Rüdiger Rossig | Journalist | Novinar

Since joining the EU, Croatia’s ruling elite has lacked a unifying direction | By Jerko Bakotin & Rüdiger Rossig

Only two months after its accession to the European Union, Croatia was butting heads with the EU Commission. The reason: Three days before the ex-Yugoslav republic was due to join the bloc, the brand new member country violated European law.

It limited the European Arrest Warrant system to crimes occurring after 2002. This meant that Croatian citizen Josip Perkovi? could not be extradited to EU partner Germany, which wants to try the former high-ranking Yugoslavian secret service officer for organizing a political assassination in Bavaria in 1983.

German media accused the 28th EU member of undermining the Union. European Commissioner for Justice Viviane Reding accused the government in Zagreb of harboring criminals suspected of committing murder during the communist regime. Brussels threatened to slap sanctions on the country. Croatia’s Social Democratic prime minister, Zoran Milanovic, emphasized that the law in question was created to protect veterans of the war for the independence of Yugoslavia (1992-1995) and that Croatian justice authorities are planning their own investigation into the Perkovi? case. But that wasn’t enough for Brussels: At the end of September, the EU demanded that Zagreb revise the law. So why is post-communist Croatia protecting a former Yugoslavian agent? In the 1990s, President Franjo Tu?man led Croatia from Yugoslavian socialism to a rigid brand of nationalism. He was primarily able to achieve this because the country was the target of neighboring Serbia’s politics of aggression.

Under the leadership of Slobodan Miloševi?, Serbia attempted to build a Greater Serbian nation on the ruins of Yugoslavia. It incited Croatia’s Serbian minority, arming it and supporting it militarily. From 1992-1995, Serbian troops controlled one-third of Croatia. Non-Serbs were suppressed and driven out.

The Croatian army eventually suppressed the uprising but in the process, they committed war crimes. Around 300,000 Croatian Serbs went into exile. The areas along the border to Bosnia-Herzegovina, where they had represented the majority of the population, are still depopulated today.

At the same time as Croatia was fighting the “Homeland War,” a new economic elite emerged alongside the fledgling political elite in non-occupied Croatia. The oligarchy typical of post-Communist societies was taking hold in a country that had previously not known any major social stratification. Tu?man is credited with saying that, to create Croatian capitalism, he would only need 200 rich families, consisting of one-quarter repatriated nationalist exiles, figures from the underworld, friends of his regime – and parts of the ex-Communist establishment.

Perkovi?, who had set up Tu?man's secret service, was included on the list. In court, he might say more about the era of the war of independence than about the Yugoslav era. Much of what he might say could damage the Croatian nation’s origin myth, which casts it as the innocent victim of Serbian aggression.

But this myth is what holds Croatian society together. Seventeen years after the end of the war, the country of 4.4 million, with the 1,777 kilometer Adriatic coastline that has earned it the nickname “Florida of the EU,” has some problems.

The group of people who, under Tu?man, privatized the companies that nominally belonged to the workers, were interested in making fast profits. Among the companies they ruined were some that would have had a future under capitalism.

The Social Democratic government that won the elections a year after Tu?man’s death in 1999 changed the system as little as its successor, which has run the country since 2011. As a result, there are hardly any factories in the country, not even in the traditional industrial regions.

There is no mass poverty in Croatia – but with purchasing power that is 61 percent of the EU average, the new member is one of the poorest EU states. Since 2008, the country’s GDP has dropped by over 10 percent and the unemployment rate is approaching 20 percent.

Tourism is the only bright cloud on the horizon: The sector is forecast to generate a total turnover of €7 billion ($9.5 billion), more than 15 percent of the total economic output. “But tourism alone cannot save an entire economy,” said Zvonimir Baleti?.

The economist is convinced that Croatia is suffering from structural deficits. The growth rate of the past few years is based on debt-financed consumption, industry’s share is half of what it was in 1990 and exports are just about 60 percent of imports, he points out.

Baleti? would like the EU to stop forcing Croatia to cut state aid for its industry – and to allow Zagreb to be more tolerant in managing its budget deficit, so that the state can invest in re-industrializing the country. “Otherwise, the EU’s neoliberal policy will drive Croatia into poverty and onto the periphery of Europe,” he said.

The country planned to enter the eurozone in four to five years, but Baleti? thinks Croatia should wait until at least 2023. By then, he adds, domestic products will have to be competitive – otherwise the result will be even lower wages, which in turn would drive up the emigration rate. That has held steady since the 1990s.

The current government in Zagreb sees the situation differently. Its policy focus is on an effective tax system, the sale of a handful of state-owned companies, boosting Croatia’s attractiveness to foreign investors, and balancing its budget through an austerity program.

What will remain for investments in employment-intensive sectors? At most, the €11.7 billion the EU Cohesion Fund has earmarked for Croatia for the next seven years. The country has already cashed in 90 percent of its €1.6 billion from the pre-accession fund. Funds for re-industrialization? There doesn’t seem to be any.

However, the frequently repeated misgiving that Croatia might become the new Greece of the EU has not come true. With a national debt of just under 54 percent of GDP, Zagreb is far removed from Athens’ 170 percent. But its debt has been on a continuous upward trend for years. The government will have to act to stop it.

The largest opposition party is doing everything it can to destabilize the country, which isn’t helping the situation at all. The Croatian Democratic Union (HDZ), which held the reins of government for 17 of the 22 years since the country became independent, does not hesitate to fan inter-ethnic hate against the small remaining Serbian minority.

This development is noteworthy. Ivo Sanader, head of the HDZ and prime minister from 2003 to 2009, seemed to have successfully turned his organization into a modern European political party. The HDZ was in the process of bidding farewell to Tu?man’s brand of nationalism. Accession to the EU had become the focus of its policy.

Suddenly, however, Sanader resigned. At the end of the following year, Croatia’s anti-corruption authority announced that it was investigating him. In 2012, the former prime minister was sentenced to 10 years in prison. The sentence is not legally binding yet – but the HDZ has returned to its familiar theme: nationalism.

A large part of the national debt is a holdover from the Sanader era, a time when Zagreb was profligately building streets and renovating docks, and lots of money found its way into private pockets. As a result, it is perhaps understandable that more and more citizens think that they are living in a completely corrupt system in which politicians rule hand in hand with the oligarchs. Ivica Todori?, the owner of Agrokor, is one of the elite. Founded during the Socialist era to cultivate plants from cuttings, his company has around 40,000 employees today. As one of Croatia's major importers, it profits from the overvalued exchange rate of the kuna, the national currency whose value has been influenced by the IMF since the early 1990s.

Todori? hardly ever finds his way into the media, but when he does, the coverage is always positive. Born in 1951, he is the largest advertiser in Croatia – and has close ties to Ninoslav Pavi?, the majority owner of Europapress Holding (EPH), which publishes five daily newspapers and 30 magazines. Westdeutschen Allgemeinen Zeitung (WAZ), the largest regional newspaper group in Germany, owns 49 percent of EPH's shares.

Pavi?'s media always support the government. The publisher's relationship with today's social democratic regime is as good as it was with its predecessor, the HDZ. Many scandals in which he appeared to be involved have never been cleared up.

“Croatia is ruled by a small group of powerful people who are responsible to no one,” said Ivica Djiki?, editor-in-chief of “Nowosti,” the weekly newspaper. Since the country's independence, becoming part of Europe was the only post-Communist goal that unified this elite group. Since July 1, 2013, there is no longer a consensus about the direction they should be pulling in.

To Stipe Mesi?, the new direction is clear: “Croatia needs to be a bridge between the EU and southeastern Europe.” President between 2000 and 2010, Mesi? did a lot to distance his country from Tu?man's legacy. “It is in our interest to help all the countries here to join the EU as quickly as possible,” he said. “To accomplish this, of course they have to fulfill the EU's conditions. This means deciding in favor of a Europe without war and with stable national borders. This applies to Croatians – and to Serbians and Albanians as well.”