Croat “patriots”.
  4. The existence of the NDH provided a necessary link of a self-imagined “proof” of the so-called “Thousand-year-old” legal continuity of the Croatian statehood.

All political parties and organizations in Croatia and Bosnia-Herzegovina of the “Croatian rights” openly propagated their direct connections with the NDH and its führer (poglavnik) Ante Pavelic who himself was a member of the “Croatian Rights” party.[12] Here is worth to notice that Franjo Tudjman, during the WWII, fought for several months in the Ustashi uniform – a fact which gave a huge credibility to him in the eyes of any Croat extremist despite his Communist past.

It seems obvious that the ultimate ethno-political goals of both the pre- and WWII Ustashi movement and post-Yugoslav “Croat Rights” are  identical including the concept of “solving” the “Serb Question” in a Greater Croatia. This was largely the case with the re-established HSP in 1990. Originally this party defined its program exclusively in relation to the NDH and the WWII Ustashi movement widely using various NDH symbols and iconography. Nevertheless, an original 1990 HSP’s leader, Dobroslav Paraga, never accepted any fascist or Nazi face of the NDH even claiming that the State was anti-fascist.[13]

For all Croat extremists, including Tudjman himself, the NDH represented democratic wishes of overwhelming majority of ethnic Croats for their own independent state (from Yugoslavia as a “Greater Serbia”) and was legitimate continuation of the independent Kingdom of Croatia which became incorporated into the Kingdom of Hungary in 1102. Furthermore, all of them deny any engagement of the NDH’s regime in any systematic and organized persecutions or genocide committed on the racial, confessional or ethnic grounds. Moreover, the HSP insists that the Ustashi terror against the Serbs in 1941−1945 was provoked by the Serbs themselves, i.e. by the Partisan uprising in July 1941 against the legitimate and internationally recognized NDH[14] neglecting the fact that the Ustashi genocide against the Serbs started three months before the outbreak of the Serb-(Partisan and non-Partisan) revolt in the NDH.

HSP’s political cynicism even indulged absurd claims that many of the massacred Serb civilians had, in fact, been killed by the Serb-Chetniks or Partisans dressed in the Ustashi uniforms. Nevertheless, a common issue among all Croat extremists regarding the “Serb Question” is the WWII practice of creation of an Autocephalous Croatian Orthodox Church as a bridge toward the final Catholization and Croatization of Croatia’s Serbs.

The excuse for Ustashi violence in the NDH is usually followed by the claim that the Nazifascist feature and iconography of the NDH were forced upon the Ustashi authorities by Germany and Italy, that the Ustashi Government did as much as possible to protect the Jews within the NDH, and finally, and of the crucial importance, that the real number of murdered Croatian Serbs is very much overestimated by the pro-Serb Yugoslav authorities after the WWII.

For instance, instead of 700.000 killed people in the death camp of Jasenovac (“Yugoslav Auschwitz”, of whom 500,000 were the Serbs) today official Croatia recognizes just 86.000. In the other words, Jasenovac is a great Serbian falsification and political propaganda: a myth projected by the supporters of an idea of a Greater Serbia.[15] For the Croat extremists, among the victims of Jasenovac the largest number have been the ethnic Croats but not the Serbs.[16] The Croat rightists as apologists for the Ustashi movement claim that the NDH is falsely represented for pure political reasons and therefore the picture of the NDH has to be repainted. However, such repainting or rewriting of the NDH’s history is at odds with historical sources and scientific account of non-partisan historiography. Finally, Dr. Franjo Tudjman himself, as a professional historian, in his most important book (Wastelands of Historical Reality) sought to minimize the crimes of the Ustashi regime in the WWII against both the Serbs and the Jews.[17]

A rehabilitation of the legacy of the NDH and Ustashi ideology with the NDH’s iconography was, however, only a formal problem for Franjo Tudjman and his HDZ who have been officially ambivalent toward it. Tudjman knew very well that any close association with the NDH and Ustashi ideology and iconography will cause many problems for Croatia’s image abroad especially among the cluster of the Jewish communities and political lobbies. However, on the other hand, for Tudjman the NDH was giving the State-building example, as Croatia for the centuries did not have any experience of a real and internationally recognized statehood. For that reason, for the HDZ’s ideologists the NDH became a crucial element for completing the main party’s task – to unify within the umbrella of the HDZ all different strands of Croatness.

In addition, the NDH was giving a link to Vatican as the main supporter of both the Ustashi and the HDZ regimes and ideology.[18] Subsequently, the HDZ’s authorities did not and do not openly endorse the Ustashi movement and the NDH, as it is the case with of “Croat rightists”, but on the other hand both Tudjman and his HDZ had avoided any clear denunciation of the NDH’s Nazi, totalitarian, genocidal and above all Serbocide aspects. Moreover, the HDZ’s Croatia adopted all important symbolic and iconographic aspects of the WWII NDH (like kuna currency, state insignias, etc.) and dedicated streets, squares and monuments in Croatia to the Ustashi WWII officials. Tudjman himself as a President of Croatia nominated, for instance, two ex-WWII Ustashi officials to high state posts: Ivo Rojnic – Ustashi commander in Dubrovnik who became Croatia’s ambassador in Argentina and Vinko Nikolic – an official in the Ministry of Education of the NDH who gained a Parliamentary seat. With the rehabilitation of the Nazi NDH, Tudjman’s Croatia was also rehabilitated as was the WWII Croatian Roman Catholic Church headed by an Archbishop of Alojzije Stepinac who directly collaborated with the Ustashi regime.[19]

A linguistic nationalism or purification of the official standardized Croat language in the public usage, but mainly from the Serb language based lexemes was an agenda of the Croatization of Croatia by Tudjman regime.[20] However, a lexical purification of the Croatian language in Tudjman’s Croatia was executed, basically, according to the NDH’s pattern. One of the first steps in the process of Croatization and purification of the Croat language by the new HDZ’s authorities was to make a clear difference between the Croat and Serb languages from lexical, orthographic and grammatical points of view. This was undertaken in a set of scientific editions by the linguists and philologists who have been at the same time trying to present and a “proper” history of the Croat language. The ultimate aim was to prove that the Croat and the Serb always have been two different ethno-national languages and of the most importance, that the Shtokavian dialect was always the Croat national language, not only the Serb.[21] The final ethno-political consequence of the HDZ’s policy of linguistic nationalism was that the Serb ethnic name was expelled from the official name of the standardized language and its orthography in Croatia and likewise everything in connection with the Serbs in regard to the Croat language.[22]

Nevertheless, as the best means to hide its de facto support for the Ustashi ideology and the WWII NDH’s legacy, Tudjman’s regime officially  supported the “anti-fascist” Josip Broz Tito’s Partisans from the WWII[23] with the political rhetoric of the post-Yugoslav Croatia building her own Statehood, the “anti-fascist” People’s/Socialist Republic of Croatia, post 1945.

However, at the same time, the HDZ created a clear atmosphere in Croatia in which the victims of the Ustashi terror (primarily the Serbs) are regarded as the national enemies. To illustrate, to January 1996 around 3,000 “Partisan” monuments were destroyed or removed in Croatia.[24] Tudjman launched an initiative to transform the memorial centre to the Jasenovac death camp  (on the Sava River on Croatia’s side) from the “victims of fascism” to the “victims of the civil war” – an initiative which also camouflaged association with the NDH, which pleased all Croat extremists.

Even before the beginning of the civil war in Croatia in 1991 the Croat security forces heavily structurally damaged the Jasenovac museum building and a large part of documentation and torture evidence simply disappeared. The monument itself was not destroyed or damaged since it is composed by four Ustashi “U” letter-symbols.

Franjo Tudjman, a Ph.D., in history, ran in to conflict with the Yugoslav Communist authorities in the mid-1960s when he started to refute the official number of murdered ethnic Serbs in Jasenovac as too high, accusing at the same time the Yugoslav Communists for deliberately falsifying the truth on Jasenovac. It cost him dismissal from the post of a head of the Institute for the History of the Workers Movement in Croatia (in Zagreb) but this action marked the beginning of the process of Tudjman’s transformation from a Partisan General, to the Croat nationalist and extremist. Nonetheless, his cosmetic political moves, as removing a prominent Ustashi extremist Tomislav Merchep from the HDZ’s Executive Committee at the Third General Convention of the HDZ in October 1995, could not hide the HDZ’s infatuation with the Ustashi iconography, ideology, legacy and ethno-political goals.

Conclusions

Tudjman’s and HDZ’s preoccupation with Croatia’s state-building and solving the “Serb Question”, rather than establishing liberal-democratic political systems and institutions, meant that the NDH’s legacy continued to play very important role in the HDZ’s strategy and policy of creation of the new order and values. In the other words, the political-ideological mainstream of the HDZ’s Croatia was and is grounded in the NDH’s legacy.

Today, as a result of the HDZ’s policy of extreme ethno-confessional nationalism, Croatia is, since mid-1995, “more ethnically homogeneous than ever was in the historic past”.[25] The Serb population on the present-day territory of Croatia fell from 24 percent in 1940 to 12 percent in 1990 and 4 percent in 1996 with the practice of its everyday assimilation (Croatization) and emigration from Croatia.

Notes:

[1] T. Judah, The Serbs: History, Myth & the Destruction of Yugoslavia, New Haven−London: Yale University Press, 1997.

[2] S. L. Woodward, Balkan Tragedy: Chaos and Dissolution After the Cold War, Washington, D.C.: The Brookings Institution, 1995.

[3] B. J. Fischer (ed.), Balkan Strongmen: Dictators and Authoritarian Rulers of Southeast Europe, London: C. Hurst & Co. (Publishers) Ltd, 2006. For the matter of clarification, Slobodan Miloshevic was a Montenegrin, probably even born in Montenegro in the village of Ljeva Rijeka. At the wartime of the 1990s, as today as well, Serbian political scene was and is completely occupied by the persons who are either not Serbs, not born in Serbia or by those whose origin is out of Serbia living in Serbia as the first generation of immigrants. Many of them even did not learn properly to speak Serbia’s Serbian language of the Ekavian dialect. On the sociolinguistic aspect of the destruction of ex-Yugoslavia and Serbian national question, see [В. Б. Сотировић, Социолингвистички аспект распада Југославије и српско национално питање, Нови Сад−Србиње: Добрица књига, 2007].

[4] On the holocaust of Serbs (Magnum Crimen) in the Independent State of Croatia, 1941−1945, see [V. Dedijer, The Yugoslav Auschwitz and the Vatican, Prometheus Books, 1992; B. M. Lituchy (ed.), Jasenovac and the Holocaust in Yugoslavia: Analyses and Survivor Testimonies, New York: Jasenovac Research Institute, 2006; V. Novak, Magnum Crimen: Half a Century of Clericalism in Croatia, I−II, Jagodina: Gambit, 2011; E. Paris, L. Perkins, Genocide in Satellite Croatia, 1941−1945: A Record of Racial and Religious Persecutions and Massacres, Literary Licencing, LLC, 2011].

[5] On the WWII Nazi Croatia, see [S. Trifkovic, Ustaša: Croatian Fascism and European Politics, 1929−1945, The Lord Byron Foundation, 2011; R. McCormick, Croatia under Ante Pavelic: America, The Ustaše and Croatian Genocide, London−New York, I.B.Tauris & Co Ltd, 2014].

[6] See the USA documentary movie [Truth is the Victim in Bosnia, 1992 at https://youtu.be/fNqHfIugmaU].

[7] For a more detailed discussion of this issue, see [В. Крестић, Геноцидом до Велике Хрватске. Друго допуњено издање, Јагодина: Гамбит, 2002].

[8] On Croatian national identity, see [A. J. Bellamy, The Formation of Croatian National Identity: A Centuries-Old Dream, Manchester−New York: Manchester University Press, 2003].

[9] On the ideology of the Croatian Party of Rights, see [M. Gross, Povijest pravaške ideologije, Zagreb: Institut za hrvatsku povijest, 1973; M. S. Spalatin, “The Croatian Nationalism of Ante Starčević, 1845−1871”, Journal of Croatian Studies, 15, 1975, 19−146; G. G. Gilbert, “Pravaštvo and the Croatian National Issue”, East European Quarterly, 1, 1978, 57−68; M. Gross. A. Szabo, Prema hrvatskome građanskom društvu. Društveni razvoj u civilnoj Hrvatskoj I Slavoniji šezdesetih I sedamdesetih godina 19. stoljeća, Zagreb: Globus nakladni zavod, 1992, 257−265]. On historical account of the political parties’ ideologies in Croatia, see [Ј. Хорват, Странке код Хрвата и њихова идеологија, Београд: Политика, 1939]. On the pogroms of Serbs in Bosnia-Herzegovina during the Great War, see [В. Ћоровић, Црна књига: Патње Срба Босне и Херцеговине за време Светског Рата 19141918, Удружење ратних добровољаца, 1996].

[10] The Herzegovinians are traditionally considered as the most belligerent and confrontational mental group within the territory of ex-Yugoslavia. On mental and cultural characteristics of the Yugoslavs, see [В. Дворниковић, Карактерологија Југословена, Београд: Просвета, 2000].

[11] P. R. Vitezović, Croatia rediviva: Regnante Leopoldo Magno Caesare, Zagreb, 1700.

[12] On Pavelic’s biography, see [B. J. Fischer (ed.), Balkan Strongmen: Dictators and Authoritarian Rulers of Southeast Europe, London: C. Hurst & Co. (Publishers) Ltd, 2006, 228−271].

[13] For instance, see, interview with Paraga in [Danas, Zagreb, 1991-03-5].

[14] The NDH was recognized by Germany, Italy, Slovakia, Hungary, Romania, Japan, Spain, National China, Finland, Denmark and Manchuria. It existed from April 10th, 1941 to May 15th, 1945 [S. Srkulj, J. Lučić, Hrvatska Povijest u dvadeset pet karata. Prošireno i dopunjeno izdanje, Zagreb: Hrvatski informativni centar, 1996, 105].

[15] On Tudjman’s Croatia’s dealing with the population losses in the NDH and the rest of Yugoslavia, see [V. Žerjavić, Population Losses in Yugoslavia 1941−1945, Zagreb: Hrvatski institut za povijest, 1997]. Compare with [С. Аврамов, Геноцид у Југославији у светлости међународног права, Београд, 1992].

[16] See, for instance, Election Declaration of the Croatian Party of Rights in 1992 [Izborna deklaracija Hrvatske stranke prava, Zagreb, 1992, 3].

[17] F. Tudjman, Bespuća povijesne zbiljosti, Zagreb: Matica Hrvatska, 1989.

[18] On direct links between the NDH and Vatican, see [Tajni dokumenti o odnosima između Vatikana i ustaške NDH, Zagreb, 1948; V. Dedijer, Vatikan i Jasenovac. Dokumenti, Beograd, 1987; D. Živojinović, D. Lučić, Varvarstvo u ime Hristovo. Prilozi za Magnum Crimen, Beograd, 1988; M. Bulajić, Misija Vatikana u Nezavisnoj Državi Hrvatskoj, I−II, Beograd, 1992; М. А. Ривели, Бог је с нама: Црква Пија XII саучесника нацифашизма, Никшић: Јасен, 2003; Д. Р. Живојиновић, Ватикан, Католичка црква и југословенска власт 19411958, Београд: Просвета−Терсит, 1994, 11−127].

[19] On Stepinac’s case, see [A. Benigar, Alojzije Stepinac hrvatski kardinal, Rim, 1974; S. Alexander, The Triple Myth. A Life of Archbishop Stepinac, New York, 1987; М. А. Ривели, Надбискуп геноцида: Монсињор Степинац, Ватикан и усташка диктатура у Хрватској 19411945, Никшић−Јасен, 1999].

[20] A linguistic nationalism was a common issue in all former East European countries after 1990 as the language was and still is understood as the main identifier of the (ethno)nation. On the linguistic nationalism in ex-Yugoslavia in the 1990s, see [S. Barbour, C. Carmichael (eds.), Language and Nationalism in Europe, Oxford−New York: Oxford University Press, 2000, 221−239].

[21] On this issue, as examples, see [V. Brodnjak, Razlikovni rječnik srpskog i hrvatskog jezika, Zagreb, 1991; M. Moguš, Povijest hrvatskoga književnoga jezika, Zagreb: Globus nakladni zavod, 1993; M. Kačić, Hrvatski i srpski. Zablude i krivotvorine; Zagreb: Zavod za lingvistiku Filozofskoga fakulteta Sveučilišta u Zagrebu, 1995; M. Lončarić, Hrvatski jezik, Opole: Uniwersytet Opolski – Instytut Filologii Polskiej, 1998]. Compare with [П. Милосављевић, Срби и њихов језик. Хрестоматија, Приштина: Народна и универзитетска библиотека, 1997].

[22] M. Okuka, „O osamostaljivanju hrvatskog književnog jezika“, А. Кюннапа, В. Лефельдта, С. Н. Кузнецова (ред.), Микроязыкиязыкиинтерязыки. Сборник в честь ординарного профессора Александра Дмитриевича Дуличенко, Тарту, 2006, 231. On the Serbian point on the Croat, Serb and Bosnian languages, see [B. Tošović, A. Wonisch, (eds.), Die serbische Sichtweise des Verhältnisses zwischen dem SerbischenKroatischen undBosniakischen, I/4, Novi Sad: Institut für Slawistik der Karl-Franzens-Universität Graz−Beogradska knjiga, 2012].

[23] For the matter of historical accuracy, the Partisans of Josip Broz Tito (half Slovene and half Croat) during the WWII have not be fighting against the Germans, Italians and Ustashi forces if they are not attacked by them. Moreover, during the whole war the Partisans collaborated primarily with the NDH regime and its armed forces but with the Germans as well. Therefore, the “anti-fascist” aspect of Tito’s Partisans and the Communist Party of Yugoslavia (the KPJ) is falls and invented by the Yugoslav communists themselves. On this issue, see [М. Самарџић, Сарадња партизана са Немцима, усташама и Албанцима, Крагујевац: Погледи, 2006; В. Б. Сотировић, Кривотворине о Јосипу Брозу Титу, Брозовим партизанима и Равногорском покрету, 1941. г.1945. г., Виљнус: Југославологија – Независни истраживачки центар за југословенске студије, 2014]. About Josip Broz Tito, see [В. Адамовић, Три диктатора: Стаљин, Хитлер, Тито. Психопатолошка паралела, Београд: Informatika, 2008, 445−610; П. Симић, З. Деспот, Тито: Строго поверљиво. Архивски документи, Београд−Службени гласник, 2010; П. Симић, Тито: Феномен 20. Века. Треће допуњено издање, Београд: Службени гласник, 2011; J. Pirjevec, Tito in tovariši, Ljubljana: Cankarjeva založba, 2011; V. Dinić, Tito (ni)je Tito. Konačna istina, Beograd: Novmark doo, 2013].

[24] Vreme, Beograd, 1996-01-15.

[25] S. Barbour, C. Carmichael (eds.), Language and Nationalism in Europe, Oxford−New York: Oxford University Press, 2000, 228.

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Croatia Is Starting Preparations To Join Eurozone


NOVANEWS

The EU’s newest member state is starting for a new objective – membership, first in Schengen, and then in the euro area. The Croatian government expects preparations for Schengen to be completed in 2019 and for the euro area it will take more time. To Prime Minister Andrej Plenkovic this is an expression of pro-Europeanism, thus, he says, euro area membership is pro-Croatian. Joining the cores of European integration has been a major priority for Mr Plenkovic’s government ever since his party, Croatian Democratic Union (HDZ), won the elections last year on a pro-European programme. Despite the political jolts and change of the coalition partner in motion, the first step in the preparation to introduce the euro has been made last week when a strategy for euro area accession was presented.

Judging by the overall organisation, it was evident that a lot of work was invested in the event. The strategy was presented in both Croatian and English language, several informative animation video clips have been presented explaining the pros of the single currency, a special webpage [in Croatian] has been created on the Croatian National Bank’s website (HNB), dedicated on the common currency. The presentation of the strategy, during a several-hour long conference, marked the launch of a public debate of the pros and cons of introducing the euro. For now, leaders are refraining from committing to a specific accession date, but in Prime Minster Plenkovic’s and central bank President Boris Vujcic’s words, it is realistic to expect that Croatia can join the exchange-rate mechanism (ERMII) by the time of Croatia’s EU Council Presidency (2020). This suggests that it is possible Croatia to become part of the currency club in 2022 or 2023.

The next national objective

Since its EU accession on 1 July 2013, Croatia has been in a condition of post-accession stress – without clear horizon and entirely consumed by domestic political issues. According to local analysts and politicians, the introduction of the common European currency is that so necessary third national target (after independence and EU and NATO accession) which can unite society in making the next step of its transformation. PM Andrej Plenkovic believes that the most important benefit from introducing the euro is that it will bring global political and economic credibility. “The common European currency is a key element of the project for European integration, especially when it comes to strengthening the single market, most of all because of the easier economic exchange with 19 member states and 340 million Europeans who use the euro“, he said.

Beyond the very geopolitical statement, which undoubtedly is very important both for the EU and Croatia, the country has very objective reasons to want to join the euro as soon as possible. Croatia is currently the only one of the smallest and open economies of the EU which has not yet introduced the euro. Moreover, the country is very highly integrated in the European economy – 60% of Croatia’s trade is with the euro area countries and 70% of the revenues from tourism come from the eurozone. A large part of the banking system is owned by banks in the euro area. Croatia is also the most euroised economy of all non-euro area members – more than 90% of foreign currency debt is in euro. The share of deposits in foreign currency is 83%.

This is the reason why HNB’s manoeuvre space is very small, governor Boris Vujcic explained. For the past years, the bank’s main task has been to maintain the kuna’s exchange rate stable in order to keep indebtedness under control and to not harm exports. Joining the euro area will completely eliminate the currency risk, said Mr Vujcic. He also gave the following example in support of his arguments. If an investor wants to invest 100 million euro in Croatia and the kuna exchange rate lost 10% to the euro he will lose 10% or 10 million euros. When this risk disappears investments will increase, as they have not yet reached their pre-recession levels. Boris Vujcic said Croatia has nothing to lose by transferring its monetary sovereignty over to the ECB because even now its monetary policy is significantly constrained.

 

At the moment, Croatia fulfils almost all accession criteria, except the one that covers the level of public debt – it should not exceed 60% of GDP. In the second quarter of this year, the debt-to-GDP-ratio was 81.9%, according to the latest Eurostat data. The ambition of the government is to reduce it to 72% of GDP by 2020. In the national reforms programme is set the target of 65% of GDP by 2022. Finance Minister Zdravko Maric is not worried about this because, he said, what is important is the trend. “Most countries in the EU and the euro area have debt levels over 60%“, he said and recalled that there is another rule which states that a clear trend for debt reduction is sufficient.

According to this rule, the difference between the current public debt level and the 60% ceiling should not exceed 1/20. What he means is the public debt rule of the Stability and Growth Pact, according to which when the 60% level is exceeded an excessive public debt procedure is launched. However, this has never happened for any member state so far and many were those who exceeded the barrier after the euro area debt crisis broke. The 1/20 step tor educe debt is applied precisely in such a procedure.

This means that Croatia has to reduce its public debt by 1.3 percentage points annually, which is plausible because last year it made a two times faster reduction, the finance minister said. Favourable economic conditions create a very good environment for debt reduction. The country exited last year a very painful recession which lasted more than 6 years, and this year it exited the excessive budget deficit procedure. Economic growth is expected to be 3.1% this year and 2.8% next year, according to the International Monetary Fund’s projections. Minister Maric acknowledged that, at the moment, the moods in the eurozone are for deepening of integration rather than enlargement.

IMF welcomed Croatia’s plan to introduce the euro but warned that, in order to achieve maximum success, it needs to accelerate implementation of structural reforms – something which has proved to be a mission impossible for years. IMF also recommends quick reduction of public debt in order to create fiscal space in support of growth in case of a new downturn. Among the recommended reforms is to improve competitiveness, reduce administrative burden for businesses, increase flexibility of the labour market, improve efficiency of the public sector, enhance property rights and judicial procedures.

At the presentation of the strategy it became clear that the government knows what to do but it has been a year at the helm and is not yet capable of undertaking some serious reforms. Deputy Prime Minister and Minister of Economy Martina Dalic underscored several times the need to implement reforms, especially aimed at increasing productivity. She pointed out that public consensus was necessary for those reforms.

Pros from introducing the euro

HNB and the government agree that benefits from joining the eurozone significantly outwiegh costs. To change banknotes and coins Croatia is expected to spend 0.5% of its gross domestic product, which the minister of finance admitted is a lot but said this is a one-off. Apart from that, Croatia has to pay the remainder of its capital in the ECB – 62.8 million euros, a contribution to the ECB protection layers – around 300 million, transfer part of its reserves – cca 350 million euro. Croatia will also participate in the capital of the permanent rescue fund (ESM) – 425 million in the first 5 years or 85 million annually. At the same time, Croatia will have full access to the financial instruments of the euro area should it be in need.

When there is no such need, the benefits are much lower costs of banks to access financial resources, reduction of interest rates to levels close to euro area core which will increase the competitiveness of the Croatian economy. It is also expected the costs for interbanking transfers to be significantly reduced. Prime Minister Andrej Plenkovic pointed to another big pro from introducing the euro – wage increase. In the past 12 years, the average gross wages in the Central European countries which introduced the euro increased much faster than in Croatia – by 37% in Slovenia, 60% in Slovakia, 88% in Lithuania and Estonia, 136% in Latvia and in Croatia wage growth was just 29%.

Citizens’ biggest concern from introducing the euro is price growth. According to analyses, even now can be observed the phenomenon of European prices but Croatian wages. Boris Vujcic quoted statistical data from previous euro area enlargements, which say that inflation rose between 0.2% and 0.3% as a result of euro introduction. Economic analysts warned, however, that such data should be approached with care because in past cases inflation was due to other factors, such as oil prices and not to euro introduction.

The government and the central bank promised that they will make sure speculations and rounding-offs of prices be avoided by introducing a requirement 6 months before euro area accession all prices to be shown in kunas and euros simultaneously. The premier recalled that in the period 2004-2016 euro area prices increased by 23% and in Croatia by 31%.

The government and HNB will launch a massive information campaign in the coming weeks. The premier rejected the possibility of a referendum on euro area accession. In his introductory statement at the beginning of the conference last week, he said that Croatia had already said “yes” to euro area accession by signing its EU membership treaty, validated at a referendum. Asked specifically by euinside, he said there was no need of a separate referendum. Plenkovic, however, refused to speculate on the possibilities a certain group to decide collecting signatures for a referendum, which has become a practise in recent years in Croatia when it comes to sensitive issues.

I think the euro is an opportunity which Croatia has to grasp and which we have to prepare well for, and which is to confirm the responsible economic policy of the government and to give Croatia a chance for further development and stability of the economy“, Mr Plenkovic added. The reactions that ensued after the presentation of the strategy were weak. The prevailing comments are that the government is trying with this strategy to create smoke and mirrors to distract public attention from the biggest scandal in the country at the moment – the crisis in the Agrokor concern. It is a fact, however,that Croatia’s euro area accession was a major priority of the government long before it emerged that Agrokor is in trouble.

The prime minster mentioned the concern in the context of the decision to start eurozone preparations by saying that the situation is under control and will not have an impact on the country’s economic perspectives. IMF shares that opinion, saying that the adopted law on systemically important companies was a good solution of the Agrokor crisis but recommended the government to identify and resolve the rest of the problems which could impact corporate governance, like accounting and auditing standards, insolvency resolution and lenders’ rights. The Fund also calls for progress in resolving the Agrokor crisis in a transparent way.

As if to prove its determination to introduce the euro, Croatia will join the fiscal compact too – an intergovernment agreement which imposes stricter fiscal discipline on the member states. Boris Vujcic explained that it was decided Croatia not to join the banking union before introducing the euro because this would cost more than the benefits. In the coming weeks, HNB will organise a series of round tables inviting experts from the new euro area members in order to learn from their experience.

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Croatia Chooses To Be in the EU Core


NOVANEWS
Adelina Marini, Zagreb

Croatia made its choice for its future in the EU by choosing, out of the several options of integration, to be in the core of the EU, which this autumn begins a major overhaul that will deepen the integration in areas like defence, security, justice, the euro area. Croatia Prime Minister Andrej Plenkovic announced at the opening of the regular government meeting on October 5th that in the coming weeks the government, together with the Croatian People’s Bank (HNB) will publish a roadmap for the country’s accession to the euro area. He believes membership is possible in several years.

Croatia’s accession to the currency club has been a priority for this government from the very beginning of its term (October 2016), but the European speech of French President Emmanuel Macron, which Mr Plenkovic described as “inspiring“, as well as the informal EU summit in Tallinn last week, pushed the government in Zagreb to accelerate the preparations for the country’s accession not only in the Economic and Monetary Union (EMU), but also Schengen. “Our firm conviction is that we have to belong to the closest circle and thus we will have greater influence and more benefits from our EU membership“, the prime minister said. In his words, at the working dinner in the Estonian capital, the member states were practically stating their choices of integration speeds.

About an acceleration in Zagreb also speaks the fact that Finance Minister Zdravko Maric recently told euinside that for now Croatia will not be defining the dynamics of its accession. He said that public expert discussions are yet to be held on the pros and cons of the euro. Only a week later however, the premier said Croatia will join in several years.

Regarding the Schengen membership, Andrej Plenkovic said he was strongly encouraged by his talks with Home Affairs Commissioner Dimitris Avramopoulos (Greece, EPP), who was this week in Zagreb. According to the prime minister, Croatia will be ready with the implementation of the technical criteria for Schengen accession in the first half of 2019, and it will then await a political decision to join, a decision that Bulgaria and Romania have been waiting for for years. The Croatian premier has got the message of encouragement of European Commission President Jean-Claude Juncker (Luxembourg, EPP), who called in his annual state of the Union address for the accession of the three countries in Schengen.

However, the implementation of the euro area criteria will take more time because Croatia is not meeting the public debt criterion. In the 2016 convergence report, which the European Central Bank publishes every two years, it is concluded that Croatia does not meet the budget deficit and the public debt criteria. The situation with the budget deficit, though, has significantly improved since then and in June this year the country exited the excessive deficit procedure. In 2014, when the procedure was launched, Croatia’s budget deficit was -5.5% of gross domestic product. Last year, it shrank to -0.8% of GDP. According to the European Commission spring forecast, the Croatian budget deficit is expected to increase this year to -1.1% of GDP but will drop back to -0.9% next year.

The situation with debt is more serious. The debt-to-GDP ratio dropped in 2016 to 84.2% from a peak of 86.7% a year earlier. It is expected the decline will continue to 79.4% next year. Croatia is meeting all the other criteria for inflation, exchange rate stability of the kuna and the long-term interest rates. In the 2016 report, the ECB praised the work of the HNB for the stability of the kuna and for the stabilisation of the long-term interest rates. In other words, Croatia could file a request to enter the currency mechanism for preparation for membership (ERMII) the minute it reduces its debt to below 60% as is the allowed maximum under the Stability and Growth Pact. Prime Minister Plenkovic recalled that the strategic goal of the government is to reduce the public debt by 10% by 2020.

When it comes to the upcoming overhaul of the EU, Andrej Plenkovic said he expected by the European elections in 2019 “a reasonably ambitious” approach to the European project, but refrained from elaborating. Plenkovic has established a tradition of reporting at the public sessions of the government and in the Sabor (parliament) about his participation in the European Council meetings, thus putting European issues on the agenda of the Croatian public. This is a rare success, especially in a country which is entirely consumed by its own domestic problems.

Emmanuel Macron’s speech as well as European Commission President Jean-Claude Juncker’s plan, outlined in his annual address in September, have obviously pushed not only Croatia but Hungary as well to reflect on an acceleration of integration in the euro area. Bloomberg reports that Hungary could join the currency club much earlier than its political leaders are willing to admit. According to signals coming from Budapest, the forint could be replaced by the euro by the end of the decade. The main argument why Hungary, Poland and the Czech Republic are delaying their membership has been economic divergences with the richer euro area countries as well as the divisions in perceptions about European integration, especially in Warsaw and Budapest.

The acceleration of the integration processes in the euro area however, especially after Berlin forms a government, is already ringing the alarm bells in the slower and more sceptic members that they might drop off of the European project if they refuse to enter deeper integration waters.

Posted in CroatiaComments Off on Croatia Chooses To Be in the EU Core

Croatia: A New Round of Instability for the Sake of Stability


NOVANEWS
Adelina Marini, Zagreb

Last fall, when snap elections took place in Croatia due to the crisis in the senior coalition partner – the Croatian Democratic Union (HDZ), and the collapsed coalition was repeated, but with renewed, more moderate leadership, it seemed like the former Yugoslav Republic, despite the general trends in Central Europe and the EU in general, was heading towards normalisation. The former member of the European Parliament’s foreign affairs committee and head of the Delegation for Relations with Ukraine, Andrej Plenković, assumed leadership of the HDZ and the government with a promise of moderation, rule of law, abandonment of the division rhetoric (Ustaše against Partisans) and for reforms.

Changes in HDZ, like coupled vessels, brought changes to the other big party, the Social Democratic Party (SDP), where young Davor Bernardić won the leadership. The new political force MOST of Independent Lists (MOST NL) seemed ready to play the constructive role of a balance maker and a corrective. This was welcomed with relief by society. The media also reacted positively. It seemed like Croatia would finally break away from the grip of the past and deal with the future, which is facing serious problems, one of the most important of which is the rapid brain drain from the country after the fall of restrictions for Croatian nationals in some EU countries.

Being a Brussels man, Andrej Plenković quickly introduced the European agenda in Croatian society by starting to report regularly in Sabor (the Croatian Parliament) after each European Council meeting, and his debut at a EU summit ended in the highest of Brussels standards – with a long briefing for journalists. All he had left to do was to consolidate his party and get rid of the far-right current in it, which at the very beginning showed that it would lower its head until a more opportune moment came to rise again. This current was personified by the controversial former minister of culture Zlatko Hasanbegović.

Through the minefields of Croatia

Optimism and hope did not last too long. Inherited problems in the party, which considers itself to be state-building, and around the country began forcing the prime minister into taking hasty actions in the name of consolidation of the party. This was the case with the state-owned oil company Ina. The Ina case is deeply linked to the HDZ after the party itself and its former leader and prime minister Ivo Sanader were convicted of corruption. Ivo Sanader was doing prison time on charges of taking a bribe to sell a larger share of the company to the Hungarian oil company Mol. Because of these allegations, Croatia filed an arbitration case, which it lost in December.

This led to Prime Minister Plenković’s first premature decision, which surprised many. Right on Christmas Eve he announced the government’s intention to buy back the Hungarian stake and return ownership of Ina to Croatia, an idea that had no good market and even less fiscal argumentation. In the process of sever fiscal adjustment, money for such a purchase cannot be found without this leading to an even greater increase in public debt, which is expected to fall to 81.9% this year, or else a raise of taxes. It was quickly evident that this decision was not feasible and five months later it is not even discussed. Ina, however, remains an unresolved problem that will play the role of a mine for every government to follow. Around it, there is a thin thread of geopolitical element, for Russian company Rosneft had appetites for the company at the beginning and over the years the Hungarian company has been threatening to sell its stake in Ina to the Russians.

Right into Andrej Plenković’s face blew up another mine – the one with Slovenia about the Gulf of Piran, which had also been planted a long time ago – back in 2001, when the prime ministers of Croatia and Slovenia at the time – Ivica Račan and Janez Drnovšek – signed an agreement to settle the border dispute around the Gulf of Piran, providing Slovenia with access to international waters. The agreement has never been ratified by Croatia and was one of the most serious obstacles for the country on its way to EU membership. After Slovenia blocked the negotiation process with Croatia, an agreement was reached with European Commission mediation to settle the dispute by arbitration.

In 2015, however, Croatian media revealed that the Slovenian member of the arbitration tribunal had exchanged information on the course of the case with the Slovenian foreign ministry. The government of Zoran Milanović, with the full support of all political forces in the Sabor and the media, decided to withdraw Croatia from the arbitration tribunal. Changes voted in December, agreed on with the participation of Prime Minister Plenković, in European and Schengen legislation about strengthening control at the EU’s external borders in response to the increased risks of terrorism, have led to a new cause for tension between the two countries. Slovenia stepped up border controls, which led to the formation of mile-long queues at Croatian-Slovenian border crossings. At peak times, travellers waited for hours to cross the border. The problem again was resolved with EC intervention, with the mediation of which an agreement was negotiated at the extraordinary European Council on 29 April.

Too big to survive

The cherry on the cake, however, was the near-collapse of the largest Croatian conglomerate, Agrokor, which has subsidiaries throughout the region of the former Yugoslavia, and employs more than 60,000 people. Dark clouds on the horizon emerged in January when credit rating agencies downgraded Agrokor’s credit rating due to doubts expressed by some of its biggest lenders about the ability of the group to service its debts. It is not easy to navigate the complex story of the conglomerate downfall, but there are a few things that are undoubtedly clear: Agrokor is a legacy of the ever-difficult transition from a Communist economy to a market one; the state, consciously, unconsciously, or both, has closed its eyes to the unnatural expansion of Agrokor to a conglomerate of systemic importance for the economy; throughout the whole story runs a solid geopolitical element; and an unpleasant dose of politicisation.

The mine in Agrokor was planted with the model of privatisation. The company began to absorb key monopolistic companies over the years, thus turning the state monopoly into a private one under the tacit consent of the state. The conglomerate owns Dijamant a.d., the largest producer of edible oils in Serbia, one of the largest meat processing companies in Croatia PIK, the largest salt producer Solana Pag d.d., the largest agricultural company and winemaker Belje, Serbia’s largest ice cream and frozen food company Frikom, Croatia’s largest producer of mineral, spring water and beverages Jamnica, Croatia’s largest ice-cream and frozen food producer Ledo d.d., the best selling water in Bosnia and Herzegovina Sarajevski kiseljak d.d., the greatest edible oils producer in Croatia Zvijezda d.d.

The conglomerate is also the owner of the largest chain of supermarkets in Croatia and the region Konzum d.d. The last big expansion of the company was the purchase of the Slovenian state-owned trade mastodon Mercator in 2014. Analysts believe that with this acquisition Agrokor was virtually overeating. The purchase happened a year after Croatia’s accession, when its market joined the single European market and competitive pressure grew considerably. This is always a challenge for companies with monopoly power and, in general, for countries that have failed to complete the transition to a full-fledged market economy. According to a survey from last year of the European Commission’s Directorate-General for Economic and Financial Affairs, Croatia has a large and diverse portfolio of state-owned or partially state-owned companies.

The government is a majority shareholder in 85 companies and holds minority stakes of over 25% in another 50 companies. The remaining 600 companies are identified as being under state control as they are under the control of regional or municipal authorities. According to this study, the public corporate sector has a significant share in the Croatian economy. Agrokor is a private company, but it is determined to be systemically important, that is, it employs many workers, has a dominant position on the market, many companies are connected to it, and has enjoyed privileges over the years. Its total share in the gross domestic product of the country is about 4%, with decreasing trends. This means that an uncontrolled bankruptcy of the company could lead to turbulence in Croatian economy and the region in general.

According to the latest report [in Croatian language] by the Croatian National Bank (HNB) on financial stability, the situation in Agrokor has increased the risks to the economy, despite growth in the economy and good macroeconomic indicators. In its spring forecast, the European Commission also referred to Agrokor as a source of risks to the economy. “Industrial production, however, deteriorated somewhat – particularly in the consumer goods segment. This was possibly related to the distressed food processing and retail group Agrokor – Croatia’s largest employer – which faced severe difficulties in (re)financing its liabilities earlier this year”, says in the forecast on Croatia.

Government actions in the Agrokor crisis were quick, cool and resolute. For a record time, a law on the restructuring of systemic companies was adopted, which faced criticism about being unconstitutional, but it helped avoid a disorderly bankruptcy with unpredictable effects for the entire economy, which had just emerged from a 6-year recession two years ago. That would have been a huge blow to the economy and especially to the level of unemployment, which is already high in Croatia – expected to be 11.6% this year.

The rapid mastering of the situation was also dictated by the need to avoid a geopolitical moment – again the role of Russia. The Kremlin-sponsored Sberbank is Agrokor’s largest creditor. Croatian media reported that the crisis in the conglomerate was actually provoked by Russia because of Prime Minister Andrei Plenković’s position on the conflict in Ukraine. Several publications in Croatian media have indicated that the fall of Agrokor started  the moment Russian ambassador to Zagreb Anvar Azimov declared the company unable to pay its debts. This also led to a downgrading of its credit rating.

In the very beginning, when the company began having liquidity troubles, Sberbank demonstrated its will creditors to take over the management. A possible acquisition through debt would have provided Russia with a significant presence on the Croatian and regional markets. However, the newly adopted special law requires the company to be run by a government-appointed commissioner whose role is to supervise the process of restructuring. The law also defines the order in which the debt is to be paid.

The Plenković gambit

It would have all ended beautifully, had it not been for the finance minister. The young and capable Zdravko Marić, who was finance minister all the way back in the first government of HDZ and MOST NL, led by Tihomir Orešković, was until recently one of the most positive figures. With his expertise, he managed to bring Croatian finances to stabilisation and to the exit from the excessive deficit procedure, which was announced on Monday (22 May). His problems began with being a former senior employee of Agrokor and the opposition, including coalition partners from MOST NL, saw this as a conflict of interest. They accused him of being aware of the state of the company, but not taking the necessary measures.

Thus the situation was a great opportunity for the opposition to gain points against the background of the Social Democrats’ declining rating under the leadership of Davor Bernardić. The Social Democrats and the Liberals demanded that the minister resigned. They were also joined the junior partner MOST NL.

Day X for the government was April 26, when the prime minister and almost the entire government attended an official lunch organised by the Croatian Employers’ Association (HUP) where the government’s measures to tackle the Agrokor crisis were commended. Unlike previous meetings with government officials, this time employers refrained from criticism. One of the reasons was that many of the members are suppliers to the conglomerate and hope to cash in their claims. The prime minister began by saying that the most important thing was to ensure political stability. He explained that the emergency situation required emergency measures and promised that the government would take on other vital reforms for Croatia, especially in the field of education.

On the next day, government was expected to announce its decision on Zdravko Marić’s future. Contrary to any expectations, instead of sacrificing him for the sake of political stability, Andrei Plenković decided to protect him at the cost of serious political instability. In addition, the prime minister, without blinking an eye, fired the coalition partner’s ministers, which provoked sharp reactions and accusations of authoritarian practises. The debates on the motion for Mr Marić’s resignation went on for almost 24 hours and brought considerable losses to the government. MOST NL lost its speaker position of the Sabor, and the government is in a stalemate, as it is still unclear whether they have a sufficient majority in Parliament to continue governing.

Prime Minister Andrei Plenković announced that the seats of the coalition partner in government will be filled after the local elections, the first round of which took place on Sunday. The results, however, do not give much clarity. Virtually everyone is losing. Moreover, the crisis has led to the re-opening of the HDZ division lines. The far-right stream saw a great opportunity for itself in the local elections. Zlatko Hasanbegović was supporting the nomination of the Croatian Marine Le Pen – Bruna Esih – for mayor of Zagreb. Andrei Plenković refused to take serious steps against the rebellious Hasanbegović, counting on him filing his own resignation, as he did. Bruna Esih’s results in the first round were twice higher than the HDZ candidate Drago Prgomet. She won 10.98% of the votes, and Prgomet – 5.60%.

Bruna Esih entered the Sabor in the parliamentary elections on September 11 through the HDZ list, gaining 16.77% of the votes thanks to the preference option. After her result at the local elections, Zlatko Hasanbegović announced the creation of a new party. This could lead to others with rather nationalistic views leaving the HDZ. Despite the debacle in Zagreb, the HDZ performed better than at previous local elections elsewhere in the country. The big losers in the first round are SDP, who are going to a second round in Zagreb thanks to the Liberals’ candidate Anka Mrak Taritaš. SDP claims that, thanks to their support, Mrs Taritaš has won 24.48%, but SDP results across the country tell a different story.

MOST NL has also suffered considerable losses, in its fortress in Metković at that, where their candidate goes into a second round. There she will compete with the HDZ candidate. MOST-ers lost their full majority in the municipal council, where they have 40.65% of the votes, followed closely by HDZ with 38.13%. These elections may be the beginning of the end of the party. The Eurosceptic and populist party “Living Wall” is completely obscure in these elections.

This picture shows that all parties have to seriously analyse their state and the reasons for the results at the local elections. They also show a 50/50 probability for snap elections. One needs to wait for the second round so one can better judge the prospects for new elections, which no one has any interest in so far. The HDZ remains the strongest party, but its stability is shaken, and certainly will not be able to win sufficient majority to be able to govern alone. The SDP, with its leadership, has no strength to confront the leadership of the right. Its weakness gives HNS, their permanent coalition partner, a chance to play alone and raise their price after they experienced a significant drop in support in the years of governance with the SDP (in some cases as much as 2%).

Zagreb will be decisive, as mayor Milan Bandić’s party has representatives in parliament, and if he wins in the second round he could help Plenković stay in power. Invincible Milan Bandić, who was suspected of corruption on numerous occasions, but never has enough evidence yet been gathered to accuse him, won the most votes on Sunday – 30.87%. If elected in two weeks, it would be his sixth consecutive term. A possible victory for Anka Mrak Taritaš will feed new energy into the HNS and raise the price of the party on the parliamentary stock exchange. The eventual fall of the government and new elections would mean a new cycle of uncertainty over Croatia, another postponement of vital reforms, and a boost for growth in nationalist sentiments that have become more and more noticeable over the past two years with the HDZ coming to power.

All this is followed by an increase in the outflow of Croats to richer and more settled countries in the EU. The latest hit on the music scene these days in Croatia is the Detour band song “I Choose” that best sums up the situation. “I choose you are gone, I choose not to be angry anymore. Guess where we go, when we are ruled by goons and in-laws, keeping cities hostage, building temples. So I finally cracked like a popcorn and f*ck them all money-chasers, plagiarists, wrapped in the flag”.

Translated by Stanimir Stoev

Posted in CroatiaComments Off on Croatia: A New Round of Instability for the Sake of Stability

A Croatian Perspective on the Bulgaria and Romania CVM Reports


NOVANEWS
Adelina Marini

“In order for the EU to be effective in the disciplining of member states, it needs to be able to sanction. Cutting of EU funds because of problems with the rule of law in some of them might be a good idea”. This is the beginning of the commentary [in Croatian language] by the correspondent of one of the most read newspapers in Croatia, Jutarnji list, Augustin Palokaj on the occasion of the tenth report by the European Commission on the progress of Bulgaria and Romania under the unique for the EU Cooperation and Verification Mechanism. This is an idea, which euinside has put forward on numerous occasions and not only regarding the case of Bulgaria and Romania. Augustin Palokaj’s text has been written before the reports were made public and rather analyses the mechanism itself and its purpose.

“Exactly ten years have passed since Bulgaria and Romania joined the EU, but these two states continue to be second grade members of sorts. The problem is not that the two are the poorest members, although Romania has gotten very close to Croatia, but in the verification and cooperation mechanism, which is a sort of monitoring by the EC, nonexistent for any other member state”, writes my colleague Palokaj, pointing out that the situation in Bulgaria is far worse than in Romania, for at the moment the country has no government and in less than a year it will take over the Presidency of the Council. “It would be truly embarrassing if the country that is presiding the Council is monitored by the EC due to insufficient results in the battle against corruption and organised crime”, continues the analysis.

Augustin Palokaj reports that the EC is preparing a scenario where the Mechanism is lifted before Bulgaria takes over the Presidency, but this will be subject to several conditions. He reminds that it was exactly because of Romania and Bulgaria that Croatia got a special monitoring levied on it prior to the membership, which saved the country from this very same Mechanism after joining in 2013. The other thing that saved Croatia was the scepticism of Germany and The Netherlands.

“Looking back from the perspective of today, such mechanisms for Bulgaria and Romania are truly useless, unpleasant, and unfair. Of course, there is a problem with corruption in these states and a serious one at that. But is there no such problem in other EU states as well?”, writes the Croatian journalist and reminds us of the words of the former Commissioner for Enlargement Günter Verheugen, according to whom, when talking about corruption, it is not Bulgaria and Romania that spring to his mind first. “And now there are more serious problems with the rule of law arising in other EU states, Poland and Hungary for example”, further writes the Jutarnji correspondent.

“Those mechanisms have grown obsolete. They did not manage to solve the problem and left Bulgaria and Romania with the feeling that they are being discriminated against, treated like second grade members. This is why it is urgent that they are removed”, ends his commentary Augustin Palokaj. He believes European institutions have the ability to affect member states when it comes to the protection of the European values. “And those values are much more threatened in some other member states, than in Bulgaria and Romania”, believes the journalist.

Translated by Stanimir Stoev

Posted in CroatiaComments Off on A Croatian Perspective on the Bulgaria and Romania CVM Reports


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