Croatia and the EU - University of Amsterdam [PDF]

Croatia and the EU: Slovakia and the European tying the knot Sloga jači

A single-country study of  Slovakia’s o  psi ti on  i  the E n U nesklad tlači

United we stand, divided we fall

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EUROPEAN POLICY STUDIES

CoRe Studies CoRe S

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Country Report on the Republic of Croatia Croatia and the EU: tying the knot A country report on Croatia’s position within the EU

Country Report Series – CoRe Series VII MA European Policy Studies University of Amsterdam June 2014

© Lai van Beek, Sophia Bout, Sarafien Hiel, Maud van Koeveringe, Linda Koning, Lucien van Pomeren, Merle Prast, Marieke Rozenbroek, Daan Stoop and Peter Wolfs. Alle rechten voorbehouden. Niets uit deze uitgave mag worden verveelvoudigd, opgeslagen in een geautomatiseerd gegevensbestand of openbaar gemaakt worden, in enige vorm of op enige wijzen, hetzij elektronisch, mechanisch door fotokopieën, opnamen of enige andere manier, zonder voorafgaande schriftelijke toestemming van de auteurs. Voor zover het maken van kopieën uit deze uitgave is toegestaan op grond van artikel 16B Auteurswet 1912 JO, het besluit van juni 1974, Stb. 351, zoals gewijzigd op grond van artikel 16B, augustus, Stb. 471 en artikel 17 Auteurswet 1912, dient men de daarvoor wettelijke verschuldigde vergoedingen te voldoen aan de Stichting Reprorecht (Postbus 882, 1180 te Amstelveen). Voor het overnemen van gedeelte(n) uit deze uitgave in bloemlezingen, readers en andere compilatiewerken (artikel 16 Auteurswet 1921) dient men zich tot de uitgever te wenden. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system of any nature, or transmitted in any form or by any mean, electronic, mechanical, now known of hereafter invented, including photocopying or recording, without prior written permission of the authors. ISBN: 978-90-807611-9-3

Table of contents Table of contents ..............................................................................................................................................i List of abbreviations ..................................................................................................................................... vi List of tables, figures and boxes ................................................................................................................. x Acknowledgements...................................................................................................................................... xii Preface .............................................................................................................................................................xiii Introduction .................................................................................................................................................. xiv

Part I .................................................................................................................................................................... 1 1. History of Croatia ....................................................................................................................................... 2 1.1 A brief history of Croatia until the 20th century ..................................................................................... 2 1.2 The First World War............................................................................................................................................ 4 1.3 The Unification of the South Slavic people ................................................................................................. 5 1.4 The Second World War....................................................................................................................................... 8 1.5 Tito’s Yugoslavia .................................................................................................................................................12 1.6 The Socialist Federal Republic of Yugoslavia ..........................................................................................16 1.7 The disintegration of Yugoslavia ..................................................................................................................19 1.8 The rise of Milošević ..........................................................................................................................................21 1.9 The 1990s Wars...................................................................................................................................................25 1.10 Conclusion ...........................................................................................................................................................27

2. The Culture of Croatia ............................................................................................................................ 29 2.1 Cultural Policy ......................................................................................................................................................29 2.2 Croatian Heritage Foundation .......................................................................................................................34 2.3 Croatian nationalism .........................................................................................................................................35 2.4 The Croatian language ......................................................................................................................................36 2.5 The Croatian identity ........................................................................................................................................39 2.6 Sports in Croatia ..................................................................................................................................................43 2.7 Stereotypes and self-stereotyping ...............................................................................................................47 2.8 Literature, architecture, art, film and music ............................................................................................50 2.9 Croatia’s gastronomy ........................................................................................................................................53 i

2.10 Conclusion ...........................................................................................................................................................54

Part II ................................................................................................................................................................ 56 3. Legal System .............................................................................................................................................. 57 3.1 The constitution ..................................................................................................................................................57 3.2 Administrative and Civil Law in Croatia ...................................................................................................62 3.3 Criminal Law of Croatia....................................................................................................................................66 3.4 Competition Policy: Chapter 8 of the acquis ............................................................................................69 3.5 Croatian company law ......................................................................................................................................71 3.6 The relationship between Croatian law and EU law ............................................................................74 3.7 Conclusion .............................................................................................................................................................76

4. Human Rights in Croatia........................................................................................................................ 78 4.1 Croatia’s human rights provisions in compliance with EU requirements ..................................78 4.2 The situation of ethnic minorities in Croatia ..........................................................................................81 4.3 LGBT persons in Croatia ..................................................................................................................................86 4.4 Gender equality in Croatia ..............................................................................................................................92 4.5 Croatia and the European Court of Human Rights................................................................................95 4.6 The problems with the judicial system in Croatia.................................................................................98 4.7 Conclusion .......................................................................................................................................................... 101

Part III ............................................................................................................................................................ 103 5. The political system ............................................................................................................................. 104 5.1 Political parties ................................................................................................................................................. 104 5.2 The president .................................................................................................................................................... 107 5.3 The Croatian parliament ............................................................................................................................... 109 5.4 The government ............................................................................................................................................... 111 5.5 Regions of Croatia............................................................................................................................................ 114 5.6 International Criminal Tribunal for the former Yugoslavia ........................................................... 117 5.7 Croatia’s accession to the European Union ........................................................................................... 125 5.8 Croatia in the EU .............................................................................................................................................. 128 5.9 Law enforcement ............................................................................................................................................. 130 5.10 Conclusion ........................................................................................................................................................ 135

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6. Foreign policy ......................................................................................................................................... 136 6.1 Main objectives of Croatian foreign policy ............................................................................................ 136 6.2 Chapter 31 - Foreign, security and defence policy............................................................................. 137 6.3 Strengths and weaknesses of Croatian foreign policy ...................................................................... 138 6.4 International organisations and Croatia ................................................................................................ 139 6.5 Croatia’s political relationship with its neighbouring countries ................................................. 139 6.6 Conclusion .......................................................................................................................................................... 149

Part IV ............................................................................................................................................................ 150 7. The economic transition of Croatia ................................................................................................ 151 7.1 Croatia’s macroeconomic situation since the 1990s......................................................................... 151 7.2 Croatia’s economy heading to the start of the EU integration process ..................................... 154 7.3 Croatia towards EU membership .............................................................................................................. 155 7.4 Croatia’s economic programme 2013 – 2017 ...................................................................................... 161 7.5 Privatisation....................................................................................................................................................... 166 7.6 Foreign Direct Investment ........................................................................................................................... 171 7.7 Purchasing power parity .............................................................................................................................. 173 7.8 Investment climate.......................................................................................................................................... 175 7.9 Underground economy.................................................................................................................................. 178 7.10 Conclusion ........................................................................................................................................................ 180

8. The infrastructure of Croatia............................................................................................................ 182 8.1 Road network .................................................................................................................................................... 183 8.2 Railway network .............................................................................................................................................. 184 8.3 Inland waterways ............................................................................................................................................ 187 8.4 Seaport infrastructure ................................................................................................................................... 188 8.5 Airport infrastructure .................................................................................................................................... 189 8.6 Water infrastructure in Croatia ................................................................................................................. 190 8.7 Telecommunication infrastructure .......................................................................................................... 190 8.8 Conclusion .......................................................................................................................................................... 192

9. Economic Sector Performance ......................................................................................................... 193 9.1 The banking sector .......................................................................................................................................... 193 9.2 Service sector .................................................................................................................................................... 196 9.3 Industrial Sector ............................................................................................................................................... 207 9.4 Agricultural sector........................................................................................................................................... 213 iii

9.5 Conclusion .......................................................................................................................................................... 221

10. The labour market ............................................................................................................................. 222 10.1 Unemployment rate ..................................................................................................................................... 222 10.2 Labour force .................................................................................................................................................... 223 10.3 Trade unions ................................................................................................................................................... 226 10.4 Income and wages ........................................................................................................................................ 227 10.5 Conclusion ........................................................................................................................................................ 228

11. Tax system ............................................................................................................................................ 230 11.1 PIT, VAT and CIT............................................................................................................................................ 231 11.2 The tax burden and its effect on the labour market ....................................................................... 232 11.3 Tax evasion ...................................................................................................................................................... 233 11.4 Conclusion ........................................................................................................................................................ 234

Part V.............................................................................................................................................................. 235 12. Corruption ............................................................................................................................................ 236 12.1 Conclusion ........................................................................................................................................................ 242

13. Demographics ...................................................................................................................................... 243 13.1 Conclusion ........................................................................................................................................................ 245

14. The social security system .............................................................................................................. 247 14.1 Pension system .............................................................................................................................................. 247 14.2 Healthcare ........................................................................................................................................................ 249 14.3 Unemployment insurance ......................................................................................................................... 254 14.4 Family benefits ............................................................................................................................................... 254 14.5 Social assistance schemes.......................................................................................................................... 255 14.6 Conclusion ........................................................................................................................................................ 255

15. Education and science ...................................................................................................................... 256 15.1 The Croatian education system ............................................................................................................... 256 15.2 Types of education........................................................................................................................................ 259 15.3 Access, efficiency, and equity ................................................................................................................... 265 iv

15.4 Quality of the higher education system ............................................................................................... 266 15.5 Science and research ................................................................................................................................... 267 15.6 Conclusion ........................................................................................................................................................ 268

16. Media ...................................................................................................................................................... 269 16.1 The media landscape ................................................................................................................................... 270 16.2 Media policy .................................................................................................................................................... 272 16.3 Media independence and professionalism ......................................................................................... 278 16.4 Conclusion ........................................................................................................................................................ 280

17. Energy and environment ................................................................................................................. 281 17.1 Energy ................................................................................................................................................................ 281 17.2 Environment ................................................................................................................................................... 288 17.3 Conclusion ........................................................................................................................................................ 292

18. The Croatian mentality .................................................................................................................... 293

19. War veterans ........................................................................................................................................ 295

Conclusion .................................................................................................................................................... 297 References.................................................................................................................................................... 304 Appendixes .................................................................................................................................................. 339 Index............................................................................................................................................................... 343

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List of abbreviations acquis

Acquis communautaire

ADA

Anti-Discrimination Act 2008

AEM

Agency for Electronic Media

AIK Invest

The Agency for Investments and Competitiveness

ASHE

The Agency for Science and Higher Education

AZTN

Croatian Competition Agency

BDSH

Bosniak Democratic Party of Croatia

CAP

Common Agricultural Policy

CARNM

Constitutional Act on the Rights of National Minorities

CBS

Croatian Bureau of Statistics

CEEPUS

Central European Exchange Program for University Studies

CEFL

Central European Football League

CEFTA

Central European Free Trade Agreement

VHI

Voluntary health insurance

CHF

Croatian Heritage Foundation

CIT

Corporate income tax

CJEU

Court of Justice of the European Union

CME

Central European Media Enterprises

Commission

The European Commission

CoE

Council of Europe

CPA

Criminal Procedure Act

CPY

Yugoslav Communist Party

CROQF

Croatian Qualifications Framework

DC

Democratic Centre

ECB

European Central Bank

ECHR

European Convention on Human Rights

ECJ

European Court of Justice

ECN

European Competition Network

ECoC

European Capital of Culture

ECRI

European Commission against Racism and Intolerance

ECtHR

European Court of Human Rights

ECTS

European Credit Transfer and Accumulation System

EDGE

Enhanced Data rates for GSM Evolution

EFF

European Fisheries Fund vi

EFTA

European Free Trade Association

EHCI

Euro Health Consumer Index

EMU

European Monetary Union

EPH

Europapress Holding

EPL

Employment protection legislation

EPOP

Environmental Protection Operational Programme

EQF

European Qualification Framework

ERM

European Exchange Rate Mechanism

ESCB

European System of Central Banks

EU

European Union

EUNIC

European Union National Institutes for Culture

FDI

Foreign Direct Investment

FP7

Seventh EU Research Framework Programme

FPRY

Federal People’s Republic of Yugoslavia

GDP

Gross Domestic Product

GPRS

General Packet Radio Service

GSM

Global System for Mobile

HAKOM

Croatian Agency for Post and Electronic Communications

Hamag Invest

Croatian Agency for SMEs and Investment

HDSSB

Croatian Democratic Alliance of Slavonia and Baranja

HDZ

Croatian Democratic Union

HFP

Croatian Privatisation Fund

HGS

Croatian Civic Party

HICP

Harmonised Index of Consumer Prices

HMZO

Croatian Pension Insurance Institute

HNB

Croatian National Bank

HND

Croatian Journalists’ Association

HNS

Croatian People’s Party – Liberal Democrats

HOO

Croatian Olympic Committee

HRT

Croatian Radiotelevision

HSLS

Croatian Social Liberal Party

HSP

Croatian Party of Rights – dr. Ante Starčević

HSPA

High Speed Packet Access

HSS

Croatian Peasant Party

HSU

Croatian Party of Pensioners

HZ

Hrvatske željeznice (Croatian Railway Company) vii

HZZ

Croatian Employment Service

HZZO

Croatian Institute for Health Insurance

ICCAT

International Commission for the Conservation of Atlantic Tunas

ICT

Information and Communication Technology

ICTY

International Criminal Tribunal for the former Yugoslavia

ICZM

Integrated Coastal Zone Management

IDS

Istrian Democratic Assembly

IMF

International Monetary Fund

IPA

Instrument for Pre-accession Assistance

IPARD

Instrument for Pre-Accession Assistance in Rural Development.

IPTV

Internet Protocol Television

JCE

Joint Criminal Enterprise

JNA

Yugoslav National Army

LGBT

Lesbian, gay, bisexual and transgender persons

LLP

Lifelong Learning Programme

LTE

Long-Term Evolution

MHI

Mandatory health insurance

MP

Member of Parliament

MSA

Mine Suspected Area

NATO

North Atlantic Treaty Organisation

NAM

Non-Alignment Movement

NDH

Independent State of Croatia

NGO

Non-governmental organisation

NIT

Nations in Transit

OECD

Organisation for Economic Cooperation and Development

ORaH

Party for the Sustainable Development of Croatia

OSCE

Organisation for Security and Co-operation in Europe

PAYG

Pay-as-You-Go

PIT

Personal income tax

PNUSKOK

Police National Office for Combating Corruption and Organised Crime

PPP

Purchasing Power Parity

R&D

Research and development

RSK

Republic of Serbian Krajina

SAA

Stabilisation and Association Agreement

SANU

Serbian Academy of Arts and Sciences

SAP

Stabilisation and Association Process viii

SAPARD

Special Accession Programme for Agriculture and Rural Development

SDA

The Party of Democratic Action

SDS

Serbian Democratic Party

SDP

Social Democratic Party of Croatia

SDSS

Independent Democratic Serb Party

SFRY

The Socialist Federal Republic of Yugoslavia

SIZ

Self-managing community of interest

SME

Small and Medium Enterprises

TEN-T

Trans-European Transport Networks

UASTT

Underdeveloped areas with special tax treatment

UDHR

Universal Declaration on the Human Rights

UN

United Nations

UNESCO

United Nations Educational, Scientific and Cultural Organization

US

United States

USKOK

Offices for the Prevention of Corruption and Organised Crime

USSR

The Union of Soviet Socialist Republics

VAT

Value Added Tax

VEM

Council for Electronic Media

WEF

World Economic Forum

WTO

World Trade Organisation

YRU

Yugoslav Radical Union

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List of tables, figures and boxes Tables Table 7.7:

GDP per capita in purchasing power parity

Table 9.1:

Fishery production in all Croatian fishing regions (2001-2012).

Table 10.1:

Different tax measures in Croatia.

Table 13.1:

Demographic pillars 1961 (left) and 2011 (right).

Table 13.2:

Future demographic situation Croatia 2061.

Table 15.3:

Number of students per education type in 2012.

Figures Figure 0.1:

Map of Croatia

Figure 5.1:

Current division of seats in parliament.

Figure 5.2:

New external land borders of the EU.

Figure 5.3:

The Croatian police counties.

Figure 6.1:

The Pelješac Bridge.

Figure 6.2:

Disputed area between Slovenia and Croatia.

Figure 8.1:

Croatia’s traffic and development axes.

Figure 8.2:

Croatia’s road network.

Figure 8.3:

TEN-T Railway map 2008 and TENT-T Railway map horizon 2020

Figure 8.4:

Croatia’s main inland waterways.

Figure 8.5:

Airports in Croatia

Figure 9.1:

Croatia’s and the EU27’ service sector compared, 2010.

Figure 9.2:

Number of tourist arrivals between 2000-2010 in Croatia.

Figure 9.3:

Croatia’s industrial sector compared to the EU27 in 2010.

Figure 9.4:

Croatia’s industrial sector performance since the economic crisis, 2008.

Figure 13.1:

Foreign nationals immigrated to Croatia in 2012.

Figure 14.1:

The Croatian social security system.

Figure 17.1:

Final energy consumption in Croatia in the period 2001-2012.

Figure 17.2

The production of primary energy in Croatia in 2012.

Figure 17.3:

Renewable energy production in Croatia in 2012.

Figure 17.4:

Mine suspected areas in Croatia.

Figure 17.5:

Greenhouse gas emissions and final energy consumption in Croatia.

Boxes Box 15.3:

Roma in the Croatian education system. x

Map of Croatia

Figure 0.1: Map of Croatia.

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Acknowledgements We would like to thank our supervisors Drs. M. van der Laaken, Dr. C.W.C. Reijnen and Dr. A.C. van Wageningen for guiding us through the process of writing this country report. Their seminars, advices and assistance have supported us during the writing process, field research in Croatia, the conduct of interviews and the guidance of the cooperation within our research group. We would also like to thank our interviewees for providing us with essential information on a wide range of topics on Croatia. With your input, we were able to construct a comprehensive and detailed image of Croatia. The information gathered through the conduct of interviews enabled us to write a nuanced and complete country report on Croatia. Furthermore, your contribution to the report has further inspired us and made us more enthusiastic to provide an in-depth analysis of Croatia. Finally, we would like to thank the input and contribution of several persons who gave us more detailed background information on our research topics. Especially the contribution of Dr. G.J.A Snel, Drs. N. Tromp, Drs. E. Dirksen, PhD candidate J. Kesic, Mrs. D. Skalicki, Mrs. B. Klen and Mr. JR. Heemsbergen has supported us during our research. The authors Lai van Beek, Sophia Bout, Sarafien Hiel, Maud van Koeveringe, Linda Koning, Lucien van Pomeren, Merle Prast, Marieke Rozenbroek, Daan Stoop and Peter Wolfs.

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Preface I am proud to present the seventh of a series of country reports, in short the CORE series, of the master European Policy Studies. This report is about Croatia. Croatia joined the EU in 2013. The territory of Croatia has passed through some important historical changes. In 1991, Croatia declared its independence from the Federal Republic of Yugoslavia. This secession was followed by the 1990s wars. Furthermore, it has changed authoritarian rule to democratic rule. Moreover, it has been engaged in a transition from a state led economy to a market economy. In 2013, Croatia joined the European Union as the 28th Member State. It is safe to say that Croatia has made some enormous changes in a period of little more than 20 years. Under my supervision and as a part of their master European Policy Studies, 11 students of the University of Amsterdam have organised a field research trip to Croatia to study the aforementioned transitions and to examine Croatian integration in the European Union. They had a political, legal and economical focus underpinned by a cultural and historical background. As shown by this report, their research has been interdisciplinary. They combined desk research with interviews in Zagreb and Rijeka. In only 14 weeks they have obtained insight in the internal affairs of Croatia, its relationship with the EU and some important problems still waiting to be solved. Some serious endeavours lie ahead for the Croatian people. Croatian society at large could benefit from a more proactive and stable political attitude. The modernisation of the infrastructure, the quality and content of education, the improvement of legislation and the development of a competitive economy are some of the major tasks Croatia has to address. A mentality change is another. The wealth of this report not only stems from the information that the students gathered and analysed. It is also the result of the chosen interdisciplinary approach. This enabled the students to draw conclusions surpassing a single disciplinary approach. They thus proved that some inferences about our complex social reality can only be made after interdisciplinary research. Therefore once again, the seventh CORE-study clearly demonstrates the necessity of and need for interdisciplinary studies like European studies, particularly European Policy Studies. I took pleasure in coaching and accompanying these students. They were actively involved in making a success of this course. For them, the course itself was an adventure, as no preset course material was available. They had to find their own information and make a comprehensive selection. During their collaboration they showed a genuine team spirit, which enabled them to handle unexpected situations. This report proves for this good cooperation. Finally, of course I want to thank the participating students for their enthusiasm and their dedication, which exceeded the demands of a compulsory assignment. Dr. A.C. van Wageningen Amsterdam, december 2014

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Introduction On 1 July 2013 the European Union saw the Republic of Croatia, a country with 4.3 million citizens, join its ranks as the 28th member state after it had received candidate status in 2004. Croatia, a former Yugoslav republic that had declared its independence in 1991, was thought to have implemented enough changes to meet the Copenhagen Criteria and was allowed into the EU. These Copenhagen Criteria were set up in 1993 in preparation for the Union’s eastwards expansion and include criteria for having a functional democratic government, a working rule of law and respect for human rights and minorities as well as an economic criterion such as a fully functioning market economy, which can cope with the competition of the internal market. As part of the Copenhagen Criteria, Croatia had to meet the requirements of the 35 chapters of the acquis communautaire (hereinafter; the acquis) as well. The 2013 enlargement of the EU is proof that these changes to Croatian legislation were not without success. The title of this report refers back to this EU expansion as the title is a triple entendre. Tying the knot is a figure of speech to say about two individuals that are getting married. In the case of the report it is the EU and Croatia that are bound together when Croatia entered the EU in 2013. This is also the second meaning of the title, literally binding each other to one another by making each other dependent on the other. The title finally refers back to Croatia’s cultural heritage, namely the invention of the cravat. The 2013 EU enlargement was the main reason for the authors to write this report. With a new addition to the EU a lot of opportunities have been created for both the old member states and Croatia itself. This report can therefore be useful to anyone who is interested in learning more about the country in order to make the best of the newly arisen opportunities and understand the main challenges Croatia is facing. This report was written in three phases. In the first phase, the authors conducted an intensive literature study of Croatia by using books, academic and news articles, commission documents, publications of non-governmental organisations (NGOs), statistics and other relevant sources that were necessary to gain knowledge about Croatia. In the second phase the authors conducted an extensive field research in Croatia where they held 57 interviews with people from the entire Croatian society. For example, interviews were held with businesses, the government, law firms, NGOs, students, professors and historical and cultural foundations. The interviews were mostly held in Zagreb, the capital of Croatia, but also in Rijeka, the principal harbour and third largest city of the country. To be able to receive the most sincere answers all interviewees were promised they would stay anonymous in this report. In the last phase, the outcome of the interviews was compared with the literature study and the literature study was adapted or complemented when necessary with the findings of the interviews. This resulted in xiv

this interdisciplinary report that will provide a thorough insight into the historical, cultural, legal, political, societal and economic dimensions of Croatia.

Outline The findings of the literature study and the field research have been grouped into five parts: Part I consists of a chapter which discusses the history of the country, and a chapter discussing the culture of the country; Part II discusses the legal dimension of Croatia; Part III discusses the internal and external political relations of the country; Part IV examines the economy of Croatia and all its peculiarities; Part V, the final part, discusses the welfare state and society of Croatia, which encompasses topics such as corruption, demographics, social security system, media and education. The history of Croatia is examined to start off this report. First, an overview of the history preceding the First World War will be provided, in which it is discussed how Croatia had been part of a greater European empire for most of its history. Furthermore, a detailed account of the post-1914 years is given, in which the coming into existence of Yugoslavia1 is discussed as well as the events leading up to the breakup of this federal republic in 1991 and the subsequent 1990s Wars. The disintegration of Yugoslavia as well as its socialist system have had a lasting impact on Croatia, which will be referred to several times across the other parts of the report. Like history, the Croatian culture has influenced, and provides an explanation for the way in which Croatia has developed. The leitmotif of the chapter on culture will be nationalism, but more topics such as cultural policies and stereotypes will be discussed. A lot of the cultural policies in Croatia have been influenced by nationalism and Croatian nationalism has furthermore played a part in the breakup of Yugoslavia. Besides nationalism, religion seems to be an important influential factor on Croatian society; Croats in general identify strongly with the Catholic Church. Finally, the Croatian language will be discussed and how it has been transformed from Serbo-Croatian to Croatian, again heavily influenced by nationalism. In Part II of this report it will be discussed that although Croatia’s legal framework has improved during the EU accession, challenges remain. The implementation of the legislation needs to be more effective, as only then reform will achieve the desired effects. Institutions and policies that guarantee democracy, the rule of law, human rights and the protection of minorities in Croatia should be strengthened to be able to implement rules and enforce human 1

The term Yugoslavia is used for describing three political entities in history. The first Yugoslavia was called the Kingdom of Serbs, Croats and Slovenes from 1918 to 1929. It was renamed to the Kingdom of Yugoslavia in 1929 and remained to be called this way until 1943. During that year, the second Yugoslavia was renamed the Democratic Federal Yugoslavia, which lasted until 1946. It was then renamed to the Federal People’s Republic of Yugoslavia. The last rename of the second Yugoslavia took place in 1963 when it was called the Socialist Federal Republic of Yugoslavia. This lasted until 1991 when it was renamed the Federal Republic of Yugoslavia; this third Yugoslavia existed until 2003. The common denominator for the use of all these entities throughout this report will be Yugoslavia.

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rights effectively. Part III consists of chapter five and chapter six that discuss Croatia’s political system and relations. The fourth chapter, however, focuses on internal political relations, such as the relationship between the different government levels and political parties. Furthermore this chapter provides a separate section on the International Criminal Tribunal for the former Yugoslavia (ICTY) and how the different political parties and governments have addressed the issues raised by this court. As cooperation with the ICTY was a prerequisite for EU membership, this chapter also discusses Croatia’s process of EU accession and some of the results of this process. Chapter five focuses on foreign policy and thus the external political relations of Croatia. The main focus in this chapter is put on the neighbouring countries such as Serbia, Bosnia and Herzegovina, and Slovenia. The Copenhagen Criteria not only serve to strengthen the judicial system but also the economy of a candidate member state. The criteria prescribe that Croatia has to have a functioning market economy and the capacity to cope with competitive pressure and market forces. If a transition country cannot transform its state-controlled economy into a functioning market economy, this can be troublesome within the Single European Market. Therefore, Part IV of this report will give a thorough insight in to the economic situation of Croatia. Both Croatia’s strengths and weaknesses of its economy will be discussed. Furthermore specific attention is given to its macroeconomic policy during the last two decades. The last part of the report, Part V, will focus on Croatia’s welfare state and its society. Firstly, the role of corruption in Croatian society will be discussed. Secondly, Croatia’s demographic situation will be looked into. Thirdly, Croatia’s welfare state will be examined, including areas as its pension system, healthcare system, unemployment insurance, family benefits and social assistance scheme. It will become apparent that the high unemployment rate, the aging of population and war veterans pose a significant burden on Croatia’s welfare state. Furthermore, attention will be given to Croatia’s education system, the Croatian media and environmental issues. The authors are confident that this report has created an extensive interdisciplinary analysis of Croatia and that it can be useful to anyone who is interested in learning more about the country and its main challenges and opportunities.

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Part I History and culture

1

1. History of Croatia In this chapter the history of Croatia will be described, with a focus on the 20 th century. However, earlier times will also be discussed briefly.

1.1 A brief history of Croatia until the 20th century For over eight centuries, Croatia fell under foreign domination. In 1991, Croatia regained its independence, which makes it a very young European state. In the beginning of the 9th century, tribes in the area began using the term ‘Duke of Croatia’ for their leaders.2 At the time the region was independent but various powers already loomed at the horizon such as the Frankish Empire, the Byzantine Empire and the Venice Republic.3 Croatia was organised in multiple traditional tribes, of which the most prominent ruled together with the king. Furthermore, institutions were established such as the Sabor (Parliament) which still exists nowadays.4 The influences of and contact with Latin and Christian powers led to the conversion to Christianity around 800.5 At the end of the 11th century, Croatia lost its independence. In 1097, the national dynasty that had ruled Croatia had come to its end and the Hungarian king presented itself as a candidate to the throne.6 As a consequence, an agreement was closed in 1102 between the Hungarian king and the Croatian nobility. The agreement ensured that Croatia would remain a separate kingdom with institutions such as the Sabor and the Ban (viceroy).7 This introduced a period of stability in the area, which continued until the death of King Louis I in 1382.8 King Louis I’s death triggered a civil war in Croatia and around the same time the conquest of the Ottomans for the Balkan Peninsula started. From the late 1300s the Ottomans ruled South Slav territories for several centuries and their influence is still noticeable today. The Ottomans never fully controlled Croatian territory, as the Hungarians kept control over a part of the Croatian lands and the Venetians had conquered territory surrounding the area of Istria. This resulted in the division of Croatia into three separate political entities with few similarities. ‘Besides the loss of territorial integrity it led to a declining sense of economic and cultural integrity.’9 It is argued that the exposure to the different influences is one of the main reasons for the strong regionalism in Croatia in the 18th and 19th century.10 In the period between the 16th and the beginning of the 19th century Croatia remained 2

Tanner, 1997, p. 47. Ibid., p. 36. 4 Ibid., p. 40. 5 Ibid., p. 36. 6 Ibid., p. 40. 7 Goldstein, 1999, p. 21 ; Tanner, 1997, p. 48. 8 Goldstein, 1999, p. 31. 9 Ibid., p. 31. 10 Goldstein, 1999, p.32. 3

2

divided, with regularly shifting borders as many battles were fought. In the 16th century, the Ottomans had conquered much territory and it seemed that Croatia would fall entirely in the hands of the Ottomans. However, the year 1593 marked the turning point when the Ottomans were defeated in Sisak.11 Although Ottoman conquests continued, from this year onwards the Ottomans were slowly pushed back. At the end of the 17th century, the Ottomans lost the battle of Vienna and Croatia was almost entirely freed from the Ottomans. Even though the Ottomans were less of a threat now, Croatia had to deal with another problem: the preservation of independence in the infighting between Hungary and Vienna. Several times Croatia tried to gain support from one of these sides in order to gain as much autonomy as they could. However, in 1779 the emperor initiated an act that placed the affairs of Croatia for the first time under the supervision of the Hungarian government. Eventually, at the end of the 18th century, the autonomy of Croatia disappeared almost entirely.12 In the beginning of the 19th century, Napoleon conquered large areas of the European continent, including the southern parts of Croatia. The French initiated widespread reforms such as equality in rights for all people and introduced a modern administration and a judicial system.13 In the 19th century, as in other European countries, national consciousness awoke among the Croats.14 The idea arose that a common standard language was needed for all Croatian regions. This gave birth to the idea of one ‘Illyrian’ standard langue. This standard language was not only meant for Croats as it intended to incorporate the broader South Slave language community.15 As the idea attracted many followers, it meant the beginning of the Illyrian Movement. This movement had a fundamental role in Croatian nationalism. Furthermore, it laid the foundations for the idea of the unification of all South Slavs.16 The Hungarians perceived the Illyrian Movement as a threat, which resulted in 1830 into a conflict between Hungarians and Croats. In a meeting of the joint Croatian-Hungarian parliament, the Hungarians claimed ‘that Hungary and Croatia were not two allied kingdoms but that Croatian lands were parts of Hungary and subject to it’.17 In 1848, the tensions between Croatia and Hungary reached a climax and resulted in a military clash. On 30 October 1848, the Croatian army defeated the Hungarians.18 Around this time, revolutions had started in Austria and Hungary. In order to ensure stability in the empire the Austrian emperor initiated a strong centralist policy. A period of absolutist and centralist rule began until in 1867 the Austrian-Hungarian agreement was signed, which turned the 11

Goldstein, 1999, p. 39. Ibid., p. 127. 13 Ibid., p. 131. 14 Ibid. 15 Ibid., p. 60. 16 Ibid., p. 61. 17 Ibid., p. 62. 18 Gazi, 1973, p. 149. 12

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empire into a dual state. For the Croats this was disadvantageous, as once again the region fell under Hungarian rule and was given the least possible amount of autonomy. From the 1870s onwards, modernisation was in full swing, which led to rapid economic development, especially in the north of the Croatian region. Although the Hungarians strongly controlled the area, Croatian nationalism as well as the ideas of Yugoslavism were gaining strength. At the turn of the century, the opposition to the regime of the Hungarians had grown stronger, as claims for more autonomy were turned down every time.19 Furthermore, Austria-Hungary formally annexed Bosnia and Herzegovina, which almost provoked a war with Serbia. Gradually, relations between the European powers became more strained until in 1914 the First World War began.20

1.2 The First World War Before the outbreak of the First World War tensions were rising in Europe. Constant competition between the main powers of Europe, imperialism, the rise of nationalistic aspirations, and the Balkan wars of 1912-1913 all contributed to increasing tensions. As a result, two main pacts were formed: the Entente Alliance, which consisted of France, Russia and Great Britain and the Central Powers, which consisted of Austro-Hungary, Germany and Italy (who switched sides later on). By concluding the pacts, the countries included agreed to support each other if one would be attacked. All European countries were watching each other closely, afraid of losing any power. Furthermore, many countries were interested in the Balkan region, as they wished to expand their influence in this area. However, several countries in the Balkan region had recently become independent and feelings of nationalism were strongly present when the Ottoman Empire started to fall apart. These new states were determined not to be repressed again and hoped to recover the territories that they felt entitled to.21 In 1914, tensions had become much more severe and war seemed inevitable. The murder of Franz Ferdinand by a Serbian nationalist was the provocation for the First World War on 28 July 1914. Soon multiple war declarations were issued and more players were involved. France, Russia and Great-Britain were later on joined by Belgium, Montenegro, Japan, Italy and the United States (US). The Central Powers were joined by the Ottoman Empire and Bulgaria. The role of Croatia in this conflict is quite marginal. As Croatia fell under the reign of the AustroHungarian Empire they had no say in war politics and were not directly affected by the war. However, Croatian soldiers did fight in Austro-Hungarian units on the Serbian and Italian fronts.22

19

Goldstein, 1999, p. 101. Ibid., p.105. 21 Hagen, 1999, p. 53. 22 Goldstein, 1999, p. 108. 20

4

In 1915 the Treaty of London23 was signed, which posed a threat to Croatia’s existence and selfdetermination. The treaty between the Entente Alliance and Italy promised certain territories of the Austro-Hungarian Empire, including parts of Croatia, to Italy if the Italians should switch sides. The idea of the formation of a South Slavic state had already been circulating since the 19th century and now seemed to be in the best interest of Croatia. As Serbia and Slovenia were also interested, a Yugoslav Committee was established in 1915 which propagated the idea of dismemberment of the Austro-Hungarian Empire, the emancipation of all South Slaves with it, and the establishment of a joint state with Serbia and Montenegro.24 As a result, in 1917, the Corfu Declaration was signed which laid down the foundations for a South Slavic state.25

1.3 The Unification of the South Slavic people When in 1917 the Austro-Hungarian Empire started to break down, Yugoslav sentiment started to gain strength. In the beginning of 1918, political representatives of all countries involved started to consider the establishment of democratically-based state of Slovenes, Croats and Serbs.26 The National Council of the State of Slovenes, Croats and Serbs was created with the aim to put an end to the Austro-Hungarian power over the South Slaves, and realise independence.27 On 26 November 1918, Serbia and Montenegro were united and on 1 December 1918, The Kingdom of Slovenes, Croats and Serbs was proclaimed by Prince Regent Alexander I of Serbia.28 Almost immediately trouble arose with the Serbs and Croats being ‘the crux of the problem’.29 In order to organise the new state, negotiations were held between the Serbian government and the National Council. After long negotiations, a centralised state was created with a Serbian king and an almost completely Serbian army. This can be explained by the fact that the Serbs had been the only one independent before the war, they had the largest population and were the only ones with a significant army that was able to protect the new state.30 Nonetheless, many Croats refused to accept the fact that they were ruled by Serbdominated institutions.31 They felt betrayed and considered these institutions to be the proof that Serbs wanted to extend their formal territory.32 Therefore, most Croats voted for the Croatian Peasant Party (HSS) which demanded more autonomy for Croatia. As the kingdom was

23

The Treaty of London,http://wwi.lib.byu.edu/index.php/The_Treaty_of_London_(1915) accessed on 14 February 2014. Trifkovic, 1992, p. 350. 25 Corfu Declaration, http://www.firstworldwar.com/source/greaterserbia_corfudeclaration.htm accessed on 17 February 2014. 26 Trifkovic, 1992, p. 352. 27 Sotirović, 2007, p. 6. 28 Doder, 1992, p. 9. 29 Ibid. 30 Trifkovic, 1992, p. 354. 31 Djokić, 2012, p. 80. 32 Trifkovic, 1992, p. 354. 24

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supposed to be a democratic state, a multi-party system was set up. However, most parties, such as the HSS, were very nationalistic, which made politics turn in some form of ‘tribal war’.33 Yugoslav propaganda such as, ‘three names one people’ had not proven to be successful. As there was no such thing as a real Yugoslav nation, it was deemed necessary to find a solution for the differences mostly between the Serbs and Croats.34 These differences included the uneven rate of economic growth, the cultural and political ones, and the contrary aspirations. As they prove unable to overcome in the following years they can be appointed as the main causes for several conflicts.35 In the 1920s, the Croats were dissatisfied with the organisation of the state and demanded more autonomy, which was called the ‘Croatian Question’. Especially the HSS had a prominent role in this, as the leader, Stjepan Radić, several times angered Serbian politicians as he opposed the regime and sought foreign support for the self-determination of Croatia.36 When Croatia almost seemed impossible to handle, King Alexander I intervened, and Radić stopped opposition. As a result, a coalition of parties was established between Radić and the Serbian Prime Minister of the Kingdom Nikolai Pašić. Already after one year, the coalition collapsed. In 1928, the political conflict escalated entirely as three deputies, including Radić, were killed by a deputy of Montenegro.37 The Kingdom was in a state of political crisis until, in January 1929 King Alexander I abolished the democratic institutions and took all the power. The Kingdom had become a dictatorship and was formally renamed the Kingdom of Yugoslavia. It is argued that the main objective of King Alexander I was to develop a feeling of national unity in order to create a Yugoslav nation.38 In his proclamation he stated that the parliamentary system was a threat to the unity and that it was his duty to preserve ‘this unity’ for the state.39 In order to achieve his goal, there was no room allowed for other national awareness and Yugoslavia was ruled in authoritarian lines, the press was censored and opponents of the regime were arrested. The dictatorship was characterised by order, discipline, state-authority and anti-communism.40 After two years, the dictatorship eased up a little. The regime used to be absolute since all power was in the hands of the king. This changed with the constitution of 1931 when power was split between the king and the National Representation. However, only members of proYugoslav organisations could be elected for the National Representation. The king’s rule mainly focused on the repression of nationalistic expressions. Therefore, all nationalist parties were 33

Doder, 1992, p. 10. Radelić, 2006, p. 14. 35 Trifkovic, 1992, p. 354. 36 Ibid., p.356. 37 Trifkovic, 1992,p. 357; Goldstein, 1999, p.120. 38 Radelić, 2006, p.20; Trifkovic. 1992, p.361. 39 Radan, 2011, p. 33. 40 Trifkovic, 1992, p. 361. 34

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forbidden. The policy, however, had the opposite effect; in the 1930s more extreme nationalist organisations were founded such as the Croat separatist movement Ustaša, which was led by Ante Pavelić. As only parties with a pan-Yugoslavic programme were allowed to be in the National Representation, Serbs and Croats several times attempted to form an opposition. However, as the ‘Croatian Question’ proved unable to be solved no agreement could be reached.41 In October 1934, King Alexander I was assassinated by Croatian and Macedonian revolutionaries during a state visit in France. The death of the king resulted in ‘a power vacuum that was hard to fill’.42 As the king’s son was too young to rule, the cousin of the king, Pavle, was given the royal power. In 1935, Prince Pavle appointed Stojadinović as prime minister. Stojadinović had a difficult task as Yugoslav politics suffered from ‘an identity crisis’ as well as extreme nationalism.43 The prime minister formed the Yugoslav Radical Union (YRU), a coalition of the former Serbian Radical Party, the Yugoslav Muslim Organisation and the Slovene’s People’s Party. The HSS was absent in this coalition, as they did not want to cooperate with Stojadinović.44 The YRU proposed a two-level government in which the local regions were allowed a certain autonomy as long as they would not go against state interest. The state structure ultimately failed due to the fact that it did not take into account the strong nationalistic feelings of that time.45 The policy of former King Alexander I had been aimed to create more unity within the Yugoslav state. This was realised several years after his death. In 1938, Prince Pavle replaced Stojadinović with Cvetković, who the prince deemed able of finding an agreement with Maček, the leader of the HSS. During the mid-1930s the Croatian and Serbian politicians had grown closer as they both wanted to return to democracy and solve the ‘Croatian question’.46 However, the disputes between the two were difficult to overcome. Only because of international pressure and the prospect of a European War, the political leaders of the parties became convinced that a united Yugoslavia was necessary.47 Finally, on 23 August 1939 the Sporazum (Agreement) was signed between the HSS and the central government. The negotiations had been tough but resulted for Croatia in the revival of the Sabor, the extension of autonomy and the recognition of equality between the three peoples as well as their religions. Therefore, it can be argued that the Sporazum was one of the first steps in completing the Yugoslav Federation. Moreover, for the first time the Sporazum recognised the distinct identities of Yugoslavia instead of the idea of a

41

Lampe, 1994, p. 83. Djokić 2012, p. 84. 43 Ibid., p. 85. 44 Radan, 2011, p. 35. 45 Ibid., p. 34. 46 Djokić 2012, p. 85. 47 Radan, 2011, p. 35. 42

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single Yugoslav people.48 The agreement seemed to be a solution to the constant conflict that had characterised Yugoslavia since its creation. Sadly, the Sporazum intensified the problems.49 As Croatia finally had received its autonomy, the other regions now wished the same. Furthermore, nationalist sentiments increased after the agreement, which was reflected for instance by the growing support for the Ustaša movement. The Ustaša, mostly described as a fascist movement, aimed at destroying Yugoslavia in order to create an independent Croatia. The movement mainly operated from Italy and Hungary, where members in exile had set up paramilitary camps to train their members.

Before they came into power during the Second World War, they

committed several terrorist attacks in Yugoslavia.50

1.4 The Second World War On 1 September 1939, the Second World War began officially with the invasion of Poland by Nazi-Germany, which also had consequences for the position of Yugoslavia. The Yugoslav government had trouble deciding how to respond at the beginning of the war. There was pressure from Nazi-Germany and Italy but Prince Paul rather saw Yugoslavia on the side of the Allies. However, as France already recapitulated in 1940 and there was no hope for British assistance, the Yugoslav government decided to adopt a neutral stance.51 Although Germany considered every country that did not side with them as an enemy, they allowed Yugoslavian neutrality under two conditions.52 First, the Germans demanded free passage for all their troops and transports through the Yugoslavian territories for the war against Greece. Secondly, Yugoslavia had to provide hospitalisation to sick and wounded German soldiers. It has to be taken into account that neutrality, in this sense, does not seem to be the correct word, because Yugoslavia had to give up its freedom as well as its military control. Yugoslavia’s stance changed after a while. Before the outbreak of the war Yugoslavia’s economy had already been in bad shape. When the Germans started demanding the surplus the country produced, the situation deteriorated rapidly. As a consequence the common people started to demonstrate against the government and asked for adjustments in their policy. Despite its earlier neutral stance, the Yugoslav government signed the Tripartite Pact with Germany and Italy on 25 March 1941 due to increasing pressure of these two countries.53 For some time government officials and generals of the Yugoslav army had been 48

Radan, 2011, p. 37. Ibid., p. 37. 50 Stan & Poliec, 2011, p.112. 51 Djokić, 2012, p. 87. 52 Jovanovich, 1994, p. 110. 53 A pact initially signed on 27 September 1940 by Italy, Germany and Japan, the Axis powers, to assist one another with political, economic and military means when any of them was attacked. Bulgaria, Hungary, Rumania and Slovakia also signed the pact later on. 49

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dissatisfied with the government’s pro-Nazi stance and were planning to overthrow the government. Only two days after the signing of the pact, a very well organised putsch started in Belgrade (the Belgrade Coup). In less than three hours all government buildings were under the control of the revolutionaries. The same day, a radio message was broadcasted that announced that the Yugoslav army had taken control over the country with general Simović as its new president, as had been decided by King Peter II (son of former King Alexander I).54 The Serb population welcomed the new government, as they had grown quite dissatisfied with the former one. The Croats were not as content as the Serbs but were not pro-German either. For example, Maćek, the leader of the HSS, believed in the victory of the western democracies and turned down the German offer to rule the Independent State of Croatia. It was then given to Pavelić.55 The joy that spread through parts of the country would not last long. When Hitler received the message of the Belgrade Coup he decided to crush Yugoslavia.56 On 6 April 1941 the Axis Power’s invasion began in Yugoslavia. The invasion started with massive air raids on Belgrade, which resulted in 17 000 casualties on the first day.57 The bombings continued for four days until Belgrade was burning completely. Beforehand, the government had not wanted to provoke the Germans to attack and therefore had not fully mobilised the Yugoslav army. As a consequence, when the Axis Powers did invade unexpectedly, the Yugoslav army was easy to defeat. Eventually, the invasion led to the dismemberment of Yugoslavia. In April 1941 the Germans handed over the Independent State of Croatia (NDH) to the Ustaša movement. The NDH consisted of Croatia and Bosnia and Herzegovina and was led by Ante Pavelić. Although the NDH was created, in reality Italy ruled the western part of Croatia and Germany the eastern part of the country.58 The Ustaša shared leadership with the Italians and Germans and in some cases was subordinate to them. The following four years were characterised by violence, mass murder, deportations and destruction. Although many Croats welcomed independence at first, many soon turned against the actions of the Ustaša.59 As mentioned above, the movement was created in 1930 due to dissatisfaction with the Serb-dominated regime. Members were mostly peasants from impoverished regions of Croatia and Bosnia Herzegovina whom all shared their hostility against Serbs. Their ideology was influenced by the 19th century Croatian nationalist Ante Starcević, who described the Serbs as a ’race of slaves, beasts worse than any’. 60 Furthermore, their ideology featured the glorification of violence, apprehension of the past, the cult of the leader

54

Jovanovic, 1994, p. 5. Djokić, 2012, p. 88. 56 Jovanovic, 1994,p. 115. 57 Ibid., p. 116. 58 Korb, 2010, p. 4. 59 Djokić, 2012, p. 88. 60 Trifković, 1992, p. 365. 55

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and Roman Catholicism.61 Although having many similarities with fascism, the Ustaša was first and foremost an extremist nationalist movement. From the moment the Ustaša came into power in 1941 a dictatorship was established. All political parties, trade unions and the rights to liberty of speech and press were abolished; liberals, socialists and communists were imprisoned. Concentration camps resembling the Nazi model were set up and in the summer of 1941 the persecution of Serbs, Jews and Gypsies started. Although there are differentiating opinions, it has been argued that the plan of the Ustaša toward the Serbs population was to kill one-third, to convert one-third with force to Catholicism and to deport one-third outside of Croatia.62 Whether this was the actual plan is not evident. The state, at that time, could be considered lawless. The Ustaša could persecute persons without any legal basis of the government and every district official had full military and police control.63 Therefore, it can be argued that especially in the beginning Ustaša officials and guards acted arbitrarily instead of following an actual plan. In the summer of 1941, inhabitants were tortured and their villages burned down. During the summer months 100 000 Serbs were killed.64 The ways in which Ustaša killed people is often described as extremely terrible, barbaric and sadistic.65 Throughout the summer the Ustaša had free reign since the Germans and Italians were distracted by rivalry with each other. When on 1 August 1941 Italian troops marched into western Croatian territory, taking over the administration and restraining Ustaša’s power, they wanted to change the state structure. The Italians announced that they would not tolerate violence against Serbs and Jews. However, this had the opposite effect; Ustaša guards at concentration camps slaughtered as many Serbs and Jews as they could.66 Furthermore, the concentration camps were moved to the east and frustrated Ustaša soldiers moved to Bosnia and Herzegovina with nothing to do besides killing.67 Although the Italians had stated that they would no longer tolerate violence by Ustaša, ‘they turned a blind eye whenever their occupation regime was under threat’.68 The Ustaša had more power in the eastern territory, which was under German influence. The German presence was minimal and they even encouraged the Ustaša to use violence, especially against Jews. As a result, Croatia together with Romania was the first country that started a concentrated attack on the Jews.69 However, the Germans soon came to realise that the anti-Serb policies of the Ustaša had a destabilizing effect. Therefore, in 1941 the Germans pressured the Ustaša to stop the Serb 61

Stan & Poliec, 2011, p. 114. Gumz, 1998, p. 35. 63 Stan & Poliec, 2011, p. 117. 64 Korb, 2010, p. 4. 65 People were burned alive, their eyes were pulled out, their noses and ears cut off, chopped in to pieces, starved to death, including children. 66 Korb, 2010, p. 6. 67 A very notorious concentration camp in Croatia was Jasenovac. 68 Korb, 2010, p. 7 69 Korb, 2010, p.7. 62

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massacres, but these protests came too late in many cases. German soldiers were not able to stop the slaughtering. The Ustaša ignored the protests and justified the murders as anti-Partisan warfare.70 In 1942, the Ustaša government had promised the Germans to put an end to the murders. Nevertheless, the Ustaša continued with their brutal actions. At one point, the Germans decided that anti-Serb policies had to stop and started using force against the Ustaša. 71 Both the Italians and Germans started to intervene regularly as the Ustaša refused to obey. Eventually, the Italians took the interventions further as they tried to protect the Serbs and later on even started to cooperate with the Chetniks, a rebel group.72 The Ustaša did not only murder in order to destroy the Serb minority in Croatia. From September 1941, Serbs were able to apply to convert to Catholicism but only under certain conditions. For example, Serbian peasants could easily apply but the Serbian intelligentsia did not have this privilege. Another way which was used to attempt to eliminate the Serb minority in Croatia, was to deport Serbs to working camps or to Serbia. At one point, the Croatian government realised that the Serb minority (estimated at around two million) would not be eliminated. Therefore, some minor concessions were done to the Serbs.73 Already soon after the Ustaša had come to power in Croatia resistance emerged. It was present in two forms, the already mentioned Chetniks, and the Communist-led Partisans. The Chetniks, mainly described as Serbian nationalists, were formed from the remains of the Yugoslav army and were fighting for the establishment of a constitutional monarchy.74 They were led by a former Commander-in chief Draza Mihailović and indeed protected many Serbs. The National Liberation Movement (Partisans) was led by Josip Broz Tito, a communist since 1917, and fought under a Yugoslav programme where different ethnicities were not important. Although both the Chetniks and the Partisans were fighting against the Ustaša, they hated each other. Both envisaged a completely different Croatia after they would have defeated the Ustaša. Furthermore, the Partisans fought all occupying powers, while the Chetniks collaborated with the Italians and later on in the war also with the Germans. Another big difference is the way the two organisations dealt with the reprisals of the Germans. The Chetniks tried to avoid killing German soldiers as this meant the death of 100 Serbs. The Partisans, however, were oblivious to the reprisals.75 The Partisans formed the strongest opposition, as they did not collaborate with the Axis powers but also because they were much

70

Gumz, 1998, p. 38. Ibid., p. 42. 72 Ibid., p. 38. 73 Ibid., p. 43. 74 Petrov, 1997, p. 17. 75 Pavasovic, 1992, p. 8. 71

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better organised than the Chetniks.76 Another reason may be the fact that the support of the civilians gradually grew for the Partisans while the Chetniks became increasingly unpopular. This was probably caused by the attacks of the Chetniks on Muslims and Croats, while the Partisans did not involve themselves in genocide policies.77 The unpopularity of the Chetniks also influenced the Allied powers. Initially, they had supported the Chetniks, but in 1943 decided to shift to Tito’s partisans. The year 1943 seemed to herald the beginning of the end for the Axis powers and the Ustaša. The Ustaša regime was approaching its end as the army was poorly organised and led, and support for it had decreased among the Croat population. Furthermore, Italy collapsed in September 1943, and also Germany was losing its grip in the area. The reason was that the Germans were disorganised and therefore proved to be unsuccessful in beating the Partisans.78 In mid-1944, the Partisans controlled half of the NDH and the Germans slowly started to withdraw. Meanwhile, the Red Army had arrived, supporting Tito, which is probably one of the main reasons that the Partisans eventually won.79 In October 1944, the Partisans, together with the Red Army, liberated Belgrade. The Ustaša and the Chetniks desperately tried to flee but were captured by the Allied powers that handed them over to the partisans resulting in many executions. In 1946, Mihailović, leader of the Chetniks, was captured and endured the same faith. During the war, all the different ethnicities had been fighting each other so the Yugoslav idea seemed dead. When the war had ended and the Germans had been defeated, Tito reinvigorated the unity of the South Slavs. The Partisans had fought under the Yugoslav programme, the unification of the South-Slav people, which historians have appointed as the Partisan Myth. The myth had been created by Communist leaders, and was based on the exaggeration of historical facts. After the war one of these facts was the common and heroic struggle of the South Slav partisan groups against the Nazi occupation.80 The idea was that the myth would turn all the different nationalities into one single identity. However, this myth and other ideological propaganda never ensured much ethnical cohesion in Tito’s Yugoslavia.81

1.5 Tito’s Yugoslavia In 1944, Tito’s Partisans had taken full control of Yugoslavia. Although the Yugoslav government, which had remained in exile during the war, had supported the Chetniks instead of

76

Grumz, 1998, p. 36. Hoare, 2010, p. 1193. 78 Grumz, 1998, p. 51. 79 Hehn, 1971, p. 367. 80 Kasymov, 2011, p. 301. 81 Ibid., p. 303. 77

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the Partisans they had to cooperate with them in order to stay in the game.82 As Tito had assured the Allies to cooperate with the government-in-exile, an agreement was signed in November 1944 with the Head of the Government-in-exile, Ivan Šubašić. The agreement provided for the creation of a joint government and a Constituent Assembly and forbade the return of King Peter.83 In March 1945 the Government of the Democratic Federal Yugoslavia was formed with Tito as its prime minister and Šubašić as foreign minister. The cooperation with the former government-in-exile did not work out, as soon it was visible that the communists were installing some kind of authoritarian regime. As a consequence, Šubašić and all other noncommunist politicians left the government.84 Furthermore, Tito ensured via show trials that his opponents were silenced, as they were executed or sent to jail.85 In November 1945, elections were held for the National Assembly. On the list of the candidates were only communists, who consequently won the elections. The communists abolished the monarchy and proclaimed the Federal People’s Republic of Yugoslavia (FPRY).86 In January 1946, a constitution based on the Soviet Union’s was approved, which divided the FPRY into six federal republics: Slovenia, Croatia, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia with its two autonomous regions Vojvodina and Kosovo. The division into multiple units was done in order to create an equal system for all the different ethnic groups within the FPRY and to avoid any possible conflicts on border territories.87 As all Yugoslav peoples were considered equal, not one of them was allowed to dominate the others. In order to create a real Yugoslav nation, propaganda played a big role in society.88 Through education and media all people were forced to learn about their history and culture but also of the history and culture of the other ethnic groups in the FPRY.89 A sense of brotherhood and unity had to be developed. The powers in the FPRY were officially split between the central government and the republics. However, in practice the power was invested in the government, and Tito was the ultimate leader who could always step in and decide on a matter if he deemed this necessary. 90 As the war had completely destroyed the economy, the objective of the communists was a ‘total and rapid mobilisation and reconstruction of Yugoslavia’.91 According to the socialist model, production, trade and property all were owned by the state and the policy of collectivisation was initiated. The government especially directed its reforms towards a massive and fast 82

Goldstein, 1999, p.153. Ibid. 84 Ibid., p.160. 85 Bennett, 1995, p.52. 86 Wilson, 1979, p.39. 87 Bennett, 1995, p.53. 88 Ibid., p.64. 89 Ibid. 90 Ibid., p.56. 91 Wilson, 1979, p.40. 83

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industrialisation. Although the economy of Yugoslavia first made a great leap 92 negative sideeffects were soon visible.93 On 29 June 1948, the world was astonished by the news of the Tito-Stalin split. Although relations were not always smooth, Yugoslavia was considered to be one of the most loyal allies of the Union of Soviet Socialist Republics (USSR).94 The communists in Yugoslavia followed the Soviet model of socialism in building their state and were one of the first communist states that had proceeded towards full collectivisation.95 Therefore, Yugoslavia was often presented as a model by the Soviets for other communist states. There are several theories written on the reason why Stalin decided to break with Tito. It has been argued that Tito pursued his own path of communism, which did not fit in the Soviets’ plans.96 Another theory argues that Stalin condemned Yugoslavia due to Tito’s foreign policy towards the Balkan region. Tito wanted to create some kind of Balkan federation where Yugoslavia would be regional hegemon in the Balkan area.97 One way or the other it was clear that tensions between the two leaders increased. Repeatedly, accusations were made against the Yugoslav Communist Party (CPY) or Tito alone. Although it is argued that Tito did not want a conflict with Stalin he denied the accusations. At the Cominform

98

conference, where the CPY

was not invited, they were expelled from the communist front.99 In July 1948, it became clear that it was unlikely that Stalin and Tito would settle their differences. As the split with the Soviets was a big blow to the CPY, Tito had to secure his own position within the party. In order to do this, Tito stated that the FPRY remained loyal to the USSR and ensured that most party members against him were executed or sent to jail. 100 Furthermore, Tito attempted to please Stalin by speeding up the process to build the FPRY along the lines of the Stalinist model. New efforts were made to nationalise the industry further and complete the process of collectivisation.101 These policies had negative consequences for the economy. Moreover, since the split, Stalin pursued a policy that aimed at the economic and political isolation of the FPRY. In 1949, the economic blockade was completed and the FPRY did no longer receive supplies from the USSR and was not able to trade with any of the communist states anymore.102 For the economy this was disastrous and it seemed to collapse. The tide turned as the FPRY was granted 92

Wilson, 1979, p. 46. Bennett, 1995, p.68. 94 Perovic, 2007, p.32; p.39. 95 Ibid., p.37. 96 Wilson, 1979, p.50; Perović, 2007, p.34. 97 Perović, 2007, p.42. 98 The Cominform was the ‘Communist Information Bureau’, the official forum for the different international communist parties. The forum’s main purpose was to coordinate the different parties’ actions, ideals and policies. 99 Wilson, 1979, p.58; Perović, 2007, p.32. 100 Wilson, 1979, p.60,p.62. Perović, 2007, p.59. 101 Bennett, 1995, p.58. 102 Wilson, 1979, p.63. 93

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economic aid from Western powers, which hoped that their actions would stop Tito from turning back towards the Soviet camp.103 Although the split had serious consequences for the FPRY it also led to the evolution of the ‘Yugoslav way’ of socialism. Due to the conflict the Yugoslav communists were faced with two problems. First, they had to demonstrate that they were legitimate and loyal Marxists in order to justify their defiance of the Soviets.104 Secondly, as the Yugoslav state was built completely along the lines of the Soviet model this had to be changed. As the states were in conflict and their ideologies were diverging it would be strange if their social systems were the same.105 As a result, the Yugoslav communists claimed they were the real Marxists-Leninists and all the others were wrong.106 As an alternative to the Soviet model workers’ self-management was introduced in the 1950s . ‘The essence of workers’ self-management is to enable workers to become the dominant subject in the economy and society as whole.’107 In order to achieve this, workers’ councils were established for each enterprise. The council members were elected for one year by all the workers of the enterprise. The councils were responsible for the management and operation of the enterprise. This entailed drafting proposals and giving advice on matters such as production, work norms, finances etc. However, as the managing directors, who were appointed by the government, were able to set aside the advice or proposals, the workers’ councils did not have actual organisational authority.108 As the workers’ councils had limited power and the managing directors were not accountable by the workers this was the weakness of the system.109 The internal changes to the socialist system in the FPRY went parallel with changes in foreign policy.110 As Tito was no longer under Soviet power, the relations with Western powers grew closer. However, as Tito was uncertain if he was able to reconcile with Western powers he made sure that no political conditions were attached to the financial aid that his country received from them.111 From 1950 onwards, close relations between Yugoslavia and Asian and African countries were gradually established. Most of these countries had recently become independent and did not want to be subordinate to either the US or the USSR.112 Tito had supported these countries in their struggle for independence and saw in them ‘important

103

Bennett, 1995, p.59. Marković, 2011, p.108. 105 Ibid., p.108. 106 Wilson, 1979, p.64. 107 Marković, 2011, p.117. 108 Marković, 2011, p.111; Wilson 1979, p.70. 109 Marković, 2011, p.112. 110 Niebuhr, 2011, p.152. 111 Wilson, 1979, p.123. 112 Vukadinović, 1974, p.204. 104

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political partners and potential strategic allies.’113 As these countries did not want to be dominated by one of the superpowers but still have a voice in international relations it was decided at the Bandung Conference in 1955 to work together. At this conference the principles of the future Non-Alignment Movement (NAM) were mentioned for the first time. These principles were the ‘condemnation of colonialism, the importance of peaceful co-existence, further international co-operation, and the strengthening of the United Nations’ (UN).114 Although Tito was not present at the Bandung Conference it is argued that he played an important role in the shaping of the NAM.115 In 1961, the first NAM conference was held in Belgrade where a declaration was issued with the general principles mentioned above plus the importance of the right of self-determination and the need of complete disarmament.116 More conferences were held but at the end of the 1960s the NAM turned towards different issues regarding economy and development rather than politics.117

1.6 The Socialist Federal Republic of Yugoslavia In the 1960s the FPRY underwent a period of extensive reforms and changed its name to the Socialist Federal Republic of Yugoslavia (SFRY). Reforms were necessary as it had become clear to Tito’s government that the FPRY suffered from severe economic problems and was bond by political issues.118 However, there was a significant difference between the more wealthy northern regions and the underdeveloped southern ones. Therefore, the northern regions, such as Croatia and Slovenia, pressured for decentralisation measures, while the southern regions, such as Montenegro and Serbia, stressed for maintaining centralised measures.119 After a period of debate, a new constitution was adopted in 1963, which aimed at recentralising the state, and the FPRY was renamed as the SFRY. The constitution led to a series of reforms that aimed at establishing further the system of self-management, to reduce the tensions between the Yugoslav republics and to lay the foundations for a socialist state.120 In 1970, it became clear that the reforms did not have the result that was hoped for.121 Around the same time Tito’s attention was needed in another direction. Although outwardly Yugoslavia seemed a unity, at various times there were signs of unrest in Yugoslavia due to the nationalities question. Despite the attempts to create a unified Yugoslav community, the different nations in Yugoslavia were all trying to enhance their own

113

Vukadinović, 1974, p.203. Wilson, 1979, p.124. 115 Wilson, 1979, p.124; Niebuhr, 2011, p.165. 116 Wilson, 1979, p.132. 117 Niebuhr, 2011, p.168. 118 Wilson, 1979, p.138. 119 Curtis, 1990. 120 Milenkovitch, 1977, p.55. 121 Milenkovitch, 1977, p.56. 114

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positions.122 Around 1970, the political conditions were the most favourable for maximum freedom for the republics and the Croat leaders made far-reaching proposals for decentralising the state, which generated opposition of the other republics.123 In the same year, a nationalist movement had come into existence in the Socialist Republic of Croatia, led by a Croat cultural organisation named the Matica Hrvatska (Croatian Queen Bee).124 The organisation had nationalistic ideas and its main complaint was that Croatia suffered from its current position in Yugoslavia.125 In April 1971, a student coup was organised at the Zagreb University. The student leaders declared a split with the Yugoslav Student Union and created the Croat Federation of Students. 126 Tito and the other republic leaders observed the nationalistic tendencies in Croatia with unease but the Croat party leadership did nothing about it. Eventually, Tito decided that something really had to be done to stop the nationalistic tendencies in Croatia. At the end of April, he organised a meeting for all responsible leaders of the Yugoslav republics. All leaders approved amendments to the constitution of 1963, which further limited federal powers in the hope that this would solve the national and economic tensions.127 The Croatian leaders were warned and pressured to take action against the nationalists. However, the Croatian communist leaders seemed not to be deterred by the warnings. As Croatia was economically the strongest republic the Croatian communists kept demanding certain economic reforms.128 Once again Tito expressed his anger towards the increasing nationalistic signs in Croatia. He stated: ‘Do we want to have 1941 again?’129 Despite several warnings, the Croat party leadership was not able to effectively control the nationalists anymore without losing their influence.130 On 23 November 1971, student strikes started at several Croatian universities demanding more autonomy for the Croatian republic. Tito’s patience had come to an end and on 2 December in a nation-wide message he accused the Croatian leaders of ‘having pandered the nationalists and separatists’.131 This resulted in a demand of the more conservative communists party members for the resignation of the Croatian leaders in question and suppression of the nationalists.

132

On 12 December, the

accused Croatian leaders resigned. In January 1972, more than 400 nationalist leaders were arrested and the Matica Hrvatksa was forbidden. In 1974, the fourth constitution of Yugoslavia was adopted. It was a very long and 122

Wilson, 1979, p.197. Ibid., p.199. 124 Irvine, 2007, p.161. 125 Ibid., p.162. 126 Wilson, 1979, p.203. 127 Ibid., p.201. 128 Ibid., p.202. 129 Ibid., p.204. 130 Ibid., p.204. 131 Ibid., p.206. 132 Irivne, 2007, p.155. 123

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complex one, which resembled many of the amendments of 1971.133 The Yugoslav government had several aims with the new constitution. First, the constitution reaffirmed and extended the system of self-management.134 The idea of self-management was not only meant for factories but for the all facets of society. Secondly, the constitution had to provide a solution for the question of nationalities.135 The amendments of 1971 had already laid down the structures for further federalisation, which was affirmed by the constitution. Furthermore, procedures to reach consensus more easily were adopted and the areas where the federation was able to act alone or had to consult the republics were clearly defined.136 The republics were independent in their policies except for foreign affairs, defence and some economic issues. All republics and the two autonomous provinces also adopted new constitutions.137 It is argued that the granting of more autonomy to the republics was because of the Croatian spring turmoil in 1971.138 Despite the high number of economic reforms that had been initiated in the 1960, the same economic problems still existed in the 1970s.139 The economy was still not able to compete in the world market, the productivity rates were lower as expected, there were structural problems in the industry, and the prices of food had increased significantly.140 Furthermore, the weaknesses of the self-management system had become apparent, and Yugoslavia was also hit by the world oil crisis of 1973.141 Another matter which became more visible in the 1970s was that the differences between the republics and two provinces had increased, not only in economically, as they had all pursued their own goals, but also politically. 142 Croatia, Macedonia, Montenegro, Kosovo and Bosnia and Herzegovina followed a more conservative path. Slovenia , Serbia, and to a lesser extent Vojvodina, followed a more liberal path. Especially in Slovenia and Serbia the leadership was more liberal and allowed certain freedoms, such as freedom of expression and private enterprises.143 Perhaps as a result of this, sounds of protest against Tito’s regime first occurred in these two republics.144 Evidently, the differences between the various Yugoslav nations have always existed. However, it has been argued that the constitution of 1974 weakened the Yugoslav ideology. ‘By treating Yugoslav constitutive nations as completed, and their republics as sovereign states, the ideological narrative of Yugoslav communism in practice shielded and promoted nationalism in

133

Milenkovitch, 1977, p.56; Roberts, 1978, p. 139. Roberts, 1978, p. 139. 135 Milenkovitch, 1977, p.56. 136 Ibid., p.57. 137 Roberts, 1978, 139. 138 Bennett, 1995, 74. 139 Wilson, 1979, p.236. 140 Ibid., p.236; p. 237. 141 Ibid., p.238. 142 Bennett, 1995, p.78. 143 Bennett, 1995, p.79. 144 Ibid.,, p.79. 134

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its constitutive nations.’145 In addition to the signs of nationalism, resentment against Tito’s regime was growing. Although Tito never tried to privilege any nation, he ended up satisfying none of them.146 In spite of this, he was able to hold the SFRY together until his death. When he died on 4 May 1980, there was no one to hold all the Yugoslav nations together.147

1.7 The disintegration of Yugoslavia There are multiple causes for the disintegration of Yugoslavia. Every cause contributed to the disintegration in varying degrees. This is a point where academics do not agree on. Before describing the period that led to the collapse of Yugoslavia it has to be emphasised that although often cited in the media, it is argued that ethnic hatred was not one of the main causes. 148 It has been argued that there was no higher degree of ethnic hatred (against each other) in Yugoslavia than in other multi –ethnic countries.149 On the contrary, ethnic hatred arose later and was the result of the media and the nationalistic rhetoric used by elites.150 After the death of Tito, the Yugoslav federation did not immediately collapse but gradually turned into a state of crisis. ‘The main problem was that there was no longer any real political authority at the centre.’151 With Tito’s death, the function of president of the republic ceased to exist. Instead every year a president of the presidency was selected, a body which consisted of nine members, one from each republic or autonomous province.152 However, in the absence of a figure such as Tito, local leaders were able to follow their own strategies and protect the interests of their own region.153 Moreover, Tito had ensured cohesion as he had the personal authority to directly mediate in conflicts.154 Evidently, as every local leader was trying to pursue own interests, this led to tensions. Especially, since Yugoslavia suffered from huge economic problems and the gap between the developed and underdeveloped regions had increased even more, the demands of the local leaders were very different.155 To make things worse, in 1982 the economy of Yugoslavia was hit hard by the world-wide debt crisis of 1982.156 The economic situation aggravated tensions but was also used by the local leaders to argue that their region was the most disadvantaged in Yugoslavia.157 These economic differences partly

145

Jovic, 2001, p.105. Bennett, 1995, p.77. 147 Gow, 1991, p.294. 148 Jovic, 2001, p.103; Banac, 2009, p.462 149 Jovic, 2001, p.105. 150 Jovic, 2001, p.105; Bennett, 1995, p.148. 151 Gow, 1991, p.294. 152 Ibid. 153 Cohen, 1992, p.397; Gow, 1991, p.295. 154 Gow, 1991, p.294. 155 Jovic, 2001, p.102. 156 Yarashevic and Karneyeva, 2013, p.265. 157 Jovic, 2001, p.103. 146

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explain the rise of nationalism in the 1980s.158 Besides the economic differences, the rise of nationalism in the 1980s had more causes. First of all, it is debatable whether there actually existed a Yugoslav nation. The formation of Yugoslavia had been based on the idea to create a Yugoslav nation that denied ethnic identity. 159 However, Tito’s nationalist policy never achieved this. It has been argued that ‘the lack of a single cultural space and of Yugoslav political institutions that would represent the citizens of Yugoslavia was the main obstacle in creating a Yugoslav nation.’160 Secondly, Yugoslavia had become more decentralised over the years, especially since the constitution of 1974. The granting of more autonomy to the regions ensured that they were able to function more independently from each other. Thirdly, the Yugoslav government proved incapable of dealing with all the problems the federation suffered from. The signs of opposition that had appeared towards the end of Tito’s rule increased after his death. The support for the communist party declined and instead opposition parties with programmes that expressed nationalistic sentiments became successful. These signs of nationalism had always been effectively suppressed by Tito but his heirs were unable to do this.161 One of the stumbling blocks in the 1980s was Kosovo. Kosovo, the poorest region of Yugoslavia, was inhabited by a dominant amount of Albanians and a minority of Serbs. However, Serbs regarded, as a result of historical reasons, Kosovo as part of Serbia. The Serbs considered it to be the ‘cradle of their nation’.162 Under the rule of Tito, Albanians had been granted more powers, causing dismay under the Serbs living there, which resulted in some of them moving away.163 Through the constitution of 1974 Serbia had lost jurisdiction of Vojvodina and Kosovo. The reintegration of these two provinces into Serbia would be one of the aims of the Serbian nationalists. The two cultures lived relatively peacefully next to each other until 1981. On 11 March 1981, students started a demonstration at a university against the poor living conditions on campus. The demonstrators were arrested. However, their words of protests had spread throughout Kosovo, which resulted in the demanding of republic status for Kosovo.164 In order to stabilise the country, the Yugoslav National Army (JNA) was rushed into the region, which was the first time that demonstrations were put down by the national army. This resulted in the jailing of 1 600 Albanians.165 This was the first time the central government took sides in a conflict between two Yugoslav constituent nations. The demonstrations in itself were not that big of an issue but ensured tense relations 158

Jovic, 2001, p.105. Seroka, 1992, p.577. 160 Jovic, 2001, p.106. 161 Seroka, 1992, p.580. 162 Ramet, 1999, p.65; Bennett, 1995, p.86. 163 Bennett, 1995, p.88. 164 Bennett, 1995, p.89. 165 Ibid., p.93. 159

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between the Serbs and Albanians in Kosovo.166 Although the Kosovo Albanians had been granted more powers earlier, state jobs and other important positions were still mainly filled by the Kosovo Serbs even though they did not form the majority.167 As the economic crisis hit hard in Kosovo, the Kosovo Albanians wanted to change Kosovo’s official status from a independent region into a federal republic. The Kosovo Serbs were determined to counteract this move.

168

As a result both groups started to use nationalistic sentiment in order to achieve their aims.169 After 1981, some Serbian newspapers tried to criminalise the Kosovo Albanians.170 The Kosovo Albanians were accused of atrocities against Kosovo Serbs, such as rape and murder, the truth of which was never established.171 Whether these accusations were true or not, it ensured broad support for the Serbian nationalists.172 This resulted in the mid-1980s in the mobilisation of Kosovo Serbs. Regularly there were protests where the Kosovo Serbs demanded that the authorities would do something about their problems, as they blamed the Kosovo leadership for a lack of security.173 In 1986, the Memorandum of the Serbian Academy of Arts and Sciences (SANU) was published. This document claimed the suffering of Kosovo Serbs and warned for the aim of Kosovo Albanians to create an ethnically pure Kosovo.174 Moreover, the memorandum portrayed the Serb nation, since the famous 1398 Battle of Kosovo Polje, as being constantly victimised.

175

This document is widely regarded as a distortion of reality.176 Nevertheless, the

document became the manifestation of Serbian nationalism.177 The narratives written in the memorandum were used by intellectuals and politicians in public discourse, and became widely accepted by the general public. The themes of the memorandum provided the Serbs with a scapegoat for their suffering and the possibility of a better future.178

1.8 The rise of Milošević Around 1987, Slobodan Milošević was party chief of the Serbian communist party and still a quite minor figure in politics. Ivan Stambolić was the president of Serbia, and Milošević was considered to be one of his henchmen and a close friend.179 Stambolić wanted to recentralise the SFRY and was not an extreme nationalist himself. In his attempts to solve the problem in Kosovo 166

Bennett, 1995. Harzl, 2010, p.44; Bennett, 1995, p.88. 168 Bennett, 1995, p.93. 169 Harzl, 2010, p.44. 170 Bennett, 1995, p.91. 171 Ramet, 1999, p.66. 172 Bennett, 1995, p.92. 173 Vladisavljević, 2010, p.778. 174 Bennett, 1995, p.92.; Morus, 2007, p.143. 175 Harzl, 2010, p.48; Morus, 2007, 146. 176 Bennett, 1995, p.92; Morus, 2007, p.143; Goldstein, 1999, p.200-201. 177 Morus, 2007, p.160; Ramet, 1992, p.82. 178 Morus, 2007, p.145. 179 Bennett, 1995, p.90. 167

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he tried to please both the Serbs and the Albanians. On 24 April 1987, Milošević visited the Kosovo town Polje. He had been sent there by Stambolić to listen to the grievances of the Kosovo’s Serbs and calm them down. However, he openly appealed to nationalism.180 Milošević said to the Kosovo Serbs: ‘Nobody will ever beat you again’.181 His words sent shock waves in the federation and Milošević was accused of breaching party politics. As a result, an open conflict arose within the Serb communist party between the Serb nationalists and the Serbs that still favoured for a multinational state.182 This was followed by an internal struggle for power won by Milošević in September 1987.183 Three months later, Stambolic resigned as President of Serbia and Milošević replaced him by one of his supporters. As Milošević had triumphed in Serbia, he now turned his direction at Kosovo, Vojvodina and Montenegro. In the period between (1988 and 1990) he made several amendments to the constitutions of Serbia, Vojvodina and Kosovo without federal approval. After demonstrations in Vojvodina and Montenegro, both leaderships resigned and Milošević replaced them with his stooges.184 The central government did not make any real effort to prevent Milošević, as they did not know how to respond.185 This can partly be explained because the federal authorities did not have enough power to correct Serbia. Furthermore, Milošević had gained considerable support outside of Serbia. The media played a significant role in mobilising popular support for Milošević. 186 Every day the media told the Serbs that they were threatened by other Yugoslavs peoples and

Serb history was twisted to ensure victimization complex of the common

people.187 As Milošević controlled the biggest newspapers and the major television networks, there was almost no other information available. This explains why the majority of Serbs actually believed the media and the upsurge of the extreme nationalism at the end of the 1980s.188 In 1989, Milošević had become president of Serbia and controlled four of the eight federal units. Besides Serbia, Vojvodina and Montenegro, Kosovo was now under his control. The Kosovo Albanian leadership had been forced to resign and the Kosovo assembly was forced to endorse a new constitution, which returned the authority of the province to Serbia.189 Kosovo’s Albanians demonstrated but were violently put down resulting in the deaths of

180

Bennett, 1995, p.94. BBC, 1995. 182 Vladisavljević,2010, p.774; Bennett, 1995, p.94. 183 Bennett, 1995, p.96. 184 Ibid., p.99. 185 Gow, 1991, p.296; Bennett, 1995, p.99. 186 Bennett, 1995, p.97. 187 Ibid. 188 Djilas, 1993, p.88; Bennett, 1995, p.96. 189 Ramet, 1991. 181

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people.190 The events in Kosovo were watched closely by the other republics and it was especially the Slovenes that sympathised with the Kosovo’s Albanians. However, as the relations with the JNA deteriorated, Slovenia focused on its own concerns fearing for their security.191 In September 1989, the Slovene parliament made several amendments to their constitution, including the right to secede.192 On 20 January 1990, an Extraordinary Congress of the Communist Party was held, which signalled the end of communist rule in Yugoslavia.193 As the Slovene Delegation walked out of the congress, declaring that they left the party. When the Croatian delegation also left the congress, the meeting was suspended.194 After the break-up of the communist party, multi-party elections were held in every republic in 1990 for the first time. This resulted in considerable losses for the communists. Only in Serbia and its Montegrin satellite, the communists won with Milošević at power, while in Slovenia, Croatia and Bosnia and Herzegovina non-communist parties with a nationalist programme had won. In Macedonia a coalition was formed between nationalists and communists.195 As the Communist Party had broken up there was need for a solution for the future of Yugoslavia. Milošević wanted to recentralise Yugoslavia while Slovenia and Croatia opted for a confederation with sovereign states, resembling the European Community.196 Macedonia and Bosnia and Herzegovina wanted a structure that consisted of elements of both the centralised and confederation plan. Initially, Montenegro had supported recentralization but later opted for a confederation.197 Both Slovenia and Croatia had declared that if the negotiations proved unsuccessful they would disassociate themselves from the federation.198 Since significant number of Serbs lived outside Serbia they were frightened what would happen if Croatia and Slovenia would separate themselves from Yugoslavia.199 Especially in Croatia there was a great minority of Serbs estimated around 12 percent of the population.200 In Croatia, the Croatian Democratic Union(HDZ) had won the elections in April 1990 and Franjo Tuđman became President. He had come to power through a nationalistic campaign, one of its main themes being the threat of the Serbs for Croatia.201 Already for some time the Serbian media had launched a media offensive against Croatia, presenting the victory of

190

Bennett, 1995, p.100; BBC, http://news.bbc.co.uk/2/hi/europe/66959.stm, last accessed on 22.05.2014. Gow, 1991, p.297. Bennett, 1995, p.101;105. 192 Ramet, 1992, p.84. 193 Gagnon, 2010, p.24. 194 Bennett, 1995, p.111; BBC, 1995. 195 Ramet, 1992, p.85;Bennett, 1995, p.120;p.121; Gow, 1991,p.296. 196 Bennett, 1995, p.138. 197 Ramet, 1992, p.85. 198 Ramet, 1992, p.85; Cohen, 1992, p.371. 199 Cohen, 1992, p.372. 200 Ibid. 201 Bennett, 1995, p.123. 191

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Tuđman and his party as the return of the Ustaša.202 Already greatly influenced by the media, the Serbian minority in Croatia was extremely frightened considering the events of the Second World War.203 The situation seemed to escalate in Croatia when the town Knin, where a majority of Serbs lived, was intending to declare its sovereignty and independence of the Serb nation.204 The Serbs formed paramilitary units, blocked off roads and important transport rail ways, and claimed some parts of the Krajina area autonomous.205 As a response, Tuđman sent on 17 August 1990 two helicopters with armed police to restore stability in the region. However, the helicopters were intercepted by two air force planes of the JNA and were forced to return to base.206 The JNA ensured that Croat police was not able to take control again in the Knin area.207 It is important to understand why the JNA supported Milošević. First of all, the majority of the soldiers were Serbs and like everyone else were also influenced by the media.208 Secondly, many of the high officers were communists and pro-Yugoslavia and did not feel anything for the confederation plans of Slovenia and Croatia, as it meant cuts in the budget and great reforms in the military.209 On 17 November 1990 an alliance was sealed between the JNA and Milošević. 210 The JNA started the disarmament of all the republics except for Serbia. However, Croatia and Slovenia were still able to secure arms by buying them from foreign countries.211 Despite the fact that Croatia was already preparing for a possible military conflict with Serbia, Tuđman still hoped to avoid this. On 25 March, Milošević and Tuđman met in Karadjordjevo where Tuđman offered Milošević a deal. Although this is never officially confirmed, it is argued by many that Tuđman proposed to divide Bosnia and Herzegovina. 212 As Tuđman had become terrified of the prospect of war, it is even suggested that he offered parts of Croatia to Milošević.213 Meanwhile, the presidents of the six republics had met several times between January 1991 and June 1991 to discuss the constitutional structure of Yugoslavia.214 There was no progress, as all republican leaders did not deviate from their positions. ‘This intransigence created a vicious cycle of escalating tension and inevitable drift toward disintegration and violence.215 On 25 June 1991, both Slovenia and Croatia declared their independence, which

202

Bennett, 1995. Cohen, 1992, p.371 ; Gow, 1992, p.298. 204 Bennett, 1995 p.130. 205 Gow, 1992, p.298; Cohen, 1992, p.372. 206 Bennett, 1995, p.131. BBC, 1995. 207 Bennett, 1995, p.131. 208 Bennett, 1995, p.134; Cohen, 1992, p.371. 209 Cohen, 1992, p.371; Bennett, 1995, p.131; p.132. 210 Bennett, 1995, p.133; Banac, 2009, p.465. 211 Cohen, 1992, p.372; Bennett, 1995, p.145. 212 Bennett, 1995, p.146; Banac, 2009, p.466; Hoare, 1997,p.123;p.124. 213 Bennett, 1995, p.147;Hoare, 1997, p.124. 214 Banac, 2009, p.466; Cohen, 1992, p.372. 215 Cohen, 1992, p.372. 203

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resulted in the actual start of war as the JNA attacked.216

1.9 The 1990s Wars On 27 June 1991, the JNA attacked Slovenia. After 10 days of fighting both sides agreed to the principles of the Brioni accord, which was drafted by the European Community. The Brioni Agreement provided for a cease-fire and three months of independence in which the Yugoslav leaders would try to resolve their differences.217 It is argued that Milošević agreed with the terms of the Brioni Agreement, as there lived almost no Serbs so it did not fit in his vision of a Greater Serbia.218 However, this did not count for Croatia. As the Brioni Agreement did not include anything on Croatia, the JNA was now able to direct its attention towards Croatia.219 After the retreat of the JNA out of Slovenia, Croatia was invaded. Already earlier fights and deaths had already occurred it now turned into actual war. Not only the JNA was involved but also irregular Serb units as well as extremist private Serb armies.220 Several cities were besieged by Serb fighters, such as Vukovar. The siege of Vukovar, a town located near to the Serbian border, started in August 1991 and ended on 18 November 1991. The city was almost entirely destroyed and many Croats were killed there. One of the largest massacres occurred in the area of Vukovar, where 200 Croats were killed and buried in a mass grave.221 For the Croats the city still serves as a symbol for their suffering.222 At the end of 1991, Croatia had lost territory, there were already thousands of deaths and many refugees.223 With the support of the JNA and Milošević, the Croatian Serbs in the area of Knin had proclaimed the Republic of Serbian Krajina (RSK).224 As Croatian fighters allowed journalists at the fighting lines, images of how Serb fighters committed atrocities were broadcasted.225 As these images became known by the world, international sympathy for Serbs soon declined.226 Around the same time, the international community became more actively involved in the conflicts in Yugoslavia. Several attempts of peace-making were made by the European Community but these failed.227 As the Community was internally divided on how to respond to

216

Ramet, 1992, p.86; Cohen, 1992, p.373; Bennett, 1995, p.155. Bennett, 1995, p.160 ; Cohen,1992 ; 218 Tatum, 2010, p.71. 219 Banac, 2009, p.466; Bennett, 1995, p.160. 220 Banac, 2009, p.466. 221 Clark, 2012, p.123. 222 Bennett, 1995, p.168. 223 Ramet, 1992, p.86; Banac, 2009, p.467. 224 Tatum, 2010, p.71; Ramet, 1992, p.86. 225 Bennett, 1995, p.163. 226 Ibid. 227 Gow, 1992, p.310. 217

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the crisis in Yugoslavia they turned to the United Nations (UN).228 Fearing UN intervention, Milošević called for an agreement which was signed in January 1992 in Sarajevo. The UN Agreement provided for the withdrawal of the JNA and the establishment of United Nations Protected Areas (UNPA’s) in contested regions in Croatia.229 In these areas UN peace forces (UNPROFOR) would ensure demilitarisation of these areas and the protection of ethnic minorities.230 Although the agreement was signed, the conflict was not over as it remained unclear what would happen with the Serb regions that had declared themselves autonomous. 231 Furthermore, the war would soon spoil over to Bosnia and Herzegovina. The war in Bosnia and Herzegovina was very complex and terrible. As this rapport is about Croatia, the war in Bosnia and Herzegovina will not be extensively discussed. The situation in Bosnia and Herzegovina was very complex as there was not one nation that formed a majority.232 The largest groups were the Bosnian Croats, Bosnian Serbs and Bosnian Muslims.233 Since 1990, a coalition of three parties, all representing one of the groups, had ruled the country. These three parties were not able to decide together on the future of Bosnia and Herzegovina. The Serbian Democratic Party (SDS), led by Radovan Karadžić, did not want Bosnia and Herzegovina to become independent in contrary to the other two parties, the Croatian Democratic Union in Bosnia and Herzegovina and the Party of Democratic Action (SDA).

After a referendum was held, Bosnia and Herzegovina declared its independence in

April 1992. As a result, Serb paramilitary units with the support of the JNA started their attacks in Bosnia and Herzegovina. At first, Bosnian Croats and Bosnian Muslims fought together against the JNA and Serb irregulars, but later on also began fighting each other.234 The international community repeatedly made diplomatic attempts in order to bring peace in the region but these were not successful.235 The failure of the international community became very painful when around 8 000 Muslim men were executed by General Mladic’s forces in Srebrenica, while the area of had been designated as a ‘safe area’ by the UN.236 In Croatia, the UNPROFOR mission was regarded as a failure. The Croats had hoped that the UN forces would assist the Croat forces in regaining control over the Serb-occupied regions.237 After three years of negotiations it became clear that there was no prospect of agreement as the Serbs were not considering to be part of Croatia in any way.238 As a result, 228

Cohen, 1992, p.374. Banac, 2009, p.467 ; Bennet, 1995, p.172. 230 Klemencic & Schofield, 1996, p.394. 231 Bennett, 1995, p.172 232 Bennett, 1995, p.180. 233 Ibid. 234 Banac, 2006, p.468 ; Bennett, 1995, p.199. 235 BBC, 1995. 236 Banac, 2009, p.469 ; BBC, 1995 ;Rijsdijk, 2003, p.308. 237 Klemencic & Schofield, 1996, p.394. 238 Klemencic & Schofield, 1996.395. 229

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Croatia launched two offensives in order retake the Serb controlled areas. From 1 to 3 May 1995, Croat forces executed Operation Flash (Operacija Bljesak) in the west of Croatia.239 The Croat forces recaptured the area and many Serbs fled. Three months later, Operation Storm (Operacija Oluja), led by General Ante Gotovina, began. On August 7 1995, the Croats had won and recovered a large part of their territory, resulting in the massive fled of around 200 000 Serbs.240 Although the fighting was over, some Croat soldiers have killed Serbs and plundered and destroyed their properties.241 In October 1995, there was a peace conference in the US. After a long period of negotiations the conflicts between Croatia, Serbia, and Bosnia and Herzegovina were settled as the Dayton Agreements were signed in December 1995.242 The disintegration of Yugoslavia led to a series of terrible wars in which people from every ethnic background have committed atrocities and can be accused of ethnic cleansing.243

1.10 Conclusion After a long period of foreign domination and being part of Yugoslavia, Croatia regained its independence in 1991. The price Croatia paid for their independence was high as it involved a series of wars, which had devastated the entire country. These wars, and the history of the 20th century still play a significant role within the Croatian society today. From the 11th century to the end of First World War, Croatia was occupied by various rulers whose legacies are still visible today. The longest foreign ruler was the Habsburg monarchy, and other rulers were the Ottomans, French, and Italians. During the period of foreign occupation Croatia’s degree of autonomy often shifted. The awakening of national consciousness during the 19th century in Europe also made Croats more aware of their shared commonalities, which led to a struggle for more autonomy. Eventually, after the First World War Croatia broke ties with its Austrian-Hungarian rulers and joined the Kingdom of Serbs, Croats and Slovenes. The unification of the South Slaves was the start of the problematic relationship between the Serbs and Croats. The tensions between the two parties were constantly present in the 20th century and culminated when the Ustaša committed atrocities against the Serbs. Under the rule of Tito, Yugoslavia became an independent communist federation, which after 1948 turned to the ‘Yugoslav way’ of socialism. One of the main features of this way of socialism was workers’ self-management, which was extended to other facets of society. Despite 239

Klemencic and Schofield, 1996, p.395 ; Banac, 2009, p.469. Pavlaković, 2010, p.1713 ; Ashbrook & Bakich, 2010, p.550. 241 Pavlaković, 2010, p.1714 ; BBC, 1995. 242 Banac, 2009, p.469 ; BBC, 1995. 243 Bennet, 1995, p.201 ; BBC, 1995. 240

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early economic progress, from the 1960s onwards Yugoslavia had to deal with severe economic problems. This resulted in the growing of tension between the federal republics; Slovenia and Croatia tended towards more independence within the federation,

while Serbia and

Montenegro preferred a more centralised authority. The death of Tito in 1980 marked the end of the cohesion within the federation and was followed by the rise of (extreme) nationalism. At first only by Milošević but who sought retribution for the events of Second World War and the position of the Serbs under Tito. Together with the fall of Communism, the federation started to dissolve with declarations of independence of Slovenia and Croatia, and the war period that followed. For Croatia, the wars were a struggle for independence and a need to defend their homeland while the Serbs call it a civil war, in which Serbia tried to keep Yugoslavia together and to unite the Serbs. After the wars, a difficult period of reconstruction began. Now, 20 years later, the effects of the wars are still there, just as there still are sometimes tensions between the Serbs and Croats. The Croatian society is orientated towards the past and uses often historical facts to explain current issues. Especially the media and politics use historical images on a daily basis, which makes the events of the 20th century a recurring feature in daily live. Although, the first steps of a changing orientation are visible within the society, the process is not fully completed yet.

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2. The Culture of Croatia With the purpose of scrutinising the culture of Croatia this chapter aims at establishing first what culture in general entails, following which a more specific profile of the Croatian culture will be presented. The purpose of examining the culture of Croatia is so that we have a better understanding of many of the other dimensions of Croatia, such as its legislation and its politics. Thus, how would we define culture? Culture is a concept that is particularly hard to define. However, the report uses the following definition of culture: ‘culture is a fuzzy set of basic assumptions and values, orientations to life, beliefs, policies, procedures and behavioural conventions that are shared by a group of people, and that influence (but do not determine) each member’s behaviour and his/her interpretations of the ‘meaning’ of other people’s behaviour’.244 This definition does not answer the question of what culture entails, but it provides us with the tools to look at Croatia’s culture since we now know what to look at. The basic assumptions and values, orientations to life, beliefs, policies, procedures and behavioural conventions that are mentioned in the definition are pointers as to what is important in studying culture. Therefore, when examining the culture of Croatia, we have set up a list of concepts that are important to study in order to develop a better understanding of the culture in general. These concepts are: Croatia’s cultural policy; the Croatian Heritage Foundation; nationalism; language and dialects; national, regional, and religious identities; sports; stereotypes; literature; and gastronomy.

2.1 Cultural Policy In this section the main objectives and organisational structure of the Croatian Cultural Policy will be discussed, as well as the international cooperation within the Cultural Policy framework.

2.1.1 The main objectives Culture is defined by the Croatian Ministry of Culture in the 2002 Cultural Development Strategy as: ‘All forms of intellectual and artistic expression of symbolic social identity, belonging, behaviour and customs, and such industrial products, including the media, produced for spending leisure and shaping people's attitudes.’245

244 245

Spencer-Oatey, 2008, p. 3, quoted in Spencer-Oatey and Franklin, 2009, p. 15. Council of Europe/ERICarts, 2013, p. 5.

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The four main objectives of Croatian Cultural Policy since 2002 are to promote the Croatian identity and cultural pluralism, to promote citizen participation, to encourage cooperation between the public and the private sector, and to support creativity.246 The promotion of the Croatian identity and cultural pluralism includes the protection and preservation of cultural heritage, intercultural dialogue and the inclusion of minorities, and diverse cultural activities.247 Cultural heritage is protected and preserved through monuments, archives, libraries, and museums.248 Intercultural dialogue and inclusion of minorities are stimulated by the Cultural Policy and mainly involve minorities from neighbouring countries. While the policy does not specify a strategy to stimulate the intercultural dialogue, it does financially support activities and projects by minorities.249 This is one way to create cultural pluralism and diversity of cultural activities. To further stimulate cultural pluralism, the ministry finances activities from diverse cultural industries, such as film, music, literature, visual arts, and theatre.250 All Croatian citizens are encouraged to participate in cultural activities. Regional and local cultural councils, which will be discussed below, play an important role in stimulating citizen participation.251 However, the budget of these councils is considered a constraint and the decentralisation of financing is necessary. Other measures to increase citizen participation in culture are to utilise new information technologies, such as internet, and to promote interest in culture and art in schools and through the media.252 The third policy objective is to encourage cooperation between the public and the private sector, which involves cooperation between public cultural institutions and private cultural institutions or businesses.253 Such partnerships could lead to more efficiency, innovation, quality, and diversification of funds.254 Diversification of funds is deemed necessary because the ministry has been dealing with cuts in its budget since 2009. The most severe budget cut was between 2008 and 2009, when the budget for culture decreased with 12 percent.255 The final policy objective is to support creativity. In order to support creativity, the ministry finances activities and projects, hosts public competitions, and financially helps independent artists by means of giving out grants, awards, and scholarships aimed to encourage artistic creativity. Independent artists can also receive support in the form of retirement and 246

Council of Europe/ERICarts, 2013, p. 4. Ibid., 2013, pp. 4-5; Ratzenböck, Okulski and Kopf, 2012, p. 22. 248 Council of Europe/ERICarts, 2013, p. 6. 249 Ibid., p. 17; p. 20. 250 Ibid., pp. 5-6. 251 Ibid., p. 13. 252 Ibid., p. 4. 253 Ibid., p. 28. 254 Ibid., p. 4. 255 Ratzenböck, Okulski and Kopf, 2012, p. 22. 247

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health contribution payments.256

2.1.2 The organisational structure The decision-making process and implementation of Cultural Policy involves governmental actors on the national, regional and local level, as well as non-governmental actors. On the national level, the Ministry of Culture drafts legislation and budget plans, and develops a longterm national cultural programme. On the national, regional and local level there exist three types of cultural councils. Cooperation between the ministry and cultural councils is an essential part of the Cultural Policy.257 These cultural councils assist and advise the ministry, propose goals and measures, and offer professional assistance.258 On the national level the government established the cultural council representing the interest of minorities, youth, gender, and civil society.259 The regional and local cultural councils are obligatory for every county and municipality with more than 30 000 inhabitants; and every municipality with more than 20 000 inhabitants is allowed to form a cultural council.260 These cultural councils set their own cultural strategies and manage cultural institutions and the national theatre. Croatia has four national theatres, in Zagreb, Osijek, Split and Rijeka.261 A third type of cultural council are nongovernmental councils that deal with certain aspects of culture, for example books and publishing, amateur art, and music. Other non-governmental actors are cultural institutions, NGOs, and artists associations.262 There often exists a close cooperation between NGOs and regional and local cultural councils, as NGOs apply for money and try to influence the cultural strategy.263

2.1.3 International cooperation As part of the acquis, Croatia needs to ensure that ‘their international commitments allow for preserving and promoting cultural diversity.’264 The Cultural Policy therefore aims at improving the planning and coordination of international and European programmes. Within the ministry there are two sectors: one regarding international cultural cooperation, and one regarding European cultural cooperation.265 256

Council of Europe/ERICarts, 2013, p. 5; p. 39. Council of Europe/ERICarts, 2013, p. 8. 258 Ibid., p. 7. 259 Ibid. 260 Ibid. 261 Interview 39. 262 Council of Europe/ERICarts, 2013, p. 7. 263 Interview 39; 42. 264 European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 28.04.2014. 265 Ratzenböck, Okulski and Kopf, 2012, p. 22. 257

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The Sector for International Cultural Cooperation coordinates and plans international cooperation and distributes grants.266 Croatia is involved in bilateral agreements and programmes within the United Nations Educational, Scientific and Cultural Organisation (UNESCO), which will be discussed below, the International Network for Cultural Policies, the International Federation of Arts Councils and Agencies, and the Forum of Slavic Cultures.267 The Sector for European Affairs and the Media deals with cooperation within the framework of the Council of Europe, the Council of Ministers of South Eastern Europe, the EU, and the European Union National Institutes for Culture (EUNIC).268 It is Croatia’s priority to cooperate with South Eastern Europe on issues such as ‘post-war reconstruction, the return of stolen cultural assets, support for mobility, and cooperation in the field of policy-making’.269 EU membership and pre-accession funds have provided Croatia with the financial means to focus on the protection of cultural heritage and the stimulation of cultural tourism.270 There also exists direct cooperation between countries, and between artists, cultural institutions and NGOs.271 The majority of these cooperation projects and programmes concentrate on the EU and other European countries.272 In order to connect with the Croatian diaspora, the independent Croatian Heritage Association was established, which will be discussed in the next section.273 Croatia plans to establish the foundation Hrvatska Kuća (Croatian House), which would be the first cultural institution representing the Croatian culture abroad. Until Hrvatska Kuća is established, the cultural attachés at the Croatian embassies are the main actors in promoting the Croatian culture.274

2.1.4 The European Capital of Culture One of the European programmes in which Croatia is involved is the European Capitals of Culture Initiative (ECoC). This initiative was developed in 1985 to demonstrate Europe’s diversity and cultural heritage, to boost tourism, and to provide the opportunity to redevelop a city’s identity. In 2014 the Croatian Ministry of Culture will open the call for application and the Croatian cities can start competing for the title of ECoC.275 Already, the cities Split and Rijeka have expressed their interest to become the ECoC in 2020.276 Interviewees have mentioned 266

Council of Europe/ERICarts, 2013, p. 8. Ibid., pp. 8-9. 268 Ibid. 267

269 270 271

Council of Europe/ERICarts, 2013, p. 10. Ibid.

Ibid., p. 9; p. 11; Interview 42. Council of Europe/ERICarts, 2013, p. 12. 273 Ibid. 274 Ibid., p. 9. 275 European Commission, http://ec.europa.eu/culture/tools/actions/capitals-culture_en.htm, last accessed on 28.04.2014. 276 Dalje.com, http://dalje.com/en-world/croatia-to-designate-european-capital-of-culture-2020/468349, last accessed on 28.04.2014. 272

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Rijeka’s potential to become the ECoC, because of their Italian, Austro-Hungarian, and Ottoman influences, their potential in cultural tourism, and their goal to redevelop their identity. Rijeka wants to redevelop its identity, because it is now considered to be an industrial town due to its port. The European Capital of Culture initiative can help Rijeka to realise its goals and potential.277

2.1.5 UNESCO World Heritage Sites As mentioned above, Croatia actively participates in UNESCO programmes. In addition, Croatia has signed the World Heritage Convention on 6 July 1992, to protect and preserve its cultural and natural heritage.278 There are currently seven World Heritage Sites in Croatia, six cultural sites and one natural park, and 16 sites have been nominated.279 Some of these cultural sites preserve Roman and Greek cultural heritage, as these areas were once under Roman or Greek influence. The medieval town of Split, for example, was built within the ruins of Roman Emperor Diocletian’s third or fourth century palace.280 The Stari Grad Plain is considered to be of ‘outstanding universal value’.281 In this city on the island of Hvar, a system of agricultural land use, based on grapes and olives, has been preserved since the fourth century.282 In Poreč several fourht century Christian monuments have been preserved. The key building is the Euphrasian Basillica, which was built in the sixth century and ‘combines classic with Byzantine elements’.283 Other cultural sites have been under influence of multiple countries and empires, which has led to a range of different architectural styles. Trogir, for example, is a medieval town that has been under the rule of Greece, the Byzantine Empire, Venice, Hungary, the AustroHungarian Empire, and France. The architecture has, therefore, Romanesque, Renaissance, Baroque and Gothic elements.284 Dubrovnik, the ‘Pearl of the Adriatic’,285 has been under Byzantine, Venetian and Hungarian-Croatian influences. An earthquake in 1667 destroyed most public buildings, yet several churches, monasteries and palaces have remained undamaged. 286 The Cathedral of St. James in Šibenik combines Gothic and Renaissance elements. Three different architects from three different regions, namely northern Italy, Dalmatia and Tuscany,

277

Interview 39; 42; 43. Council of Europe/ERICarts, 2013, p. 10; UNESCO (A), http://whc.unesco.org/en/statesparties/HR, last accessed on 17.01.2014. 279 UNESCO (A), http://whc.unesco.org/en/statesparties/HR, last accessed on 17.01.2014. 280 UNESCO (B), http://whc.unesco.org/en/list/97, last accessed on 17.01.2014. 281 UNESCO (C), http://whc.unesco.org/en/list/1240, last accessed on 17.01.2014. 282 Ibid. 283 UNESCO (D), http://whc.unesco.org/en/list/809, last accessed on 17.01.2014. 284 UNESCO (E), http://whc.unesco.org/en/list/810, last accessed on 17.01.2014. 285 UNESCO (F), http://whc.unesco.org/en/list/95, last accessed on 17.01.2014. 286 Ibid. 278

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have worked on the cathedral.287 The natural heritage site is Plitvice Lakes National Park. This national park consists of a series of lakes, caves, waterfalls, natural dams and forests. This composition leads to a rich flora and fauna, which includes the European brown bear and the wolf.288

2.2 Croatian Heritage Foundation The Croatian Heritage Foundation (CHF) deals with Croatian immigrants, as it is a country with a large diaspora. They mainly exist for people of Croatian heritage and for students that are keen on learning about Croatia’s language and culture. Together with the Zagreb University School of Croatian Language and Culture, the CHF takes care of a cultural programme during the summer. Furthermore, they facilitate online courses and Croatian days in the US and Australia. They have separate programmes for children from the age of 9 until 16 years. Another large Croatian diaspora is found in Latin America, where the CHF also facilitates Croatian language and culture classes.289 The foundation was initiated in 1951, making it Croatia’s oldest national institution. In 1990 it obtained the legal right to deal with the Croatian diaspora through the Law on the Croatian Heritage Foundation.290 This law gives the CHF its independent status. This independent status is important in the sense that their policies are not mixed with national politics, as was previously the case. 291 It is the mission of the CHF ‘to preserve and develop Croatian ethnic and cultural identity, the mother tongue and traditions by Croats living outside Croatia’.292 It does so through various departments and projects. For instance, the cultural department of the CHF focuses mainly upon the Croatian folklore through the organisation of summer and winter folklore workshops.293 The migration of Croats has been occurring since the 15th century. There are currently approximately 3.5 million Croats, or people of Croatian heritage, living outside Croatia.294 Many of them live in Germany, Australia, Austria, France, Chile, Brazil, Canada and New Zealand. The first wave of emigration was to South America, which occurred during the Austro-Hungarian Empire.295 The second wave was focused on Australia, around the time of the Second World War. During this time, also many Croats went to South America.296 The third wave was based 287

UNESCO (G), http://whc.unesco.org/en/list/963, last accessed on 17.01.2014. UNESCO (H), http://whc.unesco.org/en/list/98, last accessed on 17.01.2014. 289 Interview 51. 290 Kukavica, 2014. 291 Interview 51. 292 Kukavica, 2014, p. 264. 293 Interview 51. 294 Kukavica, 2014, pp. 265-266; Interview 58. 295 Interview 58. 296 Interview 54. 288

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upon economic reasons and occurred during the 1960s and 1970s. These people mostly went to Germany.297 Many Croatian winemakers left Croatia during the 19th century, when Dalmatian and Slavonian winemaking was hit hard. Some of these winemakers are now very well known. And each year, they return to Croatia for the International Wine Tourism Conference in Zagreb.298

2.3 Croatian nationalism A study299 showed that there are a couple of values that characterise Croats: nationalism, love for their mother, sacrifice, charity, and justice. Within Croatian culture, nationalism is important, as it could explain their sense of identity. Nationalism can thus be considered to be the leitmotif in Croatian culture and shall therefore be further scrutinised below. There are two important theories on nationalism. These two theories shall be examined and one of the theories shall be regarded as fitting to the Croatian situation. Nationalism and the concept of the nation provide a wider spectrum for understanding the formation of the Croatian national identity and it is therefore imperative to study both nationalism and the nation in relation to Croatia. Nationalism is defined in one theory300 as ‘primarily [a] political principle, which holds that the political and the national unit should be congruent. [It] is a theory of political legitimacy.’301 Nationalism is the result of forcing a high culture upon the community, thereby creating a nation. If we were to put this thinking in a chronological order, we would first encounter a state. The state gives room for nationalism to develop. Nationalism, the sense of belonging to the state, then results in the formation of a nation. The other important theory302 defines a nation by the shared ancestry, common myths, shared history, sense of belonging to a homeland, and a sense of solidarity among its population. This theory defines nationalism as ‘an ideological movement for attaining and maintaining autonomy, unity and identity on behalf of a population deemed by some of its members to constitute an actual or potential ‘nation’.’303 Thus, where the latter theory claims that a nation and its population has a shared history that binds them, the former believes that a nation is a form of political community rather than a cultural one. When asking when one is a Croat, or any other European citizen for that matter, one is inclined in looking at the history of the country as a national identity often forms through the 297

Interview 58. Kukavica, 2014, p. 269. 299 Kale, 1999. 300 Gellner, 1983. 301 Gellner, 1983, p. 1. 302 Smith, 1991. 303 Ibid., p. 73. 298

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nation’s history. The second theory’s description of nationalism, it being based upon a shared history, is therefore the most accurate description of Croatian nationalism. Croats experience a sense of belonging due to the recent wars that they have fought together, as well as due to the fact that they survived throughout all these years.304 This will be further explained below in the section on identity. It was in fact Franjo Tuđman who claimed that the Croatian national identity and the accompanying nation state was a shared ‘centuries-old dream’305, and although this may not have been supported by many other people in such a strong sense, we can see that many of the historical acts of the Croats have been in response of or in search for nationalism. Croatian nationalism, in the sense that it is the representation of the national identity, has made a very interesting development from the 1990s onwards where various people have represented it in different manners. The most prominent case of such a display is of course the display by the politicians, who were attempting to gain voters for their political programmes. Each in their own way, the politicians have tried to bring national identity within social practice and thereby create a strong sense of nationalism. For the remainder of this chapter, we will look at several forms of social practice that have been linked to the Croatian national identity and nationalism: The Croatian language; the Catholic Church; and football, the most important sport of Croatia.306 The interesting aspect of these three social practices is that each of these play a part in the daily lives of the Croats, this way the Croatian national identity finds its way into the actual experience of the population of the nation.

2.4 The Croatian language The official language in Croatia is Croatian, which has long been officially named Serbo-Croatian, and is part of the Common Slavic language tree.307 Croatian became an official language by means of the Vienna Literary Agreement in 1850.308 Originally, Croatian was written in the Croatian alphabet, but this has been altered to the Latin alphabet.309 Other languages spoken in Croatia are Serbian, Hungarian, Slovene, Macedonian, Slovak, German, Russian, and Italian. German and English are the most common second languages to most Croats.310 The Croatian language belongs to the (Common) Slavic language family. Slavonic, the language from which all Slavic languages stem, was spoken in a relatively small territory within Eastern Europe. Slavonic was divided into three dialects, which now divides Western, Southern 304

Sekulic, 2004 Bellamy, 2003. 306 Ibid.; Interview 25. 307 Interview 11. 308 Bellamy, 2003. 309 Bugarski, 2012. 310 Interview 11. 305

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and Eastern Slavic. Eastern Slavic consists of Belarusian, Ukrainian and Russian; Polish, Czech, Slovak, Kashubian, and Lusatian belong to Western Slavic; and Southern Slavic is comprised of Bulgarian, Macedonian, Slovenian, Serbian, Bosnian and Croatian.311 There are many dialects in Croatia, each specific to particular regions. The three largest dialects are Kajkavian, Chakavian and Shtokavian, differing in vocabulary, word forms and vowels.312 These dialects are each distinguishable by their words for ‘what?’. Shtokavian thus comes from shto, meaning ‘what?’, Chakavian from cha, and Kajkavian from kaj.313 Chakavian is used primarily alongside Croatia’s coastline, whereas Kajkavian is more common in those areas surrounding the capital and Shtokavian prevails mostly inland, as well as in Serbia, Montenegro, and Bosnia and Herzegovina.314 Other differentiations within the Croatian language can be found based on three variants for the sound ‘yat’, written as an e,i, or (i)je, and consequently the dialects Ekavian, Ikavian, and Ijekavian are named after them.315 The choice to base current official Croatian upon the Shtokavian dialect has everything to do with the fact that the popular Dubrovnik literature, which was written in Shtokavian, was thriving. The Croatian government chose this dialect because it was well known in and around Croatia and also because of its popular status.316 Shtokavian is now described as one of the Croatian dialects. However, it is also the main dialect of the Serbo-Croatian language family. From this the two sub-dialects (Ekavian and Ijekavian) have resulted in the formation of Croatian and Serbian, two standard languages with each a nationality related to it. Serbian is Shtokavian and Ekavian, and Croatian is Shtokavian and Ijekavian.317 This report will focus on the Serbo-Croatian language, in particular the Croatian official language. From this point onwards this report will specifically refer to either Serbian or Croatian, as these languages are linked to specific national entities. Before the foundation of Bosnia and Herzegovina, Serbo-Croatian was comprised of Serbian and Croatian and the dialects that were spoken in these regions were divided amongst both territories, resulting in a general language each.

2.4.1 History, language and identity During the 20th century, Serbian and Croatian were, along with Slovenian and Macedonian, spoken within the same state: Yugoslavia.318 Some of the languages were already acknowledged

311

Encyclopaedia Brittannica Inc, 1997. http://www.britannica.com/EBchecked/topic/535405/Serbo-Croatian-language, last accessed on 18.01.2014. 313 Bugarski, 2012. 314 http://www.britannica.com/EBchecked/topic/535405/Serbo-Croatian-language, last accessed on 18.01.2014. 315 Bugarski, 2012. 316 Interview 11. 317 Eterovich and Spalatin, 1970. 318 Interview 11. 312

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as being an official language before being brought together within Serbo-Croatian language. There was a strong sense of needing uniformity within the Kingdom of Yugoslavia, which resulted in the creation of one official language that was called ‘Serbo-Croato-Slovenian’ in official documents, even though this language was never mentioned (or used) in practice. In this period, both the Cyrillic and the Latin scripts were taught in primary schools.319 During these times, there was, however, already a strong focal point for each of the languages (Croatian, Macedonian, Serbian and Slovenian).320 Slovenian and Macedonian were divided between the northwestern and the southern parts of Yugoslavia, and Serbian and Croatian were divided within the rest of the region: East-Yugoslavia, with Belgrade as its centre, had Serbian as its language; and West-Yugoslavia, with Zagreb as its national and cultural centre, dealt predominantly with the Croatian language. The Yugoslav regime at that time had as its official standpoint that the Croats and the Serbs did have one language; they simply each used a different variant.321 It is because of this that Croats and Serbs are still able to understand each other while speaking their own languages.322 Language has played, and is still playing, an important role in the relation between the formation of collective identities and political borders rather than ethnic borders. By examining historical developments, as we have done in the previous chapter, one can see ‘how the construction, destruction and reconstruction of states have been reflected in the destiny of [the] Serbo-Croatian [language].’323 To be able to come to such an outcome, one looks at the links between identity and language within these parts of Europe, as many of the endeavours of separation within the Yugoslavian territory are often prompted by nationalism and national identity. A study named communication and identification the two most common functions of language.324 Identification through language focuses on the relation between language and establishing a sense of belonging within that particular linguistic group, which is something that is done in Croatia through language politics, as will be explained below.

2.4.2 Language politics The naming of Croatian as an official language was more a political decision than one based on lingual differences. This is also visible when looking at both the decision to make Croatian part of Serbo-Croatian and the decision to make Croatia a separate language.325 Languages that stem from the South Slavic line are languages that may be called 319

Socanac, 2012. Interview 11. 321 Eterovich and Spalatin, 1970. 322 Interview 11. 323 Bugarski, 2012, p. 219. 324 Ibid. 325 Interview 11. 320

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‘political inventions serving divergent nationalist aspirations’.326 With this is meant that instead of having a language being the indicator of an identity, a language is ‘invented’ with the purpose of having a clearer distinction between the nation states after having obtained independence. For example, with the receiving of autonomy by the Croats in 1939, the official language was mentioned being Croatian or Serbian, but no longer Serbo-Croato-Slovenian. Croatian was again the language being used in establishing documents.327 The Serbo-Croatian languages were so much alike that they could have easily been distinguished as being dialects from the same languages. People are often able to at least understand what someone from another Slavic country is saying.328 It is as one of the interviewees stated: ‘Croatian and Serbian is the same language, but a different dialect.’329 Yet the ‘lingual differences’ were reason enough to present the languages with the official status, Montenegrin being the latest addition in 2008. There was even a law established in Croatia stating the Croatian language to be unique and ‘not a dialect of any other language and cannot be used in conjunction with any other language’330 – reacting to the Serbo-Croato-Slovenian language having been the official language, overarching Serbian, Croatian and Slovenian and naming it ‘one and the same’.331 Later, during the Federal Republic of Yugoslavia, there was no officially established official language of the Republic, showing how sensitive the linguistic issues were in this area of Europe. With the gaining of independence in 1991, Croatia established in its constitution the official use of the Croatian language and the Latin alphabet, while the right to minority languages is also being assured.332 The language policies of Croatia are a clear illustration of the history of the region, where there have been tensions between ethnicities and nationalities333 and it clearly illustrates how the termination of the Serbo-Croatian language moves similarly with the termination of Yugoslavia and the birth of new states, each of which has embraced its distinctive national language.334

2.5 The Croatian identity An identity is individually characterised, but one could also see identity in a more sociological manner, namely as a link between the individual and its surroundings. In this sense, the identity

326

Bugarski, 2012, p. 222. Socanac, 2012. 328 Interview 11. 329 Interview 14. 330 Socanac, 2012, p. 313. 331 Socanac, 2012. 332 Ibid. 333 Ibid. 334 Ibid. 327

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and the individual are continuously in interaction with each other and their surroundings. 335 Examining the Croatian identity is not a study of simply one dimension but of many dimensions that overlap within identity studies. For instance, nationality, religion, class and territory are important dimensions that give shape to a national identity.336 An explanation of national identity that could be of use in this particular report concerning Croatia is that the national identity is the result of a ‘gradual expansion of the individual identity’.337 The initial formation of an individual identity is related to family and gradually expanded to the attachment to a particular country.338 Amongst scholars it has been generally accepted that there can be made a distinction between two forms of identity: a civic and an ethnic form of identity. These forms have also been named ‘western’ and ‘eastern’, although they do not particularly relate to the western or eastern part of Europe or the world. A civic identity is derived from the state before it had a nation. Such a state has been developed in the sense of having social, political and economic frameworks, which later resulted in the creation of a nation through the presenting of citizenship to the people, making them citizens of the nation. An ethnic identity results from a reversed process, where the borders of a state are formed surrounding the nation that already exists based on a more cultural identity. We can differentiate by stating that civic identity comes from a political development, and ethnic identity from a cultural development – which later on develops into a more political-oriented development.339 In the Croatian case, their identity has been most often defined as an ethnic one, being based on ius sanguinis rather than ius soli.340 In addition to an ethnic identity, the Croatian identity can be described as a so-called sleeping identity. A sleeping identity is a form of identity that has always been present, it is only showed when a country feels threatened as this often creates a strong solidarity amongst citizens‫‏‬. Up until this point the national identity was considered less important than the regional identity.341 The Croats have not actively expressed their identity through large parts of the history; according to some this is due to conquerors that claimed the Croatian territory.342 Croatia has been subjected to the three different powers in the past: The Republic of Venice along the coast; the Habsburg Empire in the north and the Ottoman Empire in the west. Because of these occupancies others have influenced the formation of a Croatian national identity. This can be seen in the Croatian language and other cultural aspects, such as the Croatian cuisine and 335

Tajfel, 1974. Smith, 1991. 337 Sekulic, 2004. 338 Tajfel, 1974. 339 Sekulic, 2004; Smith, 1991. 340 Ius sanguinis being the law of blood, stating that a person obtains citizenship through his/her parents, whereas ius soli states that a person may require citizenship when born within the territory. 341 Tajfel, 1974. 342 Presentation Josip Kesic, 20-01-2014. 336

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music. During the Venetian and Habsburg occupancy, in the 18th and 19th century, Croatia used the Venetian influence in the formation of the Croatian identity, while during the 20th century the Kingdom of Yugoslavia was the focal point of identity formation. Within the Yugoslavian Kingdom, and later Republic, national identity (or rather citizenship) was one of the most important aspects of the political system. During these times Croatian, Serbian, Montenegrin, Slovenian, Macedonian, and Muslim, were recognised as being the main identities. It was not until approximately the 1970s that people came to identify themselves with the Yugoslav identity. This was due to three reasons: people wanted to break free from their minority status, people were born into a mixed marriage (being child to a Serbian and a Macedonian parent, for example), or it was the result of living in a urbanised environment.343 People from cities were more likely to feel Yugoslavian. In addition, people from metropolitan areas (Zagreb most specifically in the case of Croatia) were more drawn towards civic identification than ethnic identification, whereas most of the other Croats felt they had an ethnic sense of belonging to Croatia.344 The 1990s Wars led to a Croatian identity that is based more on ‘anti-Serbianism’ than on ‘Croatianism'. Although Serbs and Croats have many aspects in common, including history and heritage, Croats and Serbs seem to only highlight their differences. Now that Croatia serves as an example for the other former Yugoslavian countries, it might become more aware of their similarities and Croats may become more aware of all what Croatia has to offer the EU.345 Scholars too have been trying to define a Croatian identity through ‘othering’346 rather than to look at the Croats themselves.347 The Croatian identity is a complex one as it seems to have been imposed on the Croats in an attempt to define them and explain to others ‘who they really were’.348 This was needed because the Croats primarily identified themselves with their region rather than their nation, which will be discussed in the section below. Through the creation of a Croatian nation state in a troubled context a strong form of nationalism has developed that has a defensive nature. This causes ‘intensive national identification’.349 The Croatian identity is manifested in social practices. While the government attempts to maintain its own account of national identity in their competence areas such as the education system, other accounts of national identity may come forward from the Catholic Church or from

343

Sekulic, 2004, p. 477. Ibid., pp. 477-480. 345 Skoko, 2013. 346 ‘Othering’ is portraying another as another for various (often cultural) reasons, such as nationality, race, skin colour, language, etc. 347 Sekulic, 2004, p. 474. 348 Ibid., p. 461. 349 Ibid., p. 474. 344

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sports.350

2.5.1 Regionalism There are also strong forms of regionalism and regional identities present in Croatia that are causing a form of disunity within the country. Even though a regional and a national identity do not need to be mutually exclusive, many nationalist political parties do look at it this way. The 1995-World Value Survey revealed that many Croats feel more committed to the region than to the nation state in general. In 1997 a similar question was asked to the Croats, resulting in a 79.8 percent commitment to city or region; 15.5 percent to the nation; and a 4.8 percent commitment to a region broader than Croatia.351 However, this does not mean that a regional and a national identity are mutually exclusive. These results are similar to what had been found by a Croat and a Serb who travelled through the region trying to discover the identity of the people early in the 19th century. When the people were asked who they were, they named their regions as their identity. For example, a person from Dalmatia would say ‘I am a Dalmation’. This creation of identity came not from politics but simply from the people, seeing themselves as being different from Italians and Germans and being similar to other Croats from their region. The fact that the, what they called, peasants experienced a more regional identity was opposed to what the Croatian elite experienced. They saw themselves as being Croatian in a national sense, belonging to a Croatian nation that was somehow excluding the peasants. For the elite the national identity was similar to how religious people would see religiosity. It is claimed that some religious people see all those without such an identity as inferior or at least different. This was the same for the Croatian elite who experienced a relatively strong sense of national identity and viewed all those who did not as inferior.352 The Croatian peasants were thus seen as inferior as they did not experience the Croatian national identity in the same sense of the Croatian elite did.

2.5.2 Religious identity Religion is a very important aspect of the national identity of the Croats, as it has been named the ‘cornerstone of the Croatian identity’.353 Of the whole, 87.8 percent of the Croatian population is Roman Catholic. Saint Joseph is the patron saint of Croatia, but many Croats are also strongly devoted to the Blessed Virgin, who they call Gospa. Aside from the Croatian patron saint, all of the villages and towns have patron saints, whose feast days are honoured by holding

350

Bellamy, 2003. Sekulic, 2004. 352 Sekulic, 2004. 353 http://freedombarometer.org/start-page/balkan/ranking-2/croatia/, last accessed on 12.05.2014. 351

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processions and ceremonies in the churches, sometimes in combination with a bonfire.354 Croatia has by comparison an elevated religious status where the revitalization of religion after the fall of Communism is clearly visible. The fall of Communism coincided with the gaining of independence for Croatia, and during that time Croatia experienced a strong sense of resecularisation, after there had been desecularisation during the communist regime. Croatia is often seen as one of few countries that still experience a strong role of identification by religion.355 The Croatian national identity is strongly fostered by Catholicism, as it deals with other religions that are very close by: Orthodoxy in Serbia and Islam in Bosnia and Herzegovina. Research has shown that Croats who live nearby the border with either Serbia or Bosnia and Herzegovina experience a stronger sense of religiosity than those who live, for example, nearby Italy and Slovenia, both Catholic countries.356 Several aspects, like the relation between religion and nationalism, influence these differences between regions. Living in a region where many Serbs or Bosnians live, Croats often feel stronger related to ‘their’ religion, being Catholicism. Religion plays the differentiating role in these regions, by ‘othering’ those who have a different religion and thereby feeling stronger related to their nation state. Istria, on the other hand, differentiates itself from Italy and Slovenia not through religion but through language and so while different regions make use of different forms of identity, one can see that religious practices influence the preservation of the national identity within Croatia.357

2.6 Sports in Croatia Sports are an obligatory part of the educational curriculum for children of all ages and outside of school many children take part in sports. In Croatia there are 16 000 associations related to sports, of which the Croatian Olympic Committee (HOO) is the largest. Sports are financed by the state through sponsorship, fees of membership, and both public and state contributions.358 Although sports are now obligatory in all school curriculums, this has not always been the case. It was not until in the 19th century that gymnastics became part of the school curriculums. Before this, organised sports existed in the form of shooting, rowing, skating, hiking, fishing, cycling, hunting and horseback riding.359 The first organisation in charge of sport development in Croatia was the Croatian Sports Association. It was founded in 1909 in Zagreb.360 This organisation aimed at bringing together all sports associations, but soon faced

354

Eterovich and Spalatin, 1970. Bellamy, 2003. 356 Ibid. 357 Bellamy, 2002; Marinovic Jerolimov and Zrinscak, 2006; Matijevic, 2006. 358 www.croatia.eu, last accessed on 12.05.2014; Interview 25. 359 Skoric and Hodak, 2011. 360 Jajcevic, 2010. 355

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the problem of a lack in international recognition for teams and athletes.361 Because the Croatian teams and athletes were not recognised internationally, there were little possibilities in participating on the international level. It was not until 1990 when Croatian athletes were able to compete under the Croatian flag. During the 1990s the importance of sports within Croatia was discovered and special funds were established in order to provide in the field of sports.362 Sports can be found in many areas of society and its impact is widely spread through many different dimensions – competitive sports, physical education, and physical recreation.363 The financing system in Croatia concerning sports is regulated by the Sports Act, which specifically states in Article 74 that the sport is financed through the revenue obtained through sporting activity, membership and government funds.364 Approximately one percent of the revenues obtained through the national lottery goes via the Ministry of Finance and the Ministry of Sport to the HOO. The HOO then distributes the money to the national sports federations in Croatia. Regional governments distribute their money, obtained through funds and taxes to the regional sports organisations, and the local governments do the same for the local sports organisations.365

2.6.1 Football in Croatia ‘Football victories shape a nation’s identity as much as wars do’ – Franjo Tuđman.366 Football is considered to be Croatia’s most popular sport. It is argued that football has played a significant part in the collapse of Yugoslavia.367 Looking at Yugoslavia, ‘sports can be described as a unique and malleable source of social knowledge contributing greatly to the formation, establishment and conservation of emerging national identity’.368 While former Yugoslavian countries have reconnected on the level of sport, they have not done so when it concerned football.369 The first regional sporting league in which former Yugoslavian countries participate is the Adriatic Basketball Association’s Goodyear League. Other leagues exist in different forms of sport: ice hockey, volleyball, rugby, field hockey and handball.370 Several attempts at constructing such a league for football, for example the Central European Football League (CEFL), have been made, but despite the support of the football clubs 361

Skoric and Hodak, 2011. Ibid. 363 Bartoluci and Skoric, 2009. 364 Croatian Sport Act, 2007, p. 49; Interview 25. 365 Interview 25. 366 Brentin, 2013. 367 Brentin, 2013. 368 Ibid., p. 993. 369 Wood, 2013. 370 Ibid., p. 107. 362

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such a league was never actually initiated.371 And while the reasons in favour of creating such a league have remained the same, the idea is seen as highly controversial among those below the policy-making level. This is because of the underlying tensions that are still present and question such as where the headquarters of the CEFL would be, are extremely sensitive and pressing. Football is to such a great extent integrated in the national society that it actually was involved in the collapse of Yugoslavia.372

2.6.2 Sporting nationalism For 60 years, the former Yugoslavian countries each hosted a number of football clubs that each competed with each other for the Yugoslav championship. Parallel to the regional tensions that were rising, there were also tensions between the Serbs and Croats in football. These tensions did not only cause cancellations of entire playing seasons, they eventually also resulted in the creation of separate Croatian, Slovenian and Serbian leagues.373 During the Second World War, the Axis Powers, most prominently Nazi-Germany and Fascist Italy, sponsored football matches and a league in which also the Yugoslav teams could play. After the war, those clubs that had been involved with the Nazis or the fascists were disbanded and clubs like Red Star Belgrade and Dinamo Zagreb joined the league. Their names were pointing towards Communism and therefore represented the new vision of Yugoslavia. Hadjuk Split, another Yugoslavian team, had not joined the fascists and was therefore not disbanded after the war. During the war, this Hadjuk Split played as the team of the Partisans – the People’s Liberation Army of Yugoslavia.374 These three clubs – Red Star Belgrade, Dinamo Zagreb and Hadjuk Split – formed together with Partizan Belgrade the ‘Big Four’ of Yugoslavia.375 Years after the Second World War supporting a particular club would become a declaration of ‘one’s national loyalty and political preferences’.376 During matches, national leaders were portrayed as saints and other political messages were being put on placards.377 The stadiums were seen as ‘stands of free will’ where nationalistic feelings could be portrayed.378 In general, Red Star Belgrade and Partizan Belgrade had become ‘one of the pillars of Serbian national identification among Serbs throughout Yugoslavia, and fans from all walks of

371

Ibid., pp 107-108. Bellamy, 2003; Brentin, 2013. 373 Wood, 2013, p. 1079. 374 Bellamy, 2003. 375 Ibid. 376 Wood, 2013, p. 1080. 377 Colovic, pp. 373-374. 378 Brentin, 2013. 372

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life rooted for the club to express support for Serbian national politics and Serbia’.379 For Croatia, Hadjuk Split and Dinamo Zagreb represented Croatian nationalism and their fans ‘offered the first mass support for Franjo Tuđman and his nationalist Croatian Democratic Union’.380 The two visions, that of Communism and that of Tuđman, clashed before a football match between Dinamo Zagreb and Red Star Belgrade in 1990, resulting in the destruction of stadium billboards as well as the cancellation of the entire match.381 Initially, the football fans in Bosnia and Herzegovina and Montenegro remained loyal to Yugoslavia. However, they eventually sided with their respective football clubs as a result of nationalism. Seeing Croats and Serbs promote their feelings of nationalism in the 1990s had causes the Bosnians and Montenegrins to act in a similar manner.382 By the time that the 1990s Wars had begun, football fans were the ones who volunteered first to be in the army. According to many records of the war383, it had been the football fans who had committed ‘some of the most brutal and criminal war actions’.384 It was for those who had fought during the war and those who had lost their lives that outside the stadium of Dinamo Zagreb, a plaque was erected that reads: ‘To all Dinamo fans for whom the war began 13 May 1990 at Maksimir Stadium and ended with the laying down of their lives on the altar of the Croatian homeland.’385 As mentioned above, a strong relation between sports and nationalism developed during the 1990s. This relation found its origins in Serbia and Croatia, where the sense of sporting nationalism was most powerful. Sporting nationalism refers to the expressing of one’s national identity through sport. For example, the presentation of national flags, anthems and colours surrounding sporting activities appeal to feelings of identity and belonging to a certain nation.386 This particular feeling of identity has always been very strong in Croatia when concerning football. Sporting nationalism almost always comes to the fore during times of crisis and conflict in a particular nation state. Sport is then a way to distinguish one nation state from another, as Franjo Tuđman has also pointed out.387

379

Wood, 2013, p. 1080. Ibid. 381 Wood, 2013. 382 Bellamy, 2003. 383 Ibid. 384 Wood, 2013, p. 1081. 385 Ibid., p. 1082. 386 Brentin, 2013. 387 Brentin, 2013, p. 995. 380

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2.7 Stereotypes and self-stereotyping In this section the stereotype of Croatia and the stereotypes that it has created about itself, selfstereotypes, will be discussed. Stereotypes are mere generalisations of a group of people and do not necessarily convey the truth. However, stereotypes do present a general image of the region, and self-stereotypes demonstrate how Croatia perceives itself.

2.7.1 Croatia as part of the Balkans Croatia is often lumped together with its neighbouring countries and declared to be part of the ‘Balkans’. It is argued that this is mainly the result of a lack of knowledge about the region.388 Because Croatia is perceived as a Balkan state, the stereotype of Croatia is connected to that of the Balkans in general. There is a negative connotation to the term Balkans. The Balkans are considered to be conservative, backward, tribal, primitive and extravagant.389 They have also been associated with violence, danger, and barbarism.390 The Balkan stereotype further involves that the Balkan people are intolerant, rude, impolite, lazy and primitive.391 In general, the Balkans are considered to be the opposite of (Western) Europe: the Balkan people are considered barbaric and violent, while Europeans are considered civilised and peaceful.392 These negative stereotypes and prejudices about Croatia, and the Balkans in general, have been able to take shape due to the 1990s Wars. During this period the Balkans became the centre of attention. The term ‘Balkans’ became connected to the wars (i.e. ‘Balkan wars’) and started to spread through popular media.393 There are, however, some positive connotations to the term ‘Balkans’. The Balkans are also considered to be a mystical and exotic place.394 Furthermore, it has been argued that people now realise that Croatia is a safe and secure destination for a holiday.395

2.7.2 Croatia as part of Europe Croatia is aware of its negative stereotypes, and does not agree with the way in which it is lumped together with its neighbouring countries. It has been argued that Croats oppose the view that they belong to the Balkans, and that they do not like to be associated with other 388

Bjelić, 2005, p. 7; Interview 1; 7. Bjelić, 2005, p. 15; Dodds, 2003, p. 135; p. 141; Lindstrom, 2003, pp. 315-316; Interview 7. 390 Bakić-Hayden, 1995, p. 917; Dodds, 2003, p. 138; Šarić, 2004, p. 391. 391 Šarić, 2004, p. 391; Lindstrom, 2003, p. 317. 392 Bakić-Hayden, 1995, p. 918; Šarić, 2004, p. 391; Bjelić, 2005, p. 3. 393 Lindstrom, 2003, p. 315; Todorova, 1999, as cited in Šarić, 2004, p. 391; Razsa and Lindstrom, 2004, p. 636; Bjelić, 2005 , p. 3. 394 Šarić, 2004, p. 391. 395 Interview 6. 389

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former Yugoslav countries, especially Serbia.396 In Croatian media the term ‘Balkans’ is only used to refer to others, or to refer to the threat of the Balkans.397 Croatia does not want to be associated with backwardness, barbarism and political instability.398 It perceives the Balkans as a negative place and instead wants to belong to Europe.399 The Croats associate the Balkans with negative elements such as instability, chaos, crime, corruption and illegality; while they associate Europe with stability, order, honesty and legality.400 While Europe sees itself as the opposite of the Balkans, including Croatia, Croatia also distinguishes itself from the Balkans. 401 This presents the ambiguity of ‘Balkanism’402: Croatia is considered to be part of the Balkans, yet Croatia considers its eastern neighbours to be Balkan. At the same time, Europe ‘othered’ the Balkans by presenting them as fundamentally different, while the Balkans are a part of Europe.403 Since Europe defines itself as ‘not Balkan’, it was impossible for Croatia to embrace the dual identity of being both Balkan and European.404 Therefore, Croatia aimed to transcend its Communist and Balkan past and prepared its return to Europe.405 Croats wanted to be acknowledged as part of Europe and its cultural circle.406 They started presenting themselves in ‘European’ characteristics: ‘progressive, prosperous, hard-working, tolerant and democratic’ to distinguish themselves from the Balkans.407 Croatia also used historical and cultural criteria to prove that it should be considered European, such as the Roman Catholic Church and its line of defence against the Ottoman Empire. But Croats also used the styles that they say Europeans use in their art, literature and architecture.408 Another way to clarify that Croatia belongs to Europe was by pointing at its contribution to Europe. One way was through Academia Cravatica, founded in 1997. Academia Cravatica promoted the cravat as a piece of Croatian and world heritage. The cravat was originally worn by Croatian peasants and was exported to Western Europe during the European Thirty Year War (1618 to 1648).409 Other inventions that the Croats claimed that are of a universal character are the ballpoint pen, the thermos flask, the rotating toothbrush, the self-propelled

396

Boskovic-Stulli, 2002, p. 50; Rasza and Lindstrom, 2003, p. 319; Interview 1. Šarić, 2004, pp. 392-393. 398 Tomić-Koludrović and Petrić, 2007, p. 7. 399 Šarić, 2004, p. 396. 400 Ibid., p. 403. 401 Bakić-Hayden, 1995, p. 922; Rasza and Lindstrom, 2003, p. 630; Interview 39. 402 The term ‘Balkanism’ has its origin in Imagining the Balkans (1997) by Maria Todorova. Balkanism is the discourse that creates the political and cultural stereotype of the Balkans. 403 Todorova in Rasza and Lindstrom, 2004, p. 637. 404 Tomić-Koludrović and Petrić, 2007, p. 6. 405 Rasza and Linstrom, 2004, p. 635; Bakić-Hayden, 1995, p. 924. 406 Žmegač, 2009, pp. 162-164. 407 Lindstrom, 2003, p. 317. 408 Ibid. 409 Žmegač, 2009, p. 165. 397

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torpedo, the parachute based on Leonardo da Vinci’s sketches, and the use of fingerprinting.410

2.7.3 Croatia as part of the Mediterranean Different parts of Croatia associate themselves with different parts of Europe. The southern part of Croatia, the regions Dalmatia and Istria, presents itself as part of Southern Europe and the Mediterranean.411 The Croats associate themselves with the Mediterranean to escape the Balkan stereotype. The Mediterranean stereotype is much more positive and the Mediterranean is perceived to have a rich culture.412 The rich culture of the Mediterranean is reflected in Croatia’s rich cultural heritage at the Adriatic coast, such as the UNESCO World Heritage Sites discussed above. Furthermore, in presenting themselves to the rest of the world Croatia focused on the life in Dalmatian cities.413 The way of life in these cities is relaxed and the quality of life is good.414

2.7.4 Croatia as part of Central Europe The northern part of Croatia then identifies itself more with Central Europe. It thereby places Zagreb among Central European capitals like Budapest, Prague and Vienna.415 Central Europe is an alternative for association with the previously communist Eastern Europe.416 Croatia identifies itself with Central Europe due to its past as part of the Habsburg Empire. The Habsburg domination made Croatia feel like a part of Europe and oriented Croatia to the West.417 Croatia, furthermore, points at the cultural similarities between the two: it has the same lifestyle and the same national community.418 Lastly, Croatia feels like its rightful place is in Europe due to its geographic location.419 While Croatia does not want to be associated with the Balkans, as it is linked with the negative stereotype of violence, backwardness and barbarism, Croatia often is. Croatia therefore searched for links to its European belonging. These links proved to be mainly cultural: art, literature, the Catholic Church, and its lifestyle. The self-stereotype that Croatia has created is as a part of the Mediterranean or Central Europe. What was most expressed in interviews was that Croatia is neither. Croatia has a complex identity, with Central European, Mediterranean and

410

The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=37, last accessed on 19.03.2014. Interview 33; 12; 58. 412 Lindstrom, 2003, p. 326. 413 Tomić-Koludrović and Petrić, 2007, p. 10. 414 Interview 50. 415 Boskovic-Stulli, 2002, p. 50; Lindstrom, p. 324; Interview 1. 416 Šarić, 2004, p. 390. 417 Bakić-Hayden, 1995, p. 924; Interview 2. 418 Lindstrom, 2003, p. 324. 419 Rasza and Lindstrom, 2004, p. 629. 411

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Balkan elements.420 Neither of these elements can be isolated, and the Balkan element cannot be ignored.421 It was, therefore, also expressed that Croatia should not try to compete with the Mediterranean or Central Europe. Instead, it should promote its unique mix of cultures, the good climate, the good food and a relaxed way of life.422

2.8 Literature, architecture, art, film and music Unable to cover every author, artist, and musician, this section will provide a selection of relevant persons and themes in the fields of literature, art, film and music.

2.8.1 Croatian literature In the Middle Ages Croatian literature consisted of poems and written dialogues based on religion, legends and folklore.423 This changed at the end of the 15th century when Croatian literature followed the Italian developments and introduced Renaissance themes, forms, and types, as well as humanism.424 Marko Marulić (1450 to 1524), who is considered a ‘prominent representative of European Christian humanism and the Renaissance epic’,425 combined medieval themes with Renaissance forms.426 The first Croatian prose novel, Planine (‘Mountains’), was written in 1536 by Petar Zoranić (1508 to 1569). Planine tells the story of a shepherd’s seven-day journey across the Croatian Mountains to heal his broken heart.427 In the same period Matija Vlačić Ilirik (1520 to 1575) wrote a famous Protestant biblical dictionary, Clavis scripturae sacrae (‘The Key to the Holy Scriptures’, 1567). During the 17th and 18th centuries religious poems and literature remained popular in Croatia.428 In the 18th century Enlightenment Andrija Kačić Miošić (1704 to 1760) wrote a history of the Slavic people, Razgovor Ugodni Naroda Slovinskog (‘Pleasant Conversation of Slavic People’, 1756), which became popular because it focused on everyday subjects and was written for the ‘common’ people of that time.429 The 19th century is considered an important period, because Croatian became an official 420

Dragojević, 2001, p. 17 as cited in Tomić-Koludrović and Petrić, 2007, p. 5; Lindstrom, 2003, p. 320; Interview 39; 42; 43; 12. 421 Tomić-Koludrović and Petrić, 2007, p. 5. 422 Interview 12; 33; 39. 423 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=39, last accessed on 30.04.2014; Crnkovic, http://www.britannica.com/EBchecked/topic/143624/Croatian-literature#ref842506, last accessed on 30.04.2014. 424 Humanism is a system of values and beliefs which is based on the human being. It furthermore values critical thinking and the use of reason over religion. 425 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=39, last accessed on 30.04.2014. 426 Ibid. 427 Grmača, 2013, p. 192. 428 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=39, last accessed on 30.04.2014. 429 National and University Library Zagreb, http://www.nsk.hr/en/in-memory-of-andrija-ka%C4%8Di%C4%87mio%C5%A1i%C4%87, last accessed on 30.04.2014.

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language in 1850. Previously, all three dialects, Kajkavian, Chakavian and Shtokavian, were literary languages. The Illyrian Movement, which was active in the first half of the 19th century promoted the Shtokavian dialect as the literary language of Croatia.430 The official Croatian language was eventually based on the Shtokavian dialect. During this period more nationalistic and patriotic literature was written. Ivan Mažuranić (1814 to 1890) and Stanko Vraz (1810 to 1851) for instance wrote patriotic poems that reflected on society. Petar Preradović (1818 to 1872) was a writer of patriotic songs. While the literary circles were initially mostly based in Dalmatia, writers and themes from all parts of Croatia were represented in the Realist period of the mid-19th century.431 At the beginning of the 20th century Croatian poetry dealt with common Western themes such as the meaning of life, and Croatian themes such as Croatia’s stagnation and the Hungarian domination. Famous 20th century writers are: Miroslav Krleža (1893 to 1981), Ivo Andric (1892 to 1975), and Ivana Brlić-Mažuranić (1874 to 1938). Krleža wrote about social problems and gave much depth to his characters.432 Andric won the Nobel Prize for Literature in 1961 for ‘the epic force with which he has traced themes and depicted human destinies drawn from the history of his country [Bosnia]’.433 Brlić-Mažuranić was nominated for the Nobel Prize for Literature twice, in 1937 and 1938; she wrote ‘poetic fairy tales’.434 During the 1990s the exiled writers Dubravka Ugrešić (1949) and Slavenka Drakulić (1949) wrote about their exile and political involvement, for which they both received international prestige.435

2.8.2 Architecture and art Architecture in the period from the second half of the eighth century to the end of the 10th century is characterised by the Pre-Romanesque churches. The architecture of these churches was influenced by the late Classical period and the Western European and Byzantine cultures. It was furthermore characterised by Christian symbols and motifs carved in stone. The subsequent Romanesque period, from the 11th to mid-13th century, was most present in the southern regions of Dalmatia and Istria. The Romanesque basilica, Christian cathedrals, and Monastery churches display external influences from Lombardy, Apulia, Venice, and Byzantium. In the 13th century simple Gothic churches were built in Croatia. In the same period decorated

430

Cmkovic, http://www.britannica.com/EBchecked/topic/143624/Croatian-literature#ref842506, last accessed on 30.04.2014; Interview 11. 431 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=39, last accessed on 30.04.2014. 432 Cmkovic, http://www.britannica.com/EBchecked/topic/143624/Croatian-literature#ref842506, last accessed on 30.04.2014. 433 The Nobel Foundation, http://www.nobelprize.org/nobel_prizes/literature/laureates/1961/andric-facts.html, last accessed on 30.04.2014. 434 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=39, last accessed on 30.04.2014. 435 Ibid.

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Venetian Gothic churches were built in Dalmatia.436 The Renaissance style, which prevailed from the mid-15th to the 16th century, was introduced to Croatia by the Italian sculptor and architect Nicholas of Florence (1418 to 1506), who designed the Chapel of Blessed John in Trogir. Croatia is considered to be one of the first European countries to introduce Renaissance influences in its architecture. The fortresses that were built to protect the country against the Ottomans were also influenced by the Renaissance, e.g. the fortress town of Karlovac.437 Baroque influences became apparent in frescoes, decoration, altars, and sculptures in churches and public buildings of the 17th and 18th century. The nobility, church and military authorities commissioned the building of Classical buildings in the 18th and 19th century, while the common people were more interested in the modest Biedermeier style.438 The 20th century architecture was characterised by artistic expression, creative freedom, and functionalism. Especially after the Second World War, architecture focused on aesthetics and adopted a more ‘international’ style. Painting styles that were used throughout this century were expressionism, neorealism, neoclassicism, avant-garde, (post-)cubism and postsurrealism. The famous artist, Vlaho Bukovac (1855 to 1922) used several of these painting styles in his work and was inspired by both pan-Slavism and Croatian nationalism.439

2.8.3 Film and music Croatian cinematography started in the mid-20th century with the production of documentaries and short films by Oktavijan Miletić (1902 to 1987) and the production of Yugoslav educational films. The Independent State of Croatia also started the production of propaganda documentaries and cultural films. After the Second World War the Communist regime supported war-themed film productions. Soon films were produced on the same level as Soviet and Hollywood films, yet with European elements. The greatest Croatian cinematography achievement is considered to be the Oscar nominated film The Ninth Circle (1960), a melodrama about the Second World War. In the early 1990s cinematography went through a crisis. Since 2000 public film subsidies and international co-operation have led to the building of new cinemas and the revitalisation of film production.440 From the 11th to the 19th century music composition and production in Croatia revolved around the coastal areas of Dalmatia and Istria. In the 11th century music was mostly composed in the context of the church; examples are the Gregorian chant and the Glagolitic chant. During 436

The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=42, last accessed on 19.03.2014. Ibid. 438 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=42, last accessed on 19.03.2014. 439 Ibid. 440 The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=43, last accessed on 19.03.2014. 437

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this period music was only vocal. In the Classical period, between 1730 and 1820, the first music for instruments was composed. In the 19th century northern Croatia became a more important centre for music. In 1827 the Musikverein (nowadays the Hrvatski Glazbeni Zavod) was established in Zagreb, which built a concert hall and the School of Music (nowadays the Academy of Music). The first national opera, Ljubav I Zloba (‘Love and Malice’, 1846) by Vatroslav Lisinski (1819 to 1854), reflected the pan-Slavic ideas of the Illyrian Movement. The first Croatian pop music was produced during the 1920s and 1930s. In the 1960s Croatia gained importance in the international rock scene. Jazz music became popular in the 1980s and 1990s among the Croatian younger generations.441

2.9 Croatia’s gastronomy There is not one typical Croatian dish, rather, due to the differences in climate and economic circumstances, one should look at the different regions and their gastronomic qualities. For example, the Adriatic coast is the home of seafood. It is similar to the Italian cuisine, making use of air-dried meat, gnocchi, and cheese.442 Dalmatia, a region that is part of the Adriatic coast, even has its own particular way of cooking called spod Peke, which entails a method of slow cooking.443 In the area of Lika and Gorski Kotar one will find more meat in the dishes. Northern and Central Croatia have plenty of cattle, resulting in a large amount of dairy products.444 Due its large number of cattle it could be expected that beef is the most eaten kind of meat in this area. This is however incorrect; poultry and pork are eaten more often than beef. Pork is also a primary source of meat in the northeast part of Croatia, where it is eaten dried. Goulash is a very popular dish in this region.445 One thing that all Croatian regions have in common is that they will only serve what is in season. This means white truffles in late autumn, lamb during the end of winter, asparagus in spring, and fruits in summer.446

2.9.1 Gastronomic tourism Overall, these critiques are not pointed at the Croatian cuisine in general, but rather at its potential to attract more tourists and to better serve these tourists. The importance of food for tourism is internationally researched and established. The so-called ‘gastronomic identity’ of a 441

The Miroslav Krleža Institute of Lexicography, http://croatia.eu/article.php?lang=2&id=41, last accessed on 19.03.2014. www.croatia.eu, last accessed on 12.05.2014. 443 Time Out Croatia, 2013/2014 edition, p. 30. 444 Ibid., p. 28. 445 www.croatia.eu, last accessed on 12.05.2014; Fox, 2007. 446 Time out Croatia, 2013/2014 edition, p. 28. 442

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country is seen as important, since food is often considered a cultural category representing the country to tourists. While on their vacation, most tourists are keen on discovering a new culture and research has shown that this is often ‘manifested in their choice of food, in a change of cultural practices, and emergence of new beliefs’.447 When considering academic articles concerning the gastronomy of Croatia, one finds that there has been a lot of criticism on the way that Croats present their local dishes to tourists.448 It seems that the diversity of the Croatian cuisine is not promoted enough to tourists in the touristic areas. The restaurants tend to serve ‘Western’ dishes such as pizza, carpaccio, and hamburgers.449 Dishes such as pasta, Wiener schnitzel and kebab are seen as being ‘traceable to Italian, Austrian and Bosnian national cuisines as well as to international fast food trends’.450 It is difficult to judge whether or not these are Croatian, but these dishes are not considered to be typically Croatian. There may not be that many typical Croatian dishes, but there are products that are typically Croatian or at least considered to be typically Croatian. This does not mean that these products are not found in other regions, but when visiting Croatia these products are considered as a ‘must-try’: honey, brandy, scampi from Kvarner, oysters, truffles from Istria, olive oil from Istria, wine from Istria, fish soup from Slavonia, beef stew from Dalmatia, lamb (cheese and meat) from the island of Pag, pork from Slavonia, and prsut (prosciutto) from Dalmatia.451 Although these products can be found in other regions as well, according to some they make the difference in the Croatian cuisine and thus have the opportunity of making Croatia a culinary tourist destination.452

2.10 Conclusion There are many facets to culture in general. This is not different in Croatia. This report regards nationalism as the leitmotif in Croatian culture. Cultural aspects such as language, identity and sports have all been influenced by feelings of nationalism. First, language, for instance, has been influenced by nationalistic politics. The changes from Croatian to Serbo-Croato-Slovenian to Serbo-Croatian and back to Croatian as the official language within the Croatian territory are the result of language politics based on nationalistic sentiments to express the Croatian identity. This is also visible in Croatia’s choice for using the Latin rather than the (traditionally Slavic) Cyrillic alphabet. 447

Fox, 2007, p. 554. Renko, Renko and Polonijo, 2010. 449 Fox, 2007. 450 Ibid., p. 547. 451 Skoko, 2014, p. 13; Time Out Croatia, 2013/2014 edition, pp. 29-30. 452 Time Out Croatia, 2013/2014 edition, p. 36. 448

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Secondly, The Croatian identity, the sense of belonging to Croatia, has its roots in Croatian nationalism. Many have argued that the Croatian identity is more based on what it is not rather than based on what it is. It seems that the Croatian identity is the embodiment of the differentiation of Croatia from all other (surrounding) nation-states. This is also illustrated by the fact that Croatia tries to distinguish itself from the Balkans in its self-stereotyping. Finally, sports have often been a platform for the expression of Croatian nationalism. Being able to wave the national flag at a sports event after having obtained independence was something the Croatian government as well as the athletes had long fought for. Also, during football matches, the first signs of support for Tuđman were openly shown.

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Part II The legal system

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3. Legal System In this chapter several aspects of Croatia’s legal system will be analysed. First of all, the Constitution of the Republic of Croatia, which is the foundation of the legal order of Croatia, will be discussed. Secondly, Croatia’s civil, administrative and criminal law will be discussed with a special focus on the influence of the EU accession. Thirdly, Croatia’s competition policy and company law will be outlined. Finally, in the last section the relation between Croatian law and the European law will be outlined.

3.1 The constitution The Croatian Parliament adopted the current constitution of Croatia on 22 December 1990. They rejected the communist single-party system and adopted a liberal-democratic constitution of Croatia as the Republic of Croatia. The constitution is based on the semi-presidential model of the Fifth Republic of France, with broad presidential executive powers shared with the government. In 2000 and 2001 the Croatian Parliament amended the constitution and reduced the presidential powers.453 The preamble explains how the Croats have managed to preserve their national identity throughout centuries in various forms of states, from the formation of Croatian principalities in the seventh century until now. This has also been analysed in the previous chapters on the Croatian history and culture. Croatia claims to derive its sovereignty and autonomy from a long history in which the Croatian people have had, for a long time, their own form of government and sense of nationhood even if they belonged to a greater empire. In the preamble Croats also differentiate themselves from the minorities living in Croatia to give the Croatian state more of a raison d'être.454 Croatia is defined in the chapter on basic provisions as a unitary and indivisible democratic and social state. The highest values of the constitutional order in Croatia are their freedom, equal rights, national equality, peace, social justice, respect for human rights, inviolability of ownership, conservation of nature and the human environment, the rule of law and a democratic multiparty system. However, as will be shown in a this report, the rule of law and human rights are not always respected. The basic provisions also state how laws will be conform the constitution and that Croatian citizenship is regulated by law. Furthermore, the constitution lays down rules for the use of a second language besides Croatian if a minority composes one-third of the population of a specific area.455 According to the constitution all citizens of Croatia are equal and should be treated as 453

Committee on the Constitution, 2010. Ibid., preamble. 455 Committee on the Constitution, 2010, Article 1-13. 454

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such. The only reason for different treatment of certain groups living in Croatia is allowed if it falls under the protection of the freedoms and rights of others, the protection of legal order, public morals and public health. The constitutional referendum on the definition of marriage might be a result of this as some might see gay marriage as immoral.456 However, the limitations on the basis of public health and order are similar to what we see in the Treaty on the Functioning of the European Union. Furthermore, the constitution also provides a safety guard in which the right to life, prohibition of torture and certain freedoms are always secured even if the state is in danger.457 The articles following this focus on personal and political liberties and rights. In short, it gives the citizens of Croatia the right to a trial, but also the right not to be abused and the right not to be arrested without court. Furthermore, the constitution expands on criminal offences and how the government should handle such offences. This includes restrictions for police authorities in doing research.458

3.1.1 Economic, social and cultural rights The third chapter of the Croatian constitution discusses the economic, social and cultural rights in the Articles 48 to 70. The first two articles guarantee the right of ownership of a foreign and domestic person and that the economy will be based on free enterprises and the free market. Article 49 also mentions that enterprises with a monopoly position in the country are forbidden to abuse their power. Regardless of Article 48, Article 50 mentions that ownership can be restricted to protect the interest of the republic, the environment (which is elaborated in Article 52) and public health. Articles 53 and 54 declare the Croatian National Bank (HNB) and the State Audit Office autonomous and independent institutions within the financial framework of the republic. The Articles 55 to 65 address the social and working laws in Croatia. These articles address, among other things, the right to join and create trade unions and employees councils as well as the right to strike. Articles 66 to 70 address the right to, and the mandatory nature of, education as well as the independence of the universities and the duty of the state to guarantee scientific and cultural creativity. According to an interviewee, the independence of the universities is not by all perceived as a good thing as they are seen as conservative and unwilling to reform.459 The state also has the duty to ensure everyone’s right to a healthy life and a healthy environment to live in.

456

Interview 11. Committee on the Constitution, 2010, Article 14-20. 458 Ibid., Article 21-47. 459 Interview 48. 457

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3.1.2 Organisation of government The next chapter in the constitution discusses the government.460 Every citizen above the age of 18 has the right to vote for the representatives in the Croatian Parliament (the Sabor). The Croatian Parliament will have between 100 and 160 directly chosen representatives of the Croatian people, but the exact amount is to be decided by secondary law. This law is influenced by the number representatives the minorities should have as well as the number of representatives for the diaspora of Croatia.461 The Croatian Parliament takes office no later than 20 days after the elections are held and at the first session of the parliament a majority of the members of the parliament (MPs) should be attending to elect the parliament’s speaker, which also means the start of their term as MPs. As soon as the parliament is dissolved or their fouryear term is expired, new elections should be held within 60 days of the dissolution or expiry of the four-year term. The four-year term can only be extended in cases of war, natural disaster and in the case of danger to the independence and unity of the country. The parliament can only be dissolved if a majority of the MPs call for early elections. The president can also dissolve the parliament at the proposal of the government if the parliament does not approve the budget within 120 days or if the parliament has passed a motion of no confidence in the government. However, the parliament may not be dissolved if the president is accused of violating the constitution. The parliament has a wide range of tasks. These tasks vary between the adoption of pieces of legislation, approving the budget and supervising the work of the government to granting amnesty for criminal offences, electing the ombudsperson for a period of eight years and decide on alterations of the borders. The majority makes all these decisions, provided that the majority of the MPs are attending in person. Contrary to this, laws regulating the rights of minorities are only adopted if a two-third majority of the MPs vote in favour when all MPs are present. Another exception is when the parliament votes on constitutionally established rights, as all MPs need to be present and a majority needs to vote in favour in order to pass the vote. Like the government, all MP’s can propose legislation. The MPs can also question the government and individual ministers and can call for a referendum to amend the constitution, legislation or on anything else that the parliament decides upon. Not only the parliament can call for a referendum, but the president can do so as well, at the proposal of the government and with the signature of the prime minister. It should be noted that all referenda in Croatia are binding.462 The parliament can authorise the government to regulate individual issues that would normally fall within the scope of the parliament. This can be done for a maximum period of one 460

Committee on the Constitution, 2010, Article 71-125. Interview 28; 37. 462 Committee on the Constitution, 2010, Article 87. 461

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year.463 After this period the legislation created in this time is no longer valid until decided otherwise by the parliament. Furthermore, all MPs are barred from having a second job or holding a position in the same field as their expertise in the parliament. This is also the case for the president, the prime minister and judges of the Constitutional Court and this rule is very strict to prevent conflict of interests.464 The president of Croatia is elected directly for a period of five years and can be reelected once. These elections are held between the last 60 and 30 days of the current president’s term. The task of the president is to represent and act on behalf of Croatia at home and abroad. The president is to ensure functioning of the government as well as to be responsible for the defence of the independence and the territorial integrity of Croatia. The tasks of the president include: to call for elections for the parliament, to call for referenda, to give the mandate to a person to form a government, to grant pardons, to confer decorations and awards, to cooperate with the government the foreign policy, to be the commander-in-chief of the armed forces. The president is allowed to join any session of the government, as well as to propose to the government to take specific issues in consideration.465 The government of Croatia holds the executive power and consists of a prime minster, one or more deputy prime ministers, and ministers. The government should be formed 30 days after the president has given out the mandate to form a government. This period can be extended once, and if the government has not been formed yet during the extended period a new person will receive the mandate to form a government.466 A newly formed government has to seek the confidence of the parliament in a vote, which has to pass by a majority of MPs. The government is also held accountable by the parliament and the parliament can hold a vote of confidence in the prime minister, a minister or the whole government. If the prime minister or the whole government is dismissed by the parliament in a vote of confidence, they are to resign. If a single minister has lost the confidence of the parliament, the prime minister can put forward a new minister on which the parliament can vote. If this vote fails or no new minister is put forward, the government and the prime minister are to resign.467 The tasks of the government include proposing legislation to the parliament, proposing the budget and annual account, executing laws and other decisions of the parliament, adopting decrees to implement laws, conducting foreign and domestic policy, directing and controlling the operation of the civil service, tending to the economics development of the country and 463

Committee on the Constitution, 2010, Article 88. Committee on the Constitution, 2010, Article 96, 109, 127; Act on the prevention of conflict of interest, 2011; Interview 48. 465 Committee on the Constitution, 2010, Article 98. 466 Ibid., Article 108-112. 467 Ibid. 464

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directing the performance and development of public services.468 The electorate, as well as EU citizens living in Croatia, can also vote for local and regional governments. These governments get duties given to them from higher governments if the law should be implemented the closest to the citizens. Nevertheless, these governments can also administer affairs of regional significance related to urban planning, education, public health, economic development, infrastructure and social and cultural institutions.469

3.1.3 Judicial system The governmental part of the constitution also discusses the judicial power in Croatia. The judicial power in Croatia is, according to the constitution, completely autonomous and independent from the other branches of the government and the Supreme Court of the Republic of Croatia is the highest court of law in the country.470 All court hearings are public, unless it is necessary to protect the privacy or rights of the ones tried. The judicial power might be independent from the other branches of government, however parliament and the president appoint the Chief Justice of the Supreme Court for a term of four years.471 The other judges are appointed by the National Judicial Council, which constitutes of seven judges. Of these seven judges two will be university professors of law, two will be members of parliament of whom one shall be from the opposition.472 The parliament also chooses the head of the Public Prosecution Service for a four-year term. Deputy Prosecutors General are appointed by the National Prosecutorial Council, which has the same composition as the National Judicial Council but instead of judges there will be seven Deputy Prosecutors General.473 The Constitutional Court consists of 13 judges elected by a two-thirds majority of the MPs for a period of eight years. The main tasks of the Constitutional Court are to decide if legislation, political parties and decisions of governmental bodies are in compliance with the constitution. As an effect, it can repeal and annul legislation if it decides that such legislation is considered unconstitutional.474

468

Committee on the Constitution, 2010, Article 113. Ibid., Article 117, 133-138, 146. 470 Ibid., Article 118-199. 471 Ibid., Article 119. 472 Ibid., Article 124. 473 Ibid., Article 125. 474 Ibid., Article 126, 129. 469

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3.1.4 International relations One of the constitution’s last chapters discusses the international relations of Croatia.475 It describes the rules about international treaties and the decision process regarding such international treaties. Furthermore, the constitution prohibits all international treaties that aim to create a new united Balkan state. If a new treaty is proposed two-thirds of the MPs have to be in favour in order for the treaty to proceed. The citizens of Croatia will then vote in a referendum on the treaty 30 days after the parliament has accepted the treaty. After the ratification of the treaties by the Croatian Parliament, the president signs them. The treaties that the Croatian Parliament does not have to ratify are treaties that do not require amendments to laws, are not of military and political nature or do not require a financial commitment and do not grant an organisation or alliance powers from the constitution. These treaties will be concluded by the government or by the president. All concluded international treaties that have entered into force will have supremacy over national law. 476 3.1.4 European Union There is a section recorded for the EU in the Croatian constitution, which relates considerably to the previous section on international relations.477 The first part of this section focuses on the functioning of Croatian institutions with the institutions of the EU. For instance, Croatia will be represented in the European council by the president and in the Council by the government. Furthermore, the government shall inform the parliament on pieces of legislation in which Croatia participates. The parliament can respond to this information by adopting conclusions, which ‘provide the basis on for the Government’s actions in European Union institutes.’478 Rights that are derived from EU legislation are equal to rights derived from Croatian legislation. These rights include the right to freedom of movement in the EU, as well as voting rights in the member states and the right to apply the Croatian language in communication with the EU institutions. Furthermore, the Croatian courts shall protect these rights derived from EU legislation and all legal persons with public authority shall apply EU law directly.479

3.2 Administrative and Civil Law in Croatia One important part of this report on Croatia is addressing the malpractice of the administrative and civil procedures. Many interviewees pointed to the fact that these procedures do not work properly at the moment.480 This has a negative influence on a number of areas in Croatian 475

Committee on the Constitution, 2010, Article 139-142. Ibid., Article 140-142. 477 Ibid., Article 143-146. 478 Ibid., Article 144. 479 Ibid., Article 145,146. 480 Interviews 1; 10; 17; 18; 24; 35; 37; 54. 476

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society, such as good governance, the rule of law, human rights, the judicial system, successfully implementing EU rules and the economy.481 Therefore, this section will focus on Croatia’s Administrative and Civil Law. The various acts, recent changes of the procedures and opinions of the EU, and the Croatian ombudsman regarding these procedures will be discussed. 3.2.1 Administrative Law Administrative Law consists of the procedures created by administrative agencies (governmental bodies of the central government or municipalities) involving rules, regulations, applications, licences, permits, available information, hearings, appeals and decision-making.482 The standards and principles of Croatian administrative justice are encompassed within four legal instruments. These four instruments have been established to protect the rights of the citizens against proceedings of the administrative bodies. The first is the right to a fair trial, which is stated in Article 6 of the European Convention on Human Rights (ECHR).483 The right to a fair trial is a fundamental right and is also implemented in the Croatian constitution, in Articles 22, 24, 27 and 31.484 The second legal instrument is the Act on Administrative Disputes, which was implemented in 2010.485 This act regulates the competence, composition and procedural rules of the administrative courts in Croatia. These administrative courts evaluate the lawfulness of the decisions and actions of public authorities. Furthermore, they safeguard the rights and legal interests of natural and legal persons.486 The objective of the act is stated in Article 2: ‘to protect the rights and legal interest of natural and legal persons, breached by a decision or action of a body of administrative law’.487 Other important administrative legislation acts are the Courts Act of 2010 and the General Administrative Procedure Act of 2009.488 The Courts Act of 2010 regulates the organisation, competence and jurisdiction of administrative courts. The General Administrative Procedure Act of 2009 regulates the competence of state bodies, local government and legal entities vested with public authority.489 3.2.2 Civil Law Civil Law consists of rules that define private rights and remedies and govern disputes between individuals in areas such as contracts, property, and family law. The Civil Procedure Act, which was last amended in 2011, regulates ‘the procedural rules under which courts shall hear and 481

ACA-Europe, 2011, http://www.aca-europe.eu/index.php/en/evenements-en/325-dubrovnik-26-may-2011-conferenceon-the-new-administrative-jurisdiction-system-of-croatia-in-the-perspective-of-the-accession-to-the-european-unionexchange-of-european-experiences, last accessed on 22-05-2014. 482 Ibid. 483 Ibid. 484 Committee on the Constitution, 2010. 485 Croatian Parliament, 2010, Article 1. 486 Ibid., Article 1. 487 Ibid., Article 2. 488 Croatian Parliament, 2009 (A), Article 1. 489 Ministry of Justice, 2010, Article 1.

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decide about disputes regarding the basic rights and obligations of citizens’.490 3.2.3 The opinion of the European Commission and Croatian People’s Ombudsman on Croatian Administrative and Civil Law According to the European Commission (hereinafter; the Commission), Croatia had an inefficient judicial system in 2005.491 The Commission stated that ‘Croatia has a slow and inefficient administrative and professional capacity, which discourages parties from taking cases to the court and undermines an effective enforcement of property rights’.492 To resolve these weaknesses, the Strategy for the Reform of the Justice System was launched in 2005.493 This strategy aimed to create an efficient judiciary and consisted of five targets. Firstly, ‘dealing with the large number of pending cases; secondly, reducing the duration of court proceedings; thirdly, modernising the court administration; and lastly, providing education and professional training to Croatian judges.’494 Croatia has made some improvements in the judicial system, such as adopting new acts, creating a new post of Minister for Administration and expanding the newly created Ministry of Administration. However, in 2009, the Commission found that the public administration remains weak. According to the Commission further efforts are needed to improve administrative procedures. Furthermore, a professional civil service that is able to respect the rule of law should be established. In particular, ‘completion and efficient implementation of the relevant legal framework is necessary in order to build a modern and reliable public service’.495 In 2012, the Commission also emphasised the need to reform the judiciary.496 It stated that the independence, accountability, impartiality and professionalism of the judiciary had to be improved. Croatia has continued to implement various measures to improve the efficiency of the judiciary. However, in 2012, there were still many unresolved cases regarding civil law, which still remains a matter of concern.497 The Croatian ombudsman also addressed the problems of administrative proceedings in Croatia. The backlog and length of court cases in civil and administrative court proceedings remain a serious problem because they violate the rights of citizens.498 In addition, the civil and administrative court proceeding system is too complex and therefore not completely accessible for Croatian citizens. Furthermore, the Croatian ombudsman stated that the access to justice of citizens with low income is inadequate. The lawyers ask relatively high fees and there is no 490

Croatian Parliament, 2011, Article 1. European Commission, COM (2005) 561 final. 492 Ibid. 493 Ibid. 494 Ibid. 495 Ibid. 496 European Commission, COM (2012) 601 final. 497 Ibid. 498 Croatian Ombudsman, 2009(A), p. 2. 491

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efficient supervision of the public authorities to improve this situation.499 3.2.4 The opinion of various interviewees on the functioning of Croatian public administration Various interviewees have confirmed the opinions of the Commission and the Croatian ombudsman on Croatian administrative and civil procedures.500 The malpractice of this branch of law has a negative influence on many features of Croatian society and hampers the positive development of Croatia within the EU. For example, when well prepared, one can easily set up a company in Croatia. However, property law may constitute a problem. In general, one can acquire a title of ownership over real estate by entering into the land registry, which is decided by the competent court.

501

There is a difference between the land registry book and the cadastre. All technical

data related to the size and purpose of the real estate is registered in the cadastre. The land registry book indicates the current and previous owners of the real estate and is regarded as accurate. The information of the land registry book is essential for the future buyer of the real estate. However, it should be noted that land registry books have not been established in all municipalities in Croatia, especially in smaller places on the coast. In those places, it is not entirely clear which real estate belongs to whom. This would make it hard to know who needs to be contacted to be able to buy a property. This inaccuracy in Croatian public administration should improve to ensure, for instance, a good functioning of the Croatian Company Law.502 As long as the land registry books are not in place, it is hard for companies to buy real estate and to conduct business. Furthermore, various interviewees noted that the privatisation process, that started after the end of socialist rule during the early 1990s in Croatia, could have been more successful if the quality and accuracy of legislation was better and concluded that Croatian public administration should be improved.503 The privatisation process will be further outlined in the section on economy.

499

Croatian Ombudsman, 2009(B), p.2. Interviews 1; 10; 17; 18; 24; 35; 37; 54. 501 Wolf Theiss, 2012, http://www.google.nl/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CDEQFjAA&url=http%3A%2F%2Fwww .wolftheiss.com%2Ftl_files%2Fwolftheiss%2FOffice%2520Material%2FCroatia%2FEN%2FClient%2520alert%2520 %2520Challenges%2520Related%2520to%2520Acquisition%2520of%2520Real%2520Estate%2520in%2520Croatia.pdf&ei= 56tTU_iMAcW4O5vRgbgC&usg=AFQjCNGNbRUDCqJ3-bsPu0NEC68C9ot-Zg&sig2=rIy5vX0CQd6KP4D4tEoveQ, last accessed on 17.04.2014. 502 Interviews 1; 41; 54. 503 Interviews 1; 10; 17; 18; 24; 35; 37; 41; 54. 500

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3.3 Criminal Law of Croatia From the beginning of the accession negotiations between Croatia and the EU, one of the priority issues has been the improving of the criminal legislation of Croatia. During the accession period it became clear that amendments to criminal legislation were necessary, because there were serious problems like corruption, war crimes, and violation of human rights through discrimination.504 According to the Commission Croatia’s criminal legislation was inadequate to address these problems.505 Therefore, the Criminal Code of the Republic of Croatia has been amended between 2004 and 2013 to come in line with the acquis. First, amendments to the criminal code were adopted in order to harmonise the criminal code with the acquis to prohibit criminal offences regarding discrimination. Secondly, the criminal code was also amended to harmonise it with the international legislation regarding war crime proceedings and terrorism. Thirdly, provisions of the criminal code were reduced and amended to protect the freedom of expression and freedom of association and to apply the burden of proof on the indicter.506 The latest amended criminal code of 2013 was not yet translated when this report was published. Therefore, the amended provisions that will be discussed are based on the criminal code of 2003 and secondary literature about the criminal code of 2013. 3.3.1 Freedom of expression and freedom of accession From the beginning of the accession, the freedom of expression and the freedom of accession have been a priority issue as stated in the progress reports between 2004 and 2012. In 2010 the Commission stated in its report ‘that the freedom of expression, including freedom and pluralism of the media in Croatia are generally respected’.507 The freedom of expression is provided in Article 107 of the criminal code of 2003. Issues regarding the freedom of expression will be discussed in the chapter on Croatian media. Article 109 of the criminal code defines the prohibition of the violation of freedom and association.508 The freedom of association is further provided in Article 143 of the Croatian constitution and regulated by the Associations Act and the Act on Foundations and Endowments.509 3.3.2 Terrorism On 21 October 2011 the new criminal code was adopted by the Croatian Parliament and has

504

European Commission, COM (2005) 561 final, p. 25. European Commission, 2007(a), p. 27. 506 European Commission, COM (2005) 561 final, p. 89. 507 European Commission, COM (2010) 660, p. 52. 508 The Republic of Croatia, 2003, Article 109. 509 European Commission, COM (2005) 561 final, p. 89. 505

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entered into force on 1 January 2013.510 This new law improves the consistency of the provisions concerning terrorist offences.511 First, the new criminal code prohibits any form of activity by terrorist groups or persons that use Croatia’s territory for terrorism related activities, for example the public insult of criminal acts of terrorism. This means the transportation of materials which can result in criminal acts of terrorism or any criminal offences.512 Secondly, the new criminal code aims both direct and preventive effects on all forms of organised crime as well as on terrorist crimes.513 The criminal code also introduces new provisions regarding counterterrorism. The first amended provisions is Article 97 that provides the changed definition of discrimination as follows: ‘whoever commits any of the following acts which may seriously harm a state or an international organisation when the purpose of such act is to intimidate a population or to compel a state or an international organisation to do or to abstain from doing any act or to seriously destabilise or destroy the fundamental constitutional, political, economic or social structures of a state or an international organisation’.514 The other amended provisions are related to the prohibition of financing terrorism (Article 98), the public provocation of terrorism (Article 99), the prohibition of recruitment for terrorism (Article 100), the prohibition for organizing trainings for terrorism (Article 101) and lastly, the prohibition of terroristic organisations (Article 102).515 Other important Croatian legislation regarding counter terrorism are the Law on the Office for Prevention and Organised Crime (2001), the Act on the Responsibility of Legal Persons for the Criminal Offences (2003) and the Law on the Prevention of Money Laundering (2004).516 Nowadays, the provisions regarding terrorism of the new criminal code are in line with the legislation of the United Nations (UN), acquis and the legal standards of the ECHR.517 Investigation and prosecution instruments in case of terrorism offences are prescribed in the Criminal Procedure Act (CPA) that will be discussed in the chapter below.

3.3.3 Criminal Procedure Act In 2002 the government of Croatia introduced an action plan called ‘Reform of Judiciary’, which was partly meant to strengthen the CPA.518 In 2006, the Croatian Ministry of Justice additionally established – in cooperation with the Austrian Ludwig Boltzmann-Institute of Human Rights – an action plan named ‘Reform of Pre-Trial Criminal Proceedings in Croatia’ between 2007 to 510

Committee of Experts on Terrorism, 2011, p. 6. Ibid. 512 Ibid., p. 2. 513 Ibid., p. 4. 514 Ibid., p. 6. 515 Ibid. 516 Ibid., p. 4. 517 Ibid. 518 Ludwig Boltzmann-institute of Human Rights, 2006, p.10. 511

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2012.519 One of the main purposes of this action plan was to recommend measures for the reform of pre-trial proceedings and to include an action plan for the implementation of these recommendations.520 The action plan includes the following four main recommendations: ‘investigations should be entrusted to the police in cooperation with public prosecutors and the concept of court investigations should be abolished altogether, redefining the role of courts in pre-trial proceedings, implementing the rights of victims and the institutional reform of the police and public prosecutor’s offices’.521 Unfortunately, the CPA of 2011 had not been translated into English at the time of writing this report. As a result of that, references to the provisions are based on the old CPA of 2009 or secondary literature and it is also impossible to compare the recommendations of the action plan of 2007-2012 with the new CPA of 2011. The new CPA was adopted in 2008 by the Croatian Parliament and came into force on 1 September 2011.522 The reasons for adopting a new CPA were to ensure the effective criminal prosecution of organised crime and corruption as well as the ‘need to adapt the European Model of a prosecutorial investigation’.523 The purpose of the CPA is prescribed in Article 1, which stipulates that ‘the Criminal Procedure Act of Croatia establishes the rules which guarantee that an innocent person shall not be convicted, and that a punishment or other criminal sanction shall be imposed on the persons who commits a criminal offence, subject to the provisions of the criminal law and in lawful proceedings before the competent court’.524 3.3.4 Investigation procedures The new CPA has decreased the duration of the investigation and the prosecution phases for organised crime and corruption cases, because of better cooperation between the police and the prosecution office. This has resulted in more prosecutions.525 With regard to investigations provisions, Article 206 of the CPA states that ‘the state attorney may order the police authorities to obtain necessary information by making inquiries and undertaking any other measures for collecting the data necessary for a decision on the opening of the investigation’.526 Furthermore, the CPA also includes measures whereby ‘under certain conditions it is legitimised to limit certain constitutional rights and freedoms of citizens for the purpose of the investigation during criminal proceedings’.527 Some of these measures are the following: ‘surveillance and interception of telephone conversations, interception, gathering and recording of electronic data, covert following and technical recording of persons and objects, the use of undercover 519

Ludwig Boltzmann-institute of Human Rights, 2006, p.2. Ibid. 521 Ibid. 522 Committee of Experts on Terrorism, 2011, p. 4. 523 Buric, 2013. 524 Croatian Parliament, 2009(B), Article 1. 525 European Commission, COM (2011) 666, p. 47. 526 Committee of Experts on Terrorism, 2011, p. 8. 527 Ibid. 520

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investigators and informers, simulated sales purchase, bribe-taking and business services and finally the controlled transport and delivery of objects related to a criminal offence.’528 The criminal offences where these measures may be enforced are prescribed in Article 334 of the CPA.529 According to an expert an outcome of the EU accession was that new criminal legislation has been adopted and implemented.530 The expert stated that the main changes in the legislation were regarding violating economic laws, international criminal law and antidiscrimination law. Furthermore, problems concerning the protection of citizens against criminal offences occur during the enforcement of the criminal legislation and in the antidiscrimination provisions, in particular.531 These problems are the consequences of the problems with the judicial system, which will be more in detail discussed in the chapter on the problems with the judicial system.

3.4 Competition Policy: Chapter 8 of the acquis Competition policy became a key area in the Treaty of the European Economic Community of 1957; the founding member states wanted to ensure a market characterised by free trade, which would allow consumers to buy a wide range of products of good quality at reasonable prices.532 European competition policy is based on three key elements: antitrust, which addresses issues like cartel formation; merger control, which deals with mergers and acquisitions that limit competition; and state aid control, which addresses competition issues caused by government subsidies.533 European competition policy makes sure that all the countries in the EU have similar rules, so that free competition is guaranteed (see Title VII, chapter 1 of the Treaty on the Functioning of the European Union, in which the basic rules are laid out).534 The objectives of the EU competition chapter consisted of three benchmarks. Firstly, Croatia had to adopt the competition rules. In addition it should also have the necessary administrative capacity to apply these rules. Furthermore, proof was needed to ensure that the rules are applied effectively.

The Croatian Competition Agency (AZTN) cannot reach the

competition objectives alone; a competitive environment is needed in which support of the government and public opinion and lawyers are essential.535 528

Committee of Experts on Terrorism, 2011, p.8. Ibid. 530 Interview 22. 531 Ibid. 532 European Commission, COM (2013) 171 final, p. 9. 533 Speech dr. Ansgar Held, 2008. 534 Title VII, Ch 1 TFEU. 535 Speech dr. Ansgar Held, 2008. 529

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When Croatia applied for EU membership in 2003, Croatia still subsidised its shipbuilding and steel industry.536 Croatia was obligated to stop subsidising these industries in order to comply with the EU membership criteria. 3.4.1 Croatian Competition Agency (AZTN) Upon entering the EU, the AZTN became a member of the European Competition Network (ECN).537 In 1997, the AZTN, an independent public authority, started with the enforcement of Croatian competition rules. The goal of the AZTN is to promote competition among all sectors of the economy and create a competitive environment for economic activities, by means of nonenforcement instruments, mainly through its relationships with other governmental entities and by increasing public awareness of the benefits of competition. This goal is based on the EU competition policy area.538 The work of the AZTN is based on the competition act, which lays down the competition rules, establishes the competition regime and regulates the powers and the internal organisation.539The first competition act was adopted in 1995 and was revised in 1997 and 1998.540 Since 2003, the AZTN has taken a pro-European approach. The recommendations of the Commission functioned as a guideline for the AZTN and judgments of the European Court of Justice (ECJ) were used to complement the competition act. The competition act was amended in 2003, 2009 and 2013.541 The amended competition act of 2009 enabled the AZTN for the first time to impose fines on companies.542 The competition act had to be brought into compliance with the acquis; the legal ground for harmonisation with the acquis was set out in the Stabilisation and Association Agreement (SAA) between the EU and Croatia in, signed in 2001. The competences of AZTN are in line with the EU criteria; they cover competition, abuses of dominance and merger control. Between 2003 and 2013, the AZTN was also in charge of state aid control. However the control over state aid was transferred to the Ministry of Economy in 2014.543 Furthermore, it is important to note that there is no consumer protection organisation 536

European Commission, COM (2013) 171 final, p. 9. Kapural, 2013, http://www.google.nl/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CDEQFjAA&url=http%3A%2F%2Fec.eu ropa.eu%2Fcompetition%2Fecn%2Fbrief%2F03_2013%2Fhr_in.pdf&ei=KSJU5KgJOS7ygOTyYKQBQ&usg=AFQjCNGdOM8emFAwed6hr43Ah5eyRF0RPQ&sig2=pt452Q4cvGV8jNt5kWQMow&bvm=bv.6 7229260,d.bGQ, last accessed on 20.04.2014. 538 Speech dr. Ansgar Held, 2008. 539 Competition Act, 2009. 540 NOVA workboard, 2013, http://novaworkboard.wordpress.com/2013/05/08/after-the-approval-of-the-newcompetition-act/, last accessed on 11.04.2014. 541 Agency for Protection of Market Competition, 2013, http://www.oecd.org/daf/competition/prosecutionandlawenforcement/26004218.pdf, last accessed on 8.05.2014. 542 Interview 35. 543 Ibid. 537

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in Croatia. AZTN remains the only organisation for consumers to request information. This is, however, not part of AZTN’s responsibilities. It is mentioned that such an organisation will probably emerge within a few years.544

3.4.2 The functioning of Croatian Competition Policy in practice Croatia has made substantial progress in the area of competition policy.545 Croatia privatised its shipyard industry and steel sector, where traditionally the government had much influence. Furthermore, the AZTN imposed significant fines on telecom companies that engaged in cartels. The possibility of receiving fines for uncompetitive behaviour has a positive influence on the economy. Furthermore, Croats became familiar with the AZTN because various newspapers started to write about fines that were given to companies.546 However, it has been mentioned in various interviews that in order to make the Croatian competition policy more effective, the Croatian mentality should be changed.547 Many Croats inherited the socialist mentality which is visible in their behaviour. Furthermore, shipyards are centuries old companies. Gradually, these shipyards became part of people’s regional identity, because whole generations of families worked in these companies. Therefore, the Croatian government postponed the implementation of reforms, because they did not want to be criticised for interfering in people’s regional identity.548

3.5 Croatian company law The rules of company law apply to the administration of a corporation. Croatian’s company law can be divided into three areas.549 The first is ‘setting up a company in Croatia’. The second is the ‘company registration procedure’ and the third is ‘concession and free zones’.550 3.5.1 Starting a company in Croatia The Croatian legal system regarding company law is similar to other legal systems. There are no restrictions on the establishment of companies by foreign investors. There are four basic types of entities regarding company law.551 Firstly, the limited liability company is a non-corporate business whose owners actively participate in the organisation’s management and are protected against personal liability for the organisation’s debts and obligations. The second type of entity 544

Interview 35. European Commission, COM (2013) 171 final, p. 9. 546 Interview 35. 547 Interviews 30; 35; 41. 548 Croatian Times, 2013, http://www.croatiantimes.com/news/Business/2013-03, last accessed on 13.04.2014. 549 UHY HB EKONOM, 2013, p. 9. 550 Ibid., p., 9. 551 UHY HB EKONOM, 2013, p. 9. 545

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is the simple limited liability company. It is comparable to the former and the same provisions shall apply, but its basic purpose is to enable both Croats and foreigners a simpler way to found a company and to boost self-employment. For example, the required legal capital to set up a simple limited liability company is just 1.5 euro.552 The third entity is the joint stock company, which is a business whose capital is held in transferable shares of stock by its joint owners. The last entity is the partnership. A partnership is a contractual relationship between two or more persons who share a business with a view to profit, each incurring liability for losses and the right to share in the profits. The partnerships can be subdivided in limited, unlimited and silent ones. In a limited partnership two or more partners are united to conduct a business, but the partners are only liable for the amount of money they invested in the business. In a limited partnership all partners may be individually and fully liable for any debts incurred by the organisation and creditors could go after the partners’ assets unrelated to the partnership business. Lastly, a silent partnership works by one investor only contributing money, while the other the idea and management. The silent partner provides capital investment and shares liability for the business’ performance and shares the profits and losses without getting involved in the management of the company. The other partner runs the company. Croatian company law also recognises business associations. Furthermore, non-EU investors can opt for a branch office or a representative office.553 It is stated that Croatia benefits from foreign companies who register in Croatia. It has been mentioned that they bring discipline, employment and fresh insight in doing business. The joint stock company and the simple limited liability company are the most common types in Croatia, because of the relatively easy registration procedures.554 3.5.2 Company registration procedure There are several stages in the process of establishing and registering a business in Croatia.555 First, the company has to check if the name is still available, the documents have to be verified by a public notary, the share capital has to be settled and the company has to be registered at the commercial court and the Central Bureau of Statistics. Furthermore, a business account has to be opened in order to transfer the initial capital to the company’s account. Lastly, the company has to register with the tax authorities.556 The minimum capital required when establishing a joint-stock company is 25 000 euro when establishing a limited liability company 2500 euro and 1.5 euro when establishing a 552

Avrio Advocati, 2013, http://www.avrioadvocati.com/news/article/croatia-simple-limited-liability-company-with-10knlegal-capital, last accessed on 15.01.2014 553 Avrio Advocati, 2013, http://www.avrioadvocati.com/news/article/croatia-simple-limited-liability-company-with-10knlegal-capital, last accessed on 15.01.2014. 554 Interview 41. 555 UHY HB EKONOM, 2013, p. 9. 556 Ibid.

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simple limited liability company. Simple limited liability companies are obliged to transfer 25 percent of their profits to statutory reserves until these reserves reach 2500 euro.557 Several documents are needed to register a company by a legal entity or individual: A registration certificate of the founding company translated by the Croatian court interpreter, the founding company’s letter, a copy of an identification document of the company representative, statement of acceptance of the appointment by authorised company representatives, authentication of the director’s signature by a public notary, an incorporation document and lastly, a company name explanation (if the company has a foreign name).558 It was mentioned to us that the registration procedure does not constitute a problem if you are well prepared. However, property law may cause a problem as in many cases it is not entirely clear which entity owns the ground. It can belong to the state, the church or another entity. This is due to the fact that land registry books have not been established in all municipalities. In the section on administrative and civil law it was explained that land registry books indicate the current and previous owner(s) of real estate. However, especially in the smaller towns on the coast they do not exist; in those places it is not entirely clear which real estate belongs to whom. This can be a burden when setting up a company in Croatia because it is difficult to know who needs to be contacted to buy a certain property.559 This is made even more difficult as foreigners cannot become owners of certain types of real estate, such as real estate that belongs to the government.560 3.5.3 Concession and free zones The Concessions Rights Act regulates the rights to concession. This act regulates that concessions may be granted for exploitation of natural resources and other forms of wealth, if such activities are within the interest of Croatia.561 An example of such activity is the installation of a high-speed mobile network. A concession may be granted for a maximum period of 99 years, because Croatia wants to give a message that concession is not ownership. For agriculture land this is 40 years, because Croatia wants to have more control over the land in order to protect its agriculture.562 Furthermore, free trade zones may be established based on a concession granted by the government. Domestic and foreign legal entities or foreign natural persons cannot found a zone, but can only be zone users. Zone users can make agreements with domestic founders of a zone and carry out activities within the zone such as to produce and to refine goods, to trade and to

557

UHY HB EKONOM, 2013, p. 9. Ibid. 559 Interview 41. 560 UHY HB EKONOM, 2013, p. 9. 561 Ibid., p. 10. 562 Interview 41. 558

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provide services. Retail trade, however, cannot be carried out in these zones. Companies can benefit from operating in free zones, because goods may be freely imported or exported and are allowed to remain within the zone for an unlimited period of time. Furthermore, no customs duties or taxes have to be paid on goods in the zone and zone users pay less profit tax.563 The provisions concerning the free zones are described in the Value Added Tax (VAT) Law and have been harmonised with provisions of the European Council Directive 2006/112 on the common system of VAT. Traders of goods and services do not have to pay taxes except in cases where goods and services will be exported outside the EU. There are currently 15 free zones established in Croatia. The concept of free zones was introduced in 1996 with the aim to develop certain regions as Croatia expected to attract international companies from EU countries and Switzerland with these zones.564 However, in reality not many international companies founded their business within these free zones. As a result, the 15 free zones do not constitute a significant share in the Croatian economy and are therefore not regarded as a success.565

3.6 The relationship between Croatian law and EU law The relationship between Croatian law and EU law is regulated in Article 145 of the Croatian constitution which states566: 1. ‘The exercise of the rights ensuing from the European Union acquis communautaire shall be made equal to the exercise of rights under Croatian law’.567 2. ‘All the legal acts and decisions accepted by the Republic of Croatia in European Union institutions shall be applied in the Republic of Croatia in accordance with the European Union acquis communautaire’.568 3. ‘Croatian courts shall protect subjective rights based on the European Union acquis communautaire’.569 4. ‘Governmental agencies, bodies of local and regional self-government and legal persons vested with public authority shall apply European Union law directly’.570 3.6.1 Direct effect and supremacy The direct effect of European law is, along with the principle of supremacy, a fundamental principle of European law. It was enshrined by the ECJ and it enables individuals to immediately

563

UHY HB EKONOM, 2013, p. 10. Ibid., p. 10. 565 Interview 41. 566 Committee on the Constitution, 2010. 567 Ibid., Art. 145 (1). 568 Committee on the Constitution, 2010, Art. 145 (2). 569 Ibid., Art. 145 (3). 570 Committee on the Constitution, 2010, Art. 145 (4). 564

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invoke European law before courts, independent of whether national law in this area exists. Supremacy of EU law means that EU law takes precedence over domestic law. The direct effect doctrine can be derived from Article 145 paragraphs 2, 3 and 4 of the Croatian constitution. Article 145 (2) is the legal norm that prescribes direct effect and supremacy of EU law over Croatian law. It does not explicitly prescribe supremacy of primary or secondary EU law over national law, but it does implicitly refer to the doctrine of supremacy as a part of the acquis. Article 145 (3) prescribes that Croatian courts have an obligation to protect subjective rights based on the acquis and acknowledges direct effect of EU law in the Croatian legal system. Furthermore Article 145 (3) prescribes administrative direct effect. Administrative authorities such as municipal authorities and other legal persons vested within public authority have the same obligation as a national court to apply the direct effect doctrine. The constitutional legal order of Croatia accepts the system of legal monism. This system holds that national and international law form parts of one and the same entity. This has a result that a rule adopted at international level can be directly applicable at national level. No special implementing procedure is therefore needed. According to Article 141 of the constitution, international treaties that have been concluded and ratified in accordance with the constitution, published in the Croatian Official Gazette and which have entered into force shall be a component of the domestic legal order and shall have supremacy over domestic law. Only the Constitutional Court can review the conformity of a national law with the constitution. Article 37 (1) of the Constitutional Act on the Constitutional Court of the Republic of Croatia states that if a national court in its proceedings determines that the law is not in accordance with the constitution it shall stop the proceedings and present a request with the Constitutional Court to review the constitutionality of the law. In practice, this occurs rarely.571 After Croatia became an EU member the legal Simmenthal doctrine had to be applied. According to this doctrine, ordinary courts must enforce directly applicable EU law and, if necessary, set aside inconsistent national law. National Croatian courts had to get accustomed to this new obligation.572 Since international treaties have primacy over domestic acts, they enjoy a ‘supralegislative status’.573 However, in relation to the national constitution they have a ‘subconstitutional status’, which means they have the same legal status. The correspondence of EU law with the national constitution is reviewed indirectly either by reviewing the constitutionality of national acts or reviewing other regulations that were implemented by EU

571

Ofak, 2012, p. 2. Ibid., p. 3. 573 Ibid., p. 4. 572

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law.574 3.6.2 Direct effect and supremacy of EU law in practice It was mentioned in several interviews that many Croatian judges are not aware of the direct applicability of EU law.575 This is partly due to shortcomings in their university education. They have to follow additional courses as they did not learn European Law during their time in university. Regarding directives the direct applicability does not constitute a big problem; they have been harmonised from the beginning of 2003. However, the case law of the ECJ does constitute a problem. Many judges are not used to the system. Lawyers are better informed and they point to certain ECJ cases if judges are not aware of them. On the other hand, judges are well aware of the judgements of the European Court of Human Rights (ECtHR), because Croatia ratified the ECHR already in 1997 and judges are used to work with this treaty.

3.7 Conclusion The Constitution of the Republic of Croatia has set out the legal framework for its politicians and citizens to use. However, a difference became apparent in the field as not everything worked as it is stated in the constitution. The Croatian constitution provides for a semi-presidential democracy with full respect for the rule of law, human rights and respect for and protection of minorities. However, in practice these criteria are not perfectly fulfilled. This is especially the case for the rule of law, human rights and respect for and protection of minorities, which will be elaborated in more detail in the next chapter. An important part of this report on Croatia is the way the administrative and civil procedures function. Although many acts on Croatian administrative law have been amended, Croatian administrative law still does not function properly. This has a negative influence on a lot of areas in Croatian society such as good governance, the rule of law, human rights, the judicial system and other branches of Croatian law such as company law as well as a negative influence on successfully implementing the economic EU rules. The backlog and length of court cases in civil and administrative court proceedings constitute a serious problem because they violate the rights of citizens. In addition, the civil and administrative court proceeding system is too complex and therefore not completely accessible for Croatian citizens. Furthermore, it has been demonstrated that accessibility is inadequate as low-income households. For instance, the lawyers ask relatively high fees and there is no efficient

supervision

of

the

public

authorities

to

improve

this

situation.

In the field of competition law, Croatia has made substantial progress. Since 2009, the 574 575

Ofak, 2012, p. 3. Interview 1; 41.

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AZTN has the authority to impose fines on companies, which had a positive influence on the enforcement of Croatian competition law. Furthermore, Croatia privatised its shipyard industry and its steel sector. However, to make the Croatian competition policy more effective, the Croatian mind-set should be changed, because many Croats are used to the socialistic system and therefore not used to privatisation, which is illustrated by the fact that the Croatian shipyards were privatised just before accession.

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4. Human Rights in Croatia One of the key focusses for EU accession was implementing Chapter 23 that consists of the judicial and fundamental rights, with a special focus on the situation of national minorities in Croatia. This chapter, therefore, aims to give a brief overview of the human rights situation in Croatia and especially the situation of ethnic minorities, esbian, gay, bisexual and transgender persons (LGBT) and women in Croatia. Moreover, some judgments of the ECtHR concerning the right of fair trial in Croatia will be discussed. And finally, it is important to address the problems with the functioning of the judicial system in Croatia, because these problems have an negative influence on the human rights protection of all citizens in Croatia.

4.1 Croatia’s human rights provisions in compliance with EU requirements For its accession to the EU, Croatia had to implement the political criteria as laid down in the Copenhagen European Council in June 1993. The Copenhagen Criteria prescribe ‘that these countries must have achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities’.576 In 2001 Croatia signed the SAA and committed itself to harmonising its legislation to the EU legislation and the fundamental rights.577 In particular, for the accession into EU Croatia had to implement the acquis, Chapter 23 is important in the light of human rights as it concerns the judicial and fundamental rights. Besides Chapter 23, Croatia and the EU also agreed on the following key priorities: 

‘To implement the Constitutional Act on the Rights of National Minorities (CARNM), with particular attention to its provisions guaranteeing proportional representation of minorities in employment’.



‘Encourage a spirit of tolerance regarding the Serb and Roma minorities and take measures to protect persons belonging to minorities who may be subject to threats or acts of discrimination, hostility or violence’.



‘Continue to implement the strategy and action plan for the protection and integration of Roma and ensure availability of the necessary means, especially with regard to employment, education and housing’.



‘Adopt and implement a comprehensive anti-discrimination strategy’.578

A number of Croatian laws have been amended to meet the requirements of the chapter and its

576

European Commission, COM (2005) 561 final, p.10. GRGIĆ et. al, 2009, p. 15. 578 European Commission, COM(2007) 658 final, p. 6. 577

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key priorities. First, Croatia implemented acts on human rights and the fundamental freedoms of the Croatian citizens in Chapter 2 and 3 of the Constitution of the Republic of Croatia. Secondly, Croatia also had to harmonise its anti-discrimination legislation with the European standards of anti-discrimination legislation.579 Therefore, it was necessary for Croatia to improve Croatia’s anti-discrimination framework.580 The chapters below will discuss the current anti-discrimination framework that consists of the anti-discrimination provisions in the criminal code and the Anti-Discrimination Act of 2008 (ADA). 4.1.2 Anti-discrimination framework Between 2004 and Croatia’s EU accession, the Commission addressed three main problems with regard to the Croatian anti-discrimination framework. First, the Commission reported in 2005 and 2009 that ‘in practice the level of protection of citizens against discrimination and the implementation of the principle of equal treatment of persons on ground of racial or ethnic origin was still not in line with the EU standards’.581 Ethnic minorities and LGBT582 persons faced many violations of human rights through discrimination.583 Secondly, ‘the judicial prosecution with regard to discrimination acts was still not in line with the European legislation’.584 And lastly, ‘with regard to the scope of anti-discrimination legislation gaps still remained’.585 4.1.3 The prohibition of discrimination in the Criminal Code The criminal code has been amended between 2004 and 2013 to cover the prohibition of offences based on discrimination.586 Subsequently, in a report of 2012 the Commission assessed that the criminal code had to be expanded to cover the prohibition of racism and xenophobia offences.587 Therefore, amendments to the criminal code were adopted in order ‘to come in line with the acquis to prohibit all forms of expressions of racism and xenophobia’.588 For example, two amended provisions are Article 174 that defines ‘the prohibition of hate crime and the prohibition of racial and other discrimination’ and in Article 106 is the violation of the equality of Croatian citizen prescribed as a criminal offence.589 Furthermore, Croatia adopted a new ‘Act on Misdemeanours against Public Order and Peace that will introduce the misdemeanour of violations against public peace and order on the ground of 579

European Commission, COM (2005) 561 final. European Commission, COM (2007) 658 final. p. 27 581 European Commission, COM (2005) 561 final, p.19. 582 LGTB refers to lesbian, gay, bisexual and transgender persons. 583 European Commission, COM (2005) 561 final, p. 19. 584 European Commission, COM (2009) 533, p. 9. 585 European Commission, COM (2005) 561 final, p. 19. 586 Ibid., p. 19. 587 European Commission, COM (2005) 561 final, p. 9. 588 Ibid. 589 ECR, 2012, p. 7; GRGIĆ et. al, 2009 p. 12. 580

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racial, ethnic, religious and other grounds in 2013’.590 At the same time Croatia had intensified the investigation trainings of hate crimes for police officers.591 These measures are intended to contribute to a more effective protection of Croatian citizen against discrimination offences. Apart from the improvement of the criminal code, the Commission emphasised that the civil anti-discrimination legislation also needed to be improved.592 Therefore, the Croatian Parliament established a new Anti-Discrimination Act in 2008.593 4.1.4 The new anti-discrimination act The prohibition of discrimination is expanded by provisions of the ADA designed to eliminate discrimination in Croatia.594 In order to reduce discrimination, new provisions have been installed in the ADA. First, the ADA expands the scope of discrimination grounds in accordance with the international treaties and European legislation.595 Article 1 (1) of the ADA defines the following grounds of discrimination: ‘race or ethnic affiliation or colour, gender, language, religion, political or other belief, national or social origin, property, trade union membership, education, social status, marital or family status, age, health condition, disability, genetic heritage, gender identity and expression and sexual orientation.’596 Secondly, the ADA defines actions deemed to be discrimination and all forms of discrimination in Article 1.597 According to Article 1 (2) of the ADA, discrimination occurs by ‘placing any person, or a person related to that person by kinship or other relationship, in a less favourable position on the grounds’ stated in paragraph 2 of this Article.598 Thirdly, Article 1 (3) states that ‘placing a person in a less favourable position based on a misconception of the existence of the grounds referred to in the Article’s first paragraph is also considered to be discrimination’.599 Fourthly, the burden of proof has been introduced in the ADA.600 The burden of proof is prescribed in Article 20 that says: if the complainant convinces the court that he or she has been discriminated on the basis of her/his belonging to a certain groups, the burden of proof shifts to the defendant. 601 Finally, the ADA also explicitly refers to the Croatian ombudsperson responsible for the elimination of discrimination, which resulted in the increase of the ombudsperson’s scope of work.602 The

590

European Commission, COM (2013) 171 final, p. 9. Ibid., p. 7. 592 European Commission, COM (2005) 561 final, p. 19. 593 GRGIĆ et.al., 2009, p.18. 594 Ibid., p. 17. 595 Ibid., p. 16. 596 Ibid., p. 24. 597 Ibid., p. 16. 598 Ibid., p. 28. 599 Ibid., p. 24. 600 Ibid., p. 16. 601 Ibid., p. 153. 602 Ibid., p. 16. 591

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tasks of the Croatian ombudsperson are prescribed in Articles 10 to 12 of the ADA.603 Although the legislation seems to be in line with the EU standards604, there are some problems. There seems to be a consensus among experts that one of the problems can be found in the inadequate interpretation and implementation of the discrimination provisions by the judges.605 Furthermore, it is argued that a number of cases have been dismissed because there was no intention in the discrimination.606 This could indicate that the judicial system does not perceive discrimination as a serious crime.607 Finally, one expert stated that there is still no effective legal mechanism for the fight against xenophobia and racism, which affects the protection of national minorities in Croatia.608

4.2 The situation of ethnic minorities in Croatia There are conflicting ideas on the situation of human rights in Croatia. In a 2013 report, the Commission stated that human rights are in general well-respected in Croatian society.609 However, Amnesty International and experts in the field addressed the fact that minorities, in particular Roma and Serbs, faced discrimination or violence on the ground of their ethnicity.610 Minorities in Croatia are protected by the equality principle stated in the Constitution of the Republic of Croatia. The fundamental equality right is provided by Article 15, which prescribes ‘that all members of all nations and minorities have equal rights and shall be guaranteed freedom to express their national identity, freedom to use their language and script, and cultural autonomy’.611 Therefore, as mentioned above, key priorities for Croatia were the improvement of the protection of national minorities against discrimination. According to the Commission reports (and confirmed by legal experts) the first step in order to improve the situation of minorities was the implementation of the CARNM between 2002 and 2008.612 4.2.1 The Constitutional Act on the Rights of National Minorities On 13 December 2002 the CARNM was approved by the Croatian Parliament. The law came into force on 23 December 2002.613 Article 3 provides the protection of the freedoms and rights of national minorities.614 In addition, this is the first act that has included a definition of national minorities. According to Article 5 CARNM, national minorities are ‘a group of Croatian citizens 603

GRGIĆ et. al, 2009, p. 89. European Commission, COM (2013) 171 final, p. 10. 605 Interview 3; 22; 34; 46. 606 Interview 22. 607 Interview 22. 608 Interview 32. 609 European Commission, COM (2013) 171 final, p. 9. 610 European Commission, COM (2005) 561 final, p. 19; Amnesty International, 2013, p. 73; Interview 3; 14. 611 Committee on the Constitution, 2010, Article 15. 612 European Commission, COM (2013) 171 final, p. 9; Interview 3. 613 ERRC, (2003), http://www.errc.org/article/croatia-adopts-new-minorities-law/1443, last accessed on 7.02. 2014. 614 Croatian Parliament, 2002, Article 3. 604

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whose members traditionally live in the territory of Croatia and whose members have ethnic, linguistic, cultural and/or religious features different from other citizens’.615 Moreover, Article 4 (4) of the CARNM provides the prohibition of discrimination of any national minority and that members of national minorities must be equally treated based on the law and in legal protection.616 In spite of the protection guaranteed in the CARNM and ADA numerous problems remain: weakness of human rights institutions, the under-representation of ethnic minorities in public administration and the problems with the judicial system in terms of efficiency and independency, which will be described in the section on the problems with the judicial system. 4.2.2 Strengthening human rights institutions The Croatian People’s Ombudsperson deals with the protection of the human rights of Croatian citizens and in particular with the protection of minorities in Croatia.617 There is one general Croatian ombudsperson, named the Croatian People’s Ombudsperson, who covers all human rights fields and there are specialised ombudspersons that cover gender equality, children rights and rights of persons with disabilities.618 The Commission emphasised in its final report of 2013 that ‘The Croatian People’s Ombudsperson and specialised ombudspersons play an important role in human rights protection’ and it is important that the Ombudspersons recommendations must be adopted.619 In order to ensure the protection of national minorities the Commission emphasised that the ombudspersons offices needed to be strengthened, which has since been done according to interviewees.620 Experts in the field stated that they have received more complaints from citizens as a result of increased awareness of their rights.621 Furthermore, there seems to be different views between national experts concerning the collaboration between the government and the NGOs.622 One interviewee stated that the government is working together with NGOs in Croatia.623 This is contested by the Croatian NGOs that have declared that they are not working together with the Croatian government and do not get funds from the government to improve the protection of minorities.624 It has been argued that NGOs have to apply for projects in order to receive funding and most often they receive funds from international programmes.625 Nevertheless, human rights NGOs are very present in

615

Croatian Parliament, 2002, Article 5 . Ibid., Article 4. 617 Croatian Ombudsman, 2009 (A); Interview 3. 618 Croatian Ombudsman, 2009 (A). 619 European Commission, COM(2013) 171 final, p. 9. 620 European Commission, COM(2013) 171 final, p. 9; interview 3; 34. 621 Interview 3. 622 Interview 14; 31. 623 Interview 14. 624 Interview 14; 46. 625 Interview 14. 616

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the public media and collaborate with each other in campaigns.626 4.2.3 Under-representation of ethnic minorities in state administration and judiciary bodies According to a Commission report, in 2012, ‘the level of employment of minorities in the state administration and judiciary still remained below the requirements as demanded by the CARNM’.627 Furthermore, The European Council against Racism and Intolerance (ECRI) recommended in its report of 2012 that the Croatian authorities need to take measures ‘to increase the recruitment of ethnic Serbs in the public sector employment and in particular the police’.628 Furthermore, the ECRI stated that situation of the under-representation of national minorities in the judiciary is even worse.629 This was confirmed by experts in the field, who stated that although improvements have been made on national level, the under-representation of ethnic minorities remains a problem on a local level.630 One of the reasons could be found in the long process of reorganising the judicial system, see also the section on the problems with the judicial system of Croatia.631 4.2.4 Serbian returnees The Serb National Council published a report on Serbs in Croatia that shows how many Serbs lived in Croatia. A sharp decline as a result of the 1990s Wars can be seen between 1991 and 2001. In 1991, 581 633 Serbs lived in Croatia, out of a total population of 4 478 265. This constitutes 12.2 percent of the population. In 2001, the number of Serbs living in Croatia was 201 631 out of a total population of 4 437 460. This constitutes 4.5. percent of the population. In 2011, 186 633 Serbs lived in Croatia, out of a total population of 4 428 889. This constitutes 4.4 percent of the population.632 Many of these Serbs are said to have only a temporary citizen status, as they only have temporary ID documents.633 Different issues with the position of Serbian citizens and in particular Serbian refugees remain a problem.634 According to reports of the Commission, the Croatian ombudsperson, and Amnesty International Serbian returnees continue to face discrimination, especially in the fields of housing and employment.635 Some of these problems have been confirmed by an interviewee.636 Firstly, Serbian refugees still have to receive pensions from before and during 626

Interview 3; 14; 46. European Commission, COM (2012) 601 final, p. 11. 628 ECRI, 2012, p. 32. 629 ECRI, 2012, p. 22. 630 Interview 3; 14; 31. 631 Interview 3. 632 Serb National Council, 2014, p. 4. 633 YUCOM; CMS, 2014, p. 9. 634 European Commission, COM (2012) 601 final, p. 11; Interview 3; 14; 31. 635 European Commission, COM (2012) 601 final, p. 8; Interview 3; 31; 34. 636 Interview 31. 627

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the war which have not been paid by the Croatian government.637 The Law on Convalidation is implemented in order to resolve the problems of the Serbian returnees, for example the convalidation of pensions. According to a report 24 330 claims for convalidation of working years were fixed and 1 304 claims are undecided. Furthermore, 571 claims of the convalidation of pensions are fixed and 29 percent are still undecided.638 Secondly, the loss of houses during the war. More than 60 percent of the houses have been destroyed, 195 000 houses were damaged and about 200 settlements are still without electricity.639 Thirdly, thousands of Serbs are waiting for new houses or compensation of their loss of tenancy and property rights during the 1990s Wars.640 Before the war, many Serbs were living in apartments owned by the Croatian government, the ‘socially owned apartments’.641 This was the so-called ‘right of tenancy’ and it was their property.642 During the war the government decided to sell the houses to Bosnian returnees and therefore these formerly evicted Serbs are unable to return to their houses.643 According to the Commission 148 000 houses have been rebuilt since 1995 and around 106 cases are still waiting for a housing solution.644 And the last problem that is argued, is the reconstruction of the areas where the returnees returned in Croatia, for example the access to electricity and the poor infrastructure.645 There is a discrepancy in the opinion between experts with regard to the situation of the Serbian returnees in Croatia. To resolve the problems of the destroyed houses and places it has been argued that the Croatian Parliament has adopted several measures, namely the reconstructing houses of the war, the reconstruction of water supplies, roads and social institutions like schools, kindergartens and ministerial offices.646 Furthermore, it has been argued that the Croatian Parliament attempts to improve the process of institution building, recognition, financial and programme support of national minorities’ institutions.647 However, one interviewee indicates three main problems with regard to the Serbian refugees in Croatia:648 First, the Croatian government does not build enough houses for the returnees and the bureaucratic system delays the return of many Serbs to Croatia.649 Secondly, there is the problem of the interpretation of the anti-discrimination law and CARNM by local officials and

637

Interview 31. ECRI, 2012, p. 30. 639 ECRI, 2012, p. 28; Interview 31. 640 Human Right Watch, 2006, p. 4; Interview 31. 641 Human Right Watch, 2006, p. 4. 642 Ibid., p. 4. 643 Interview 31. 644 European Commission, COM (2012) 601 final, p. 11; ECRI, 2012, p. 28. 645 Human Right Watch, 2006, p. 26; Interview 31. 646 ECRI, 2012, p. 7; Interview 31. 647 Interview 31. 648 Interview 3. 649 Interview 3; 14. 638

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the judicial system.650 Thirdly, the integration of Serbian refugees in the Croatian society is inadequate.651 The Sarajevo Declaration, which aims to find solutions for refugees and displaced persons on the territory of the former Yugoslavia, also mentions the issue with the Serbian returnees in Croatia. In line with Annex 7 of the Act of Accession, Croatia is required to ‘complete the repossession of houses and improve the climate of reintegration of returnees’. 652 The Accession Partnership between the EU and Croatia required the refugee return issue to be ‘a short-term priority’.653 4.2.5 The Croatian Anti-Cyrillic Referendum According to some experts in the field, the protection of national minorities has been violated by two right-wing campaigns after the establishment of the new Croatian government in 2010.654 The first campaign was held by the representatives of the Catholic Church in December 2013 proposing to change the marriage provision of the Croatian constitution.655 The second campaign was started exclusively against the Serbian community in Croatia. On 17 November 2013 war veterans arranged themselves in a ‘Committee for the Defence of Croatian Vukovar’ and launched a campaign against the use of Cyrillic script. With this campaign they aimed for a referendum, proposing that ‘minority language rights should apply only where at least half of the population is from an ethnic minority, instead of a third stated in Article 12 of the CARNM’.656 The Anti-Cyrillic campaign was started as a reaction to the installation of new signs in Latin and Cyrillic script in Vukovar, it can be seen as a demonstration of war volunteers against the Croatian Parliament, the constitution and all other relevant institutions.657 The Committee managed to get 600 000 votes for the referendum. One interviewee stated that the referendum would not be legitimate, because the referendum can be seen as a violation of the human rights as stated in the acquis and the Constitution of Croatia.658 According to experts in the field this proposal would violate the Serbian language rights because the Serbian community of Vukovar contains one third of the population of Vukovar.659 650

Interview 3. Ibid. 652 Sarjevo Process, 2012, p.3. 653 Ibid, p.3. 654 Interview 3; 14; 31; 34; 46. 655 Interview 14; 31. 656 Ivanovic, 2013, http://www.balkaninsight.com/en/article/announced-success-of-the-anti-cyrillic-petition last accessed on 16.02.2014; Interview 3; 4; 14; 22; 31. 657 Interview 3; 4; 14; 22; 31. 658 LSE, http://blogs.lse.ac.uk/europpblog/2014/03/12/five-minutes-with-zoran-milanovic-prime-minister-of-croatia-areferendum-against-minority-rights-is-not-going-to-happen-we-shall-oppose-it-by-all-legal-means/, last accessed on 20.05.2014; Interview 32. 659 Minorities Rights Group International, http://www.minorityrights.org/12252/press-releases/antiminority-referendumin-croatia-to-go-to-the-constitutional-court-for-review.html, last accessed on 13.05.2014; Interview 31. 651

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It is argued that the Anti-Cyrillic campaign illustrates the tense relation between Croatian and Serbian citizens in Croatia, in particular in Vukovar.660 It is mentioned that the hate and intolerance is used by veterans to gain power in Croatia.661 The Croatian government attempts to improve the situation in Vukovar in order to bring peace and tolerance between communities.662 However, it has been argued that the government should invest more in Vukovar to improve the situation, for example to ensure the representation of national minorities in the police and to organise public debates, where people can talk about the past.663 4.2.6 Roma According to the Croatian Bureau of Statistics (CBS), there are 9 463 Roma living in Croatia, however sources indicate that in reality the number of Roma is much higher.664 Similar to the progress reports of the Commission, the Croatian ombudsperson emphasises that Roma still face discrimination in Croatia, especially in housing, employment, education and access to goods and services.665 Furthermore, Roma still face problems in obtaining their residence and citizenship status in Croatia.666 Roma that have no official legal status cannot have access to free legal aid.667

Experts in the field stated that the situation has improved on the national level,

but that Roma face discrimination on a local level.668 Croatia adopted a National Strategy for Roma Inclusion for 2012-2020.669 However, it is argued that due to the economic crisis the budget for positive action programmes for Roma has been cut.670 The economic crisis affects the more marginalised groups and hinders the positive action plans to improve the rights of Roma minority in Croatia.671

4.3 LGBT persons in Croatia In the beginning of the accession period the Commission did not mention the situation of LGBT persons in its progress reports. In a progress report of 2009, the Commission for the first time forced the development of new anti-discrimination law and in particular hate crime legislation to protect the fundamental rights of LGBT persons.672 In 2012, the Commission and Amnesty International concluded ‘that LGBT people still face threats and attacks and that the legal framework for free legal aid needs to be improved to enable better access to legal aid and to 660

Interview 14; 31. Ibid. 662 Ibid. 663 ECRI, 2012, p. 27; Interview 3; 14. 664 Croatian Bureau of Statistics, 2013 (A). 665 Croatian Ombudsman, 2009(A) p. 8; European Commission, COM(2012) 601 final, p. 4. 666 ECRI, 2012, p. 10. 667 Croatian Ombudsman, 2009(A) p. 3; ECRI, 2012, p. 7 668 Interview 3; 14. 669 European Commission, COM(2013) 171 final, p. 9; Interview 3. 670 Interview 3; 14. 671 Ibid. 672 European Commission, COM (2009) 533, p. 14. 661

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foster the role of NGOs as legal providers’.673 However, it has been argued that during the EU accession period the legal framework for the protection of LGBT persons has been improved due to the implementation of Chapter 23.674 4.3.1 Legal protection In terms of legal protection of LGBT persons there are two legal systems that prohibit discrimination based on sexual orientation in Croatia.675 First, Article 89 of the criminal code prohibits hate crime based on sexual orientation.676 Secondly, the ADA also prohibits discrimination based on sexual orientation, gender identity and gender expression.677 Thirdly, the Gender Equality Act provides the prohibition of discrimination on the basis of someone’s marital status and sexual orientation.678 Lastly, a new Law on Life-Partnership is currently subject to a first and second reading by the Croatian government and parliament.679 4.3.2 The situation of LGBT persons in Croatia Despite the improvements in the legal protection of LGBT persons Amnesty International claimed in a report of 2012 that, although improvements were made, ‘shortcomings exist in the investigation and prosecution of hate crimes and that intolerance and prejudices against LGBT persons have not been effectively tackled by the state authorities’.680 One of the interviewees stated that these problems occur more in rural counties than in the cities.681 Moreover, according to experts in the field there are three main problems with the protection of LGBT persons in Croatia.682 Experts in the field illustrate that the first main problem is the ability of judges to adequately implement the anti-discrimination provisions in case of sexual orientation.683 However, this problem can also be found in the protection of all minorities in Croatia and therefore will be discussed more in detail in the section on the problems with the judicial system. In comparison, it is argued that more improvement has been made regarding criminal cases because hate crime based on sexual orientation is implemented in the criminal code and judges specialised in criminal law are more competent in dealing with discrimination than civil law judges.684 The second problem is that LGBT persons often do not

673

European Commission, COM(2012) 601 final, p. 12; Ombudsperson for Gender Equality, 2012, p. 64. Interview 34; 46. 675 Interview 46. 676 Juras, 2009, p. 17; GRGIĆ et. al, 2009, p. 20. 677 Interview 46. 678 Juras, 2009, p. 5. 679 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; Interview 34. 680 Amnesty International, 2012. 681 Interview 34; 46. 682 Interview 46. 683 Interview 34; 46. 684 Interview 34; 46. 674

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file a complaint of discrimination at the court.685 According to a study this is because they have no confidence in the Croatian legal system, especially in the police.686 This seems to be in line with a statement of the Commission that there are still a small number of discrimination complaints and judicial proceedings started in case of sex and sexual orientation.687 With regard to the third problem, concerning the possibility for NGOs to start and intervene in judicial proceedings, a discrepancy between the views of interviewees can be seen.688 It is argued that although NGOs invest much to start judicial proceedings, it is still difficult to start judicial proceedings.689 Nevertheless, the number of proceedings for discrimination based on sexual orientation has increased due to the fact that LGBT NGOs have good policies and instruments to start judicial proceedings.690 This is illustrated by NGOs that work together with legal offices and lawyers to start judicial proceedings if discrimination occurs and give legal support to LGBT persons.691 Finally, because of the good policy and effective legal instruments of NGOs the situation of LGBT persons has been improved.692 The EU accession period also changed the visibility of LGBT rights in Croatia. NGOs used the EU requirements to raise the awareness of politicians about LGBT issues and the situation of LGBT persons.693 This also became clear during a referendum in 2013, which proposed to change the definition of marriage in a provision of the constitution.694 4.3.3 Constitutional referendum on the definition of marriage As a result of a heated public debate about a constitutional amendment that would define marriage as a union between ‘a man and a woman’ a national referendum was held in Croatia on 1 December 2013.695 The outcome of the referendum was that 65.87 percent voted in favour for a marriage constitutionally defined as ‘a union between a man and a woman’, while 33.51 percent voted against this.696 The referendum was officially organised by the citizens group ‘In the Name of the Family’ because the group collected 683 948 voters and that is more than the

685

Interview 34. Juras, 2009, p. 3. 687 European Commission, SEC (2011) 1200 final, p. 11. 688 Interview 34; 46. 689 Interview 34; 46. 690 Ombudsperson for Gender Equality, 2013, p. 21; interview 34; 46. 691 Interview 34; 46. 692 Ibid. 693 Interview 34; 46. 694 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004. 695 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; Horvat, http://www.theguardian.com/commentisfree/2013/dec/04/croatia-gay-marriage-vote-europe-rotten-heart, last accessed on 19.05.2014. 696 APIS IT d.o.o., http://www.izbori.hr/2013Referendum/rezult/rezultati.html, last accessed on 19.05.2014. 686

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requested 10 percent of the total number of voters in Croatia to hold a referendum.697 However, it has been argued that the referendum was also supported by the HDZ, church-affiliated organisations, war veterans groups and various social-conservative affiliations.698 Experts in the field stated that the campaign of the Catholic Church was very explicit and quite dangerous from the perspective of LGBT persons.699 Although 65.87 percent voted in favour for this new definition of marriage in the referendum, only 37.90 percent of the Croatian population had decided to vote.700 It has been argued that this was the lowest participation rate in any national elections and referendum in Croatian so far.701 Experts in the field suggest that the low participation rate is a result of the declining influence of the Catholic Church in Croatia.702 One interviewee assumed that it was more the social pressure than the religion that persons voted yes for defining marriage as a union between a man and a woman.703 Furthermore, it has to be mentioned that during the referendum the media for the first time openly opted a side, declared to be against the referendum and that people should vote no.704 Experts in the field mention that there is also another reason for the referendum. According to them it was also a statement against the ruling centre-left coalition of the government.705 They emphasised that the referendum is a clear illustration of the rise of rightwing parties that are organising campaigns to violate human rights in Croatia.706 4.3.4 Impact of the referendum Experts specialised in human rights illustrated the referendum as an example of the situation of LGBT persons and human rights situation in Croatia.707 Moreover, they all agreed that the referendum had a great impact. However, they differ on the negative and positive consequences of the referendum. To begin with, it has been argued that the most negative outcome of the referendum is that it will be difficult for LGBT persons to marry in Croatia and they feel that this

697

Constitutional Court of the Republic of Croatia, 2013. Interview 31. 699 Interview 3; 34; 46. 700 APIS IT d.o.o., http://www.izbori.hr/2013Referendum/rezult/rezultati.html, last accessed on 19.05.2014. 701 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; Interview 46. 702 Interview 46. 703 Ibid. 704 Interview 4. 705 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; Interview 14; 34. 706 Interview 3; 14; 31; 34; 46. 707 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; Interview 3; 14; 31; 34; 46. 698

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is a violation of the rights of LGBT persons.708 Furthermore, according to an interviewee, persons who are against LGBT people have received more power to discriminate LGBT persons.709 Despite the negative impact, the referendum also showed two positive influences. 710 First, it is argued that the referendum had an opposite effect as it mobilised many people of the Croatian society that supported LGBT equality.711 Before the referendum not many people paid attention to LGBT rights. The referendum has increased the people’s awareness of the problems that LGBT persons are facing and it has encouraged them to become activists.712 Secondly, the referendum stimulated the adoption of a new legislative framework with regard to same-sex partnership.713 According to some during the referendum the public discussion of the Croatian government’s proposal for the Law on Life-partnership took place.714 The Law on Lifepartnership will make same-sex partnership equal to marriage and adoption.715 Currently, the new law must be approved by the Croatian Parliament in the first reading. After the first reading the Croatian government will decide on parliamentary amendments and proposals and then will adopt the final text of the law.716 The national experts state that the final vote of the proposal will show whether the protection of LGBT rights really will be improved.717 4.3.5 The role of institutions during the referendum The referendum illustrates the problems between the institutions in Croatia, as they seem to be unaware of each other’s competences.718 It has been stated by the interviewees that the Croatian institutions have blamed each other for their responsibilities during the referendum.719 Some argued that the Croatian Parliament had the right to ask the Constitutional Court whether the initiative was in accordance with the provisions of the Croatian constitution, but that the Croatian Parliament refused to challenge this.720 On the other hand, one interviewee mentioned 708

Interviews 3; 14; 31; 34; 46. Interview 3. 710 Interview 34; 46. 711 Ibid. 712 Interview 34. 713 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; interview 32; 34; 46. 714 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; interview 36. 715 LSE, http://blogs.lse.ac.uk/europpblog/2014/03/12/five-minutes-with-zoran-milanovic-prime-minister-of-croatia-areferendum-against-minority-rights-is-not-going-to-happen-we-shall-oppose-it-by-all-legal-means/, last accessed on 20.05.2014 716 Ibid. 717 Interview 34. 718 Interview 3; 31; 46. 719 Ibid. 720 Zagreb Pride, 2014, http://www.zagrebpride.net/web/index.php?option=com_content&view=frontpage&Itemid=78&lang=hr, last accessed on 27.02.2004; Interview 3; 46. 709

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that the Constitutional Court did not respond adequately.721 Despite the discussion about responsibility, the Constitutional Court published a communication regarding the legitimacy of the referendum and also gave two warnings to the public.722 First, the Constitutional Court stated that only the Constitutional Court has the authority to decide whether a referendum is in accordance with the constitutional law.723 This is prescribed in Article 95 of the constitution.724 Secondly, the Constitutional Court discussed whether the proposed amended provision on the definition of marriage was against the ECHR and the Charter of Fundamental Rights of the EU.725 The citizens’ group ‘In the Name of the Family’ claimed that in order to protect the Croatian family marriage can only be a union between man and a woman and therefore the Constitutional Court of Croatia concluded that it was not directly a violation of the human rights as prescribed in the ECHR, since it concerns marriage.726 The Constitutional Court took this decision in line with the interpretation of the ECtHR in the case Schalk and Kopf v. Austria which stated ‘that the “justification” for treating same-sex and opposite sex couples differently could be a policy aim of protecting the “traditional” family and the Court accepts that this in principle is still a valid aim’.727 Nevertheless, the Constitutional Court’s opinion on the referendum was that the amended provision of the constitution ‘may not have any influence on the further development of the legal framework of common-law marriage and same-sex unions, because everyone in Croatia ‘has the right to respect and legal protection of their personal and family life and their human dignity’.728 Furthermore, the Constitutinal Court stated that this should be the last referendum concerning human rights provisions laid down in the Croatian constitution.729 Some interviewees stated that the increase of right-wing campaigns is a dangerous development for the situation of human rights in Croatia.730 The Croatian government is now trying to change the Croatian constitution in order to forbid any referendum that can change the minority and human rights of the constitution.731 However the response of the parliament to the referendum initiative is on hold.732 There is still no majority of the Croatian government that supports the

721

Interview 31. Constitutional Court of the Republic of Croatia, 2013. 723 Ibid. 724 Ibid. 725 Constitutional Court of the Republic of Croatia, 2013; Interview 3. 726 Lovista, 2014, https://insidethevatican.com/back-issues/zelja-markic-head-croatian-citizens-group-name-family, last accessed on 27.02.2014; Interview 3. 727 European Court of Human Rights, 2011, Application no: 30141/04; Scherpe, 2013, p. 92. 728 Constitutional Court of the Republic of Croatia, 2013. 729 Ibid. 730 Interview 14; 31. 731 Ivanovic, 2013, http://www.balkaninsight.com/en/article/announced-success-of-the-anti-cyrillic-petition last accessed on 16.02.2014; Interview 3; 31. 732 Interview 31. 722

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change of the referendum law.733

4.4 Gender equality in Croatia One of the main focuses for Croatia’s accession was to pursue equal rights for women and in particular the implementation of Chapter 19 of the acquis. Chapter 19 provides equal rights for women in social policy and employment.734 According to a report of the Commission in 2005, further developments for equal opportunities of women in the area of the labour market, employment and social policy were required.735 Croatia therefore attempted to improve gender equality by implementing the Gender Equality Act, which will be discussed below, and the Gender Equality Action Plans.736 Gender equality is explicitly guaranteed in Croatia’s legal framework. Firstly, on the ground of Article 3 of the Croatian Constitution, gender equality is one of the highest values in the Croatian constitutional order.737 Gender equality is furthermore mentioned in Article 14 of the constitution, which states that Croatian citizens enjoy all rights and freedoms, regardless of gender.738 Secondly, Croatia has ratified all the UN treaties, their optional protocols, and the ECHR, which includes protocols regarding gender equality.739 Furthermore, Article 1(1) of the ADA prohibits discrimination based on gender, gender identity, and gender expression.740 Thirdly, sexual assault is prohibited on the basis of Article 152 of the criminal code and criminal acts against sexual freedom are prohibited in Article 154 of the criminal code. 741 And lastly, the Gender Equality Act, which was a key priority during Croatia’s accession period, ‘regulates general bases for the protection and promotion of gender equality […], and it defines and regulates the protection against discrimination based on gender and creation of equal opportunities for women and men.’742 The Gender Equality Act had already been developed before the accession, but had yet to be implemented with required improvements in 2008.743 In 2011 the Commission reported that ‘the protection of women against violence needed to be strengthened’744 and that the position of women in the labour market was still unequal.745 Therefore, ‘a new National Policy for the Promotion of Gender Equality for the period 2011733

Ivanovic, 2013, http://www.balkaninsight.com/en/article/announced-success-of-the-anti-cyrillic-petition last accessed on 16.02.2014; Interview 14; 31; 46. 734 European Commission, COM (2005) 561 final. p. 76. 735 European Commission, COM (2005) 561 final. p. 78. 736 Ibid., p. 9. 737 Committee on the Constitution, 2010, Article 3; European Commission, (2007), p. 9. 738 Committee on the Constitution, 2010, Article 14. 739 European Commission, 2007(a), p. 9. 740 Croatian Parliament, 2008, Article 1. 741 European Institute for Gender Equality, http://eige.europa.eu/legal-definitions/croatia-sexual-assault-excl-rape, last accessed on 22.05.2014. 742 Juras, 2010, p. 5. 743 European Commission, COM (2009) 533, p. 12. 744 European Commission, SEC (2011) 1200, final, p. 11. 745 Ibid., p. 32.

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2014’ was adopted.746

4.4.1 Croatia’s Ombudsperson for Gender Equality A Croatian Ombudsperson Office for Gender Equality was established in 2004 to promote gender equality and to implement the Gender Equality Act.747 The ombudsperson investigates individual complaints and provides assistance to Croatian citizens who have complaints concerning discrimination based on gender, marital or family status, or sexual orientation.748 Furthermore, the ombudsperson publishes annual reports on the situation of gender equality in Croatia. The main focus of these reports is on the frequency of gender-based discrimination, the position of women in the labour market, and domestic violence against women (which will all be discussed below).749 4.4.2 Judicial proceedings concerning gender equality Discrimination on grounds of gender is ‘the most widespread form of discrimination in Croatian society’750, yet there is only a relatively small number of court cases regarding gender inequality.751 In 2012 the Croatian Ombudsperson dealt with 1 514 cases concerning discrimination on grounds of gender, an increase of 8.8 percent compared to 2011.752 In 58.8 percent of the cases these complaints were related to ‘employment and labour, social security, health and pension insurance’.753 In most cases (62.5 percent), it were women that complained about being discriminated against or treated unequally.754 It has been argued that the number of cases on gender discrimination is relatively low due to distrust in the judicial system, the length of the proceedings, the costs of proceedings, and the risk of revaluation by employers. Due to these costs and risks, people are unwilling to start a court case.755 The aforementioned increase in the number of court cases between 2011 and 2012 is due to two reasons. The first one is that the Gender Equality Act and ADA have been implemented. And secondly, NGOs put a lot of effort in promoting gender equality.756 Interviewees confirm that it is due to Croatia’s accession to the EU that the new Gender Equality

746

European Commission, SEC(2011) 1200 final, p. 42. European Commission, 2007(a), p. 13. 748 Ombudsperson for Gender Equality, 2013, p. 8; Interview 34. 749 Ombudsperson for Gender Equality, 2013, p. 14. 750 Ibid., p. 21 751 Ombudsperson for Gender Equality, 2013, p. 21; Interview 34. 752 Ombudsperson for Gender Equality, 2013, p. 8. 753 Ibid. p. 14. 754 Ibid. 755 Interview 34. 756 Ombudsperson for Gender Equality, 2013, p. 21. 747

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Act and ADA have been implemented and harmonised with EU legislation.757 However, indirect discrimination on grounds of gender is still not recognised in case law, because there have not been any complaints of indirect discrimination filed.758 4.4.3 The position of women in the labour market According to the Croatian ombudsperson for Gender Equality women have an unequal position in the Croatian labour market, which is worsening due to the economic crisis. The employment rates of women and pay gap of women and men in Croatia will be discussed in the section on the income and wages of Croatian citizen. The main cause for the unequal position of women is discrimination in employment and social benefits.759 According to a study of the ombudsperson all the individual complaints that the Ombudswomen received ‘were related to the discrimination in employment and labour and 42.5 percent of these were related to sexual harassment and were submitted exclusively by women’.760 In most cases the sexual harassment of women was coming from their superiors and were for example demands for a sexual relationship, messages including pleadings, threats and pictures, publications of vulgarities about the victim over the internet, touching of body parts and physical assaults as rape, physical attacks and strikes.761 Moreover, the Croatian ombudsperson for the first time held a study to the presence of discrimination in the labour market based on pregnancy.762 The most important conclusions of the ombudsperson were the following: employers violate the legal obligation towards pregnant women and women with children and women do not have trust in the effectiveness of the legal system and their protection against this form of discrimination.763 Furthermore, the ombudsperson concluded that it is necessary to raise awareness of women about their legal rights and the creation of ‘a mechanism to control the employers of their procedures towards pregnant women’.764 4.4.4 Domestic violence against women Croatia has signed the Convention by the Council of Europe aimed at ‘preventing and combating violence against women and domestic violence’.765 The Croatian ombudsperson monitors the functioning of the police, social welfare centres, and health clinics, which handle complaints

757

Interview 34. Ombudsperson for Gender Equality, 2013, p. 21; Interview 34. 759 Ombudsperson for Gender Equality, 2013, p. 16. 760 Ibid., p. 17. 761 Ibid., p. 17. 762 Ibid. 763 Ibid., p. 19. 764 Ibid. 765 Ibid., p. 22. 758

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about (domestic) violence against women.766 It has been mentioned that the Croatian police is in general very open and willing to cooperate with the Ombudsperson for Gender Equality to improve the protection of women against (domestic) violence.767 According to a study of the Croatian ombudsperson 79 percent of women in Croatia are victims of violent behaviour in a family and the perpetrators are male family members.768 In order to reduce the (domestic) violence against women, the ombudsperson gives legal advice and support to citizens in judicial proceedings.769 4.4.5 Gender Equality NGOs compared to LGBT NGOs It has been argued that Gender equality NGOs and LGBT NGOs apply different strategies to improve the situation of respectively gender equality and LGBT persons.770 One interview stated that gender equality NGOs try to reach their goal by lobbying the government and ministries. 771 On the other hand, LGBT NGOs invest more resources in starting court proceedings in order to protect LGBT persons. It has been argued that this results in a higher number of court cases concerning discrimination based on sexual orientation.772 It has also been mentioned that it is part of LGBT NGOs to create more visibility and publicity to bring more attention to judicial proceedings, for example during the constitutional referendum in 2013, which changed the constitutional provision on marriage.773 Nevertheless, it has been argued that the Croatian Ombudsperson for Gender Equality receive more requests for legal advice because its authority and influence. 774

4.5 Croatia and the European Court of Human Rights The ECtHR is a supranational court established in 1959 on the basis of Article 19 of the ECHR, and is part of the Council of Europe. The ECHR was drawn up in 1950 in line with the Universal Declaration of Human Rights (UDHR), and regulates human and civil rights for all residents of the 47 member states of the Council of Europe. At the ECtHR, individuals, groups, organisations, and countries can file complaints against one of the members. The court is based in Strasbourg and consists of 47 judges, one on behalf of every member state.775 Since 1997, when Croatia ratified the ECHR, Croatia has contributed to the ECtHR by providing a judge, registry staff, and paying membership contribution. One of the 47 ECtHR 766

Ombudsperson for Gender Equality, 2013. Interview 34. 768 Ombudsperson for Gender Equality, 2013, p. 26. 769 Ombudsperson for Gender Equality, 2013, p. 16; Interview 34. 770 Interview 34. 771 Interview 34. 772 Interview 34; 46. 773 Ibid. 774 Interview 34. 775 European Court of Human Rights, 2013, http://www.echr.coe.int/Documents/Court_in_brief_NLD.pdf, last accessed on 21-05-2014. 767

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judges is thus Croatian: the current Croatian judge is Ksenija Turković. Of the 675 registry staff members, there are six Croatian members. The registry staff provides legal and administrative support to the Court in the exercise of judicial functions; its staff consists of lawyers, administrative and technical employees, and translators. Lastly, Croatia contributed 833 842 euro in 2013 to the Council of Europe. This contribution is based on Croatia’s population and Gross Domestic Product (GDP), and contributes to the ECtHR’s budget in 2013 of approximately 67 million euro.776 4.5.1 Judgments concerning Croatia In 2012 the ECtHR dealt with 2414 cases concerning Croatia, of which 2 392 were inadmissible. The Court delivered 22 judgements; 19 of these judgements found at least one violation of the ECHR.777 In eight out of these 19 judgements, the ECtHR found a violation of Article 6 of the ECHR: the right to a fair trial.778 The right to a fair trial means that citizens can be sure that processes will be fair and certain. It prevents governments from abusing their powers. ‘The right to a fair trial is one of the cornerstones of a just society’.779 This right is found in Chapter 23 of the acquis ‘Judiciary and Fundamental Rights’ that Croatia had to implement in order to become an EU member. Three cases regarding the violation of Article 6 of the ECHR prior to Croatia’s EU accession in 2013 will be discussed. 4.5.1.1 Ajdarić v. Croatia: no verification of evidence Ajdarić is a national of Bosnia and Herzegovina and was born in 1953. He was arrested in 2005 in Croatia and placed in detention on suspicion of having committed a car theft. In 2005 he was transferred to a Prison Hospital due to illness. He shared the room with M.G., S.S., and five other prisoners. M.G. was accused for having committed three murders in Croatia in 1998. S.S. was a former policeman, who was mentally unstable and was sentenced for attempted murder. In 2006 S.S. contacted the Croatian police department with information that he overheard conversations between M.G. and Ajdarić revealing that Ajdarić was implicated in the three murders, which M.G. had been accused of. However, S.S. did not know exact places or dates. In September 2006 Ajdarić was found guilty of three murders and was sentenced to 40 years’ imprisonment, solely on the basis of the evidence given by S.S. Ajdarić was acquitted of the charges of car theft.780 Ajdarić complained about the unfairness of his conviction, as it was based on a conversation between himself and another prisoner, which was claimed to be overheard by a 776

European Court of Human Rights, http://www.echr.coe.int/Documents/CP_Croatia_ENG.pdf, last accessed on 21.05.2014, p. 1. 777 Ibid. 778 Ibid., p. 2. 779 Fair Trials International, 2013 http://www.fairtrials.org/about-us/the-right-to-a-fair-trial/, last accessed on 12.04.2014. 780 European Court of Human Rights, 2011, Application No: 20883/09.

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third mentally unstable prisoner. The ECtHR found that there had been a violation of Article 6 of the ECHR. The national courts did not verify S.S. statements and accepted them as truthful, nor did they address his medical condition.781 4.5.1.2 Lisica v. Croatia: no verification of evidence The two applicants were born in 1978 and live in Croatia. In May 2000 they were arrested by the police on suspicion of robbing a bank. During their pre-trial detention, a stolen VW vehicle found by the police and the BMW vehicle owned by one of the applicants were searched. They had been entered by two police officers to take a sample of the seat cover for examination, without a search warrant and without the knowledge or presence of both applicants. On the basis of this search, the police officers found evidence; the plastic mould found in the BMW presumably came from the broken lock of the stolen VW used for the robbery. In February 2001, the county court found the applicants guilty of bank robbery and a prison sentence was imposed on them. The court relied on the evidence of the two police officers. The two applicants complained that the manner in which the evidence was obtained during the criminal proceedings against them had been unfair. However, in May 2002 the Supreme Court dismissed the appeal of the two applicants and sentenced them to six years and six months and four years and ten months of prison, respectively.782 Again, the ECtHR held that there had been a violation of Article 6. The item of evidence that was obtained without a search warrant was the only direct link between the BMW (owned by the applicants) and the vehicle used in the robbery. This evidence had been given significant weight by national courts; and formed the basis of the conviction. However, the court should have investigated the evidence. Since it was obtained without a search warrant, the trial against the two applicants was not fair.783 4.5.1.3 Mežnarić v. Croatia: possible partiality of judges Mežnarić is a Croatian national who was born in 1954. On 10 July 1991 an action was brought against Mežnarić for breach of contract. The plaintiffs were represented by their legal counsel, M.V., for a period of two months, beginning on 27 November 1991. M.V.’s daughter took over her father’s law practice and replaced him as the plaintiffs’ counsel in a hearing held on 27 January 1992. The Croatian courts found Ivan Mežnarić guilty. Mežnarić filed a constitutional complaint, which was dismissed on 18 December 2000 by the Constitutional Court. However, the Constitutional Court consisted of judge M.V.; he was a member of the panel of five judges who delivered that decision. Mežnarić complained that he did not have a fair trial before an impartial counsel of judges, because his constitutional complaint was decided by five judges, 781

European Court of Human Rights, 2011, Application No: 20883/09. European Court of Human Rights, 2010, Application No: 20100/06. 783 Ibid. 782

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including M.V., who had represented his opponents at an earlier stage in the proceedings.784 The ECtHR held that there had been a violation of Article 6; the applicant did not have a fair hearing before an impartial tribunal due to the dual role of a judge in a single set of proceedings. That fact reinforced by the involvement of judge M.V.’s daughter who had also represented the opponents of Mežnarić, created doubts about judge M.V.’s impartiality.785 4.5.2 The current situation In these three recent cases a violation of Article 6 has been demonstrated; the applicants’ rights to a fair trial had been deprived. Without this right, the rule of law and public faith in the justice system will collapse.786 If this right cannot be guaranteed, it will constitute a big problem for the rule of law in Croatia. Following the report of the Commission in 2012,787 Croatia was ready for accession and met the accession criteria, including Chapter 23. However, many interviewees pointed to the fact that the administrative procedures of cases handled by Croatian courts are troublesome and that this hampers the right to a fair trial.788 There is a problem with structure and organisation of the judiciary. The Croatian government has to alter the legislation to improve the administrative procedures in order to guarantee the right to a fair trial. Whether Croatia will be able to guarantee the right to a fair trial remains to be seen.

4.6 The problems with the judicial system in Croatia One of the key priorities for the EU accession was the reform of the judicial system. The Commission emphasised in its progress reports that ‘further efforts were needed to strengthen the independence, accountability, impartiality and professionalism of the judiciary’.789 The Commission emphasised that the improvement of the functioning of the judiciary was one of the main challenges for Croatia790 and that ‘the inefficiency of courts, the excessive length of court proceedings, weaknesses in the selection and training of judges and difficulties with the enforcement of judgments remain’.791 However, in 2013, the Commission noticed the following improvements: a system for appointing judges and prosecutors has been introduced, the Judicial Academy continues to work properly and trainings for implementing EU law have been intensified.792 Among interviewees there seems to be a consensus that there have been improvements regarding the harmonisation

784

European Court of Human Rights, 2005, Application No: 71615/01. Ibid. 786 Fair Trials International, 2013, http://www.fairtrials.org/about-us/the-right-to-a-fair-trial/, last accessed on 12.04.2014. 787 European Commission, (COM) (2013) 171 final, p. 50. 788 Interview 1; 10; 17; 18; 24; 37; 54. 789 European Commission, COM (2013) 171 final, p. 4. 790 European Commission, COM (2005) 561 final, p. 16. 791 Ibid. 792 European Commission, COM (2013) 171 final, p. 9. 785

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and implementation of EU legislation.793 However, interviewees specialised in the Croatian legislation share a clear common view (in particular concerning discrimination of Croatian citizens); the problem is not the level of legal protection of Croatian citizens, but can be found in the judicial system.794 Specifically, experts in the field are suggesting that there are four problematic issues with the judicial system in Croatia: the education of judges, the fact that the judicial system is too independent, the non-transparency of the judiciary, and inconsistent decisions as a result of all this.795 4.6.1 Education of judges Experts in the field have stated that discrimination was not a priority issue during the accession period.796 Although the level of anti-discrimination legislation seems to be adequate in theory, in practice the way the ECtHR and other courts deal with anti-discrimination legislation is still too complicated for Croatian judges and state attorneys.797 They are not comfortable dealing with the complexity of (in)direct discrimination and the burden of proof.798 For example, with regard to the protection of LGBT persons, it has been argued that there are still problems with the implementation and the interpretation of the anti-discrimination provisions regarding sexual orientation and gender. This also applies to anti-discrimination provisions regarding Roma and Serbian minorities. According to the experts consulted, the cause of the problems can be found in the education of judges.799 They agree that judges need to be educated in implementing the anti-discrimination legislation correctly.800 4.6.2 Too independent Some interviewees mentioned that the judicial system is too independent, this means there is a lack of effective supervision on the judicial system.801 Furthermore, it has been illustrated that the Judicial Academy is reluctant to improve the education of judges to ensure that they will be more specialised in specific areas.802 The possible reasons mentioned are the socialistic heritage of the system and the long process of changing the organisation.803 One interviewee also mentioned that ‘if a judge makes a wrong decision, there are no official consequences and therefore the judges are not taking their responsibility’.804 This is in contradiction with a

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Interview 3; 14; 34; 46. Interview 3; 22; 14; 34; 46. 795 Interview 3; 14; 22; 34; 46. 796 Interview 34. 797 Interview 3; 22; 34; 46. 798 Ibid. 799 Interview 3; 14; 22; 34; 46. 800 Ibid. 801 Interview 3; 22; 34; 46. 802 Interview 3. 803 Ibid. 804 Interview 22. 794

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statement by the Commission, in its report of 2012 that ‘the Judicial Academy works well’. 805 Furthermore, it has been stated that NGOs and the ombudspersons provide seminars for judges to improve their expertise, but the training of judges is still not enough.806 The decision or advice of the Croatian ombudsperson during a judicial proceeding is not legally binding and therefore the courts will do their own investigation and make their decision. This could lead to the situation that judges make a wrong decision because of their lack of knowledge to implement the legislation correctly.807 4.6.3 Transparency According to experts in the field a further problem with regard to the judicial system can be found in the fact that the judicial system is not transparent.808 One interviewee pointed to the fact that decisions of judges are only available for the parties involved and not for the public.809 There is no database for judicial decisions and therefore the whole proceeding and decisions process is unclear. It has been suggested that in order to increase the quality of judicial decisions, it should be made mandatory for all courts in Croatia to publish their decisions for the public.810 The fact that the information of the judicial process is not available to the public makes it hard for lawyers to provide Croatian citizens with legal advice.811 4.6.4 Inconsistency of decisions The fourth main issue with the judicial system is the inconsistency of judicial decisions.812 An expert in the field states that this is a consequence of the fact that judges are not comfortable dealing with the complexity of (in)direct discrimination and the burden of proof, and of a lack of ability to interpret the provisions of the prohibition of discrimination by civil law (the ADA) and criminal law (Criminal Code and Civil Procedure Act).813 A national expert illustrated this by mentioning that in discrimination proceedings the outcome does not depend on the legal knowledge of the judge, but on the availability of the parties to convince the judges that one version is better than the other.814 This results in inconsistency of decisions and this is also one of the reasons why Croatian citizens do not to start judicial proceedings.815 4.6.5 EU accession During the accession period new legislation was implemented and harmonised with EU law. 805

European Commission, COM(2012) 601 final, p. 8. Interview 3; 34; 46. 807 Interview 3; 34; 46. 808 Interview 3; 34. 809 Interview 34; 46. 810 Interview 34. 811 Interview 34; 46. 812 Interview 34. 813 Interview 34; 46. 814 Interview 34. 815 Ibid. 806

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Experts agree that this has resulted in a strengthened legal framework and that the citizens are more aware of their rights.816 However, they also state that a decline can be seen in the implementation and monitoring process after the accession.817 Furthermore, the experts emphasised that there needs to be more focus on the enforcement of European legislation.818 Therefore, it has been argued that NGOs are continuingly trying to raise awareness to improve the ability of judges to implement the anti-discrimination legislation correctly.819 Some interviewees addressed the following solutions that could be taken in order to improve the quality of decisions: more collaboration between NGOs and the judicial system and describing the mandatory to courts to publish their decisions for the public.820 Moreover, one interviewee hoped that the decisions of the ECtHR and Court of Justice of the European Union (CJEU) could facilitate enforcement of the legislation. Furthermore, one of the consequences of the dysfunction of the judicial system is said to be that Croatian citizens have no trust in the judicial system.821 They also mentioned that the ineffective judicial system is one of the reasons why there are still only a small number of court proceedings on discrimination, because people do not file a complaint.822 Finally, all the problems with the judicial system result in a kind of vicious circle: due the lack of supervision on the judicial system the quality of the system and in particular education of judges will not improve, this results in the fact that the Croatian citizens do not have confidence in the judicial system and do not file a complaint at the court. Because of these problems the legal protection of citizens will not be improved and this violates the human rights of ethnic minorities, LGBT persons and women.

4.7 Conclusion The EU accession has improved the legal protection of the rights of ethnic minorities, LGBT persons and women in Croatia and these citizens are more aware of their rights. However, two right-wing campaigns in 2013 have shown that the protection of the human rights of Serbs and LGBT persons are still under pressure in Croatia. Moreover, the main problem concerning the legal protection Croatian citizens is the fact that in practice there is a lack of ability by judges to the correct application of the antidiscrimination legislation. It appears, that the case law of the CJEU constitutes especially a problem. Many judges are unknown to this system because they did not learn European law

816

Interview 3; 14; 22; 31; 32; 34; 46. Interview 3; 14; 46. 818 Interview 3; 22; 31; 32; 34; 46. 819 Interview 3; 32; 34; 46. 820 Interview 22. 821 Interview 14; 22; 32; 34; 46. 822 Interview 14; 22; 34; 46. 817

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during their studies/time at university. Lawyers on the other hand, are better informed and they are the ones who point to certain CJEU cases if judges are not aware of them. Other problems of the judicial system are the non-transparency of the judicial proceedings, the inconsistency of the decisions and the ineffective supervision on the judicial system. The dysfunction of the judicial system in Croatia results in the fact that the Croatian citizens do not have confidence in the judicial system, and more importantly, it violates the human rights of Croatian citizens, in particular of ethnic minorities, LGBT persons and women.

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Part III Politics

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5. The political system In this chapter several political aspects of Croatia will be analysed. Firstly, this chapter looks into the composition of the Croatian government. Subsequently, the functioning of the ICTY and its relation to Croatia is thoroughly discussed. Lastly, Croatia’s EU accession is examined, as well as the external EU borders and its (history of) law enforcement.

5.1 Political parties Since Croatia’s first post-communist elections in 1990, Croatia’s national political field has been divided between two major parties: the Social Democratic Party of Croatia (SDP) and the HDZ, the Croatian Democratic Union. The HDZ, a conservative, centre-right political party, was founded in 1989 by Franjo Tuđman, who later became the country’s first president and was succeeded by Stjepan Mesić from the Croatian People’s Party – Liberal Democrats (HNS). The HDZ was constantly in power until it lost the elections to the SDP-led coalition in 2000. As a result, the HDZ was confined to the opposition role from 2000 until 2003 as the SDP-led coalition governed the country.823 The elections in 2003 showed once again that the support to the HDZ was decreasing as the HDZ now had to form a coalition to have a majority in parliament and be able to govern the country. One scholar has explained this as being the result of the ‘regime’s inability to deliver prosperity that drove a traditionally cautious electorate into the arms of the opposition’.824 Another scholar claimed that the HDZ’s loss during the elections was caused ‘largely because it failed to adapt to the changing demands and aspirations of the Croatian people’.825 In 2011, an HDZ-led coalition lost the elections to the SDP-led Kukuriku coalition826, which has formed the current government of Croatia. The HDZ is proud that they were the first party in power after Croatia declared itself independent, and that they are the ones that have installed the current democratic institutions that preserve the democratic identity of the country to this day.827 However, this party is currently embracing more right-wing forces and has formed an alliance with conservative organisations and the Catholic Church. This became very apparent during the campaign on the constitutional referendum on the definition of marriage, which showed that the HDZ had shifted from a moderate to a very conservative political position – at least in this respect.828 This is, according to one scholar, in contrast with what has happened under Ivo Sanader’s leadership, between 2000 and 2009, where the HDZ was transformed from an authoritarian party led by 823

Lamont, 2010. Ibid., p. 1. 825 Bellamy, 2001, p. 18. 826 The Kukuriku coaltion consists of the Social Democratic Party of Croatia, the Croatian People’s Party – Liberal Democrats, the Istrian Democratic Assembly and the Croatian Party of Pensioners. 827 HDZ, 2011, http://www.hdz.hr/sites/default/files/program_7_opci_sabor.pdf, last accessed on 13.03.2014. 828 Zagreb Pride, 2014, http://www.zagreb-pride.net, last accessed on 27.02.2014. 824

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Tuđman to a moderate right wing party that often flirted with nationalistic, right wing organisations to weaken the SDP-led government.829 The other major contemporary party in Croatia is the SDP. Former communists established the SDP in 1990, but they promptly reformed their old communist ideas and created a modern reformed centre-left socialist party.830 Part of their campaign and programme was to fight corruption and this helped to discredit their HDZ opponent as party members were arrested on corruption charges. The HDZ tried the same with the SDP by claiming that they were still communists and would want Yugoslavia to reunite. Although this did mobilise right wing voters to vote for the HDZ, it did not damage the SDP-led Kukuriku coalition. The reputation of the other parties of Kukuriku, the HNS, Istrian Democratic Assembly (IDS) and the Croatian Party of Pensioners (HSU) was also not damaged.831 The SDP, with their coalition partners of Kukuriku, created the coalition agreement of Plan 21 to awaken the Croatian potential. It is unclear what this potential entails as almost all of Plan 21 is very general, but two years after its implementation the Kukuriku coalition claims that Croatia is now a country whose government is responsible, rational, and one that does not close its eyes for reality.832 However, research in the field indicated that barely anything that was written down in Plan 21 has come to realisation.833

Figure 5.1: Current division of seats in parliament.

The most notable of the other Croatian political parties are the HSS, the Croatian Peasant Party, the Croatian Social Liberal Party (HSLS) and the Croatian Party of Rights. These are

829

Valenta and Strabac, 2010, p. 84; Interview 28. Dolenec, 2008. 831 Antić, 2011. 832 Kukuriku, 2013, http://www.kukuriku.org/plan21/programski-okvir/, last accessed on 24.02.2014. 833 Interview 6; 23; 37. 830

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notable as they were in coalition with the HDZ, but this is something they were punished for by the electorate and only the HSS kept one seat in parliament while the HSS and HSLS lost all their seats. Another noteworthy party is the Labour Party (Hrvatski Laburisti), which received six seats as a completely new party, as it manifested itself as the party that stands for workers’ rights and as a party that is willing to defend those rights.834 One of the other opposition parties is the Democratic Centre (DC) party, which describes itself as a milder, but similar, party as the HDZ. The Croatian Civic Party (HGS) in another small opposition party, but this party is in coalition with the HDZ and is described as a populist party. Another coalition partner of the HDZ is the right wing Croatian Party of Rights- Dr. Ante Starčević (HSP)835, which has currently one seat in parliament. The Croatian Democratic Alliance of Slavonia and Baranja (HDSSB) is another opposition party and this party focuses on regional reorganisations to improve the conditions in Slavonia. This is similar to the work of the IDS, which focuses on the interests of the citizens in the county of Istria. A new party in Croatian Parliament is the Sustainable Development of Croatia (ORaH). Orah means walnut and represents the background of the party, which is to be a green party. The party is fairly new, as the only member in parliament was the former SDP minister of environmental protection and nature Mirela Holy. Furthermore, there are currently eight independent politicians in parliament.836 The parties that have seats to represent the minorities in Croatia are the Independent Democratic Serb Party (SDSS), with three representatives in parliament, and the Bosniak Democratic Party of Croatia (BDSH), which is one of the political parties that competed for the seat to represent the Bosnians and Herzegovinians and other minorities in Croatia and won this seat.837 Generally speaking, the parties do have a dialogue with each other, but there are some parties that do not have a lively dialogue. For instance, the HDZ and SDP do not have an active dialogue, as they disagree on almost all matters. The exception to this is the subject of Europe on which they do work together in committees in parliament, because they both recognise the positive effects the European institutions could have on Croatia. Noteworthy here is that there are no Eurosceptic parties838 in Croatia and all parties work together to improve their knowledge of the EU institutions. Another party that the SDP does not have an active dialogue with is the HSP. The SDP considers them to be out of the political spectrum and believe they are a negative addition to the political arena in Croatia. The reason for this is the HSP’s support for the referendum on Cyrillic 834

Antić, 2011. A different party than the earlier mentioned Croatian Party of Rights. 836 Sabor.hr eds, 2014a, http://www.sabor.hr/Stranke, last accessed on 14.03.2014. 837 Ibid. 838 Interview 48; 50. 835

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writing and the HSP calling the minorities in Croatia guests even though these minorities have been in Croatia for centuries.839 The HSP, however, is a coalition partner of the HDZ and these parties, as do the other coalitions, do have an active dialogue.840 The HSP is, according to an interviewee841, very far right and even flirting with fascism, which would explain why the SDP sees them as a negative addition to the political arena in Croatia. For instance, one member of the HSP has a picture of former Ustasa leader Ante Pavelić on his wall. HDZ is in this same category, as they do not criticise Nazi chants and salutes during football games. One interviewee even mentioned that Tomislav Karamarko, the current leader of the HDZ, is believed to have laughed and commented positively about a remark regarding killing SDP members. He therefore argued that HDZ is a fascist party, but only in rhetoric – not in actions.842

5.2 The president When Croatia declared its independence and adopted its very first constitution in 1990 it was dubbed the ‘Christmas Constitution’843, because it was adopted near Christmas on 22 December. This constitution was adopted after many amendments had already been made to the existing socialist constitution. Amendments, such as allowing multi-party elections and the removal of the Serbian language and script as well as dropping communist symbols and language, had been made. These amendments were thought to not be enough, as the constitution that they were based on limited the routine activities of governmental organisations and institutions. Furthermore, it held down the economic, political and social development of the Croatian people.844 The new ‘Christmas Constitution’ was based on the Constitution of the Fifth Republic of France, which meant that the president had broad executive powers, which it shared with the government. As mentioned above, the first president was Franjo Tuđman and as the constitution provided him with broad executive powers he was a very autocratic ruler. This was possible as under the constitution Croatia was a semi-presidential system, which provides the president with a great deal of power. Adding to the many prerogatives that had been given to him by the constitution he often overstepped them and executed tasks he was not allowed to do according to the constitution.845 The opposition parties in parliament opposed this and tried, after Tuđman’s death in December 1999, to amend the constitution in such a way that the 839

Interview 48. Interview 28; 48. 841 Interview 28. 842 Ibid. 843 Widner, 2005a, http://www.princeton.edu/~pcwcr/reports/croatia1990.html, last accessed on 24.02.2014. 844 Ibid. 845 Lovric, 2000, http://www.aimpress.ch/dyn/trae/archive/data/200011/01107-002-trae-zag.htm, last accessed on 24.02.2014. 840

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parliament’s role would be strengthened.846 After the new presidential elections in January 2000, the newly elected president Mesić (2000-2010) agreed and he set up a group to work on a draft proposal for a new constitution. Within this constitution the semi-presidential system was to be traded in for a parliamentary system and many powers were to be transferred from the president to the parliament and the government. The Croatian Parliament adopted the new constitution on 8 November 2000 and it entered into force the same day. The president, however, still has broad responsibilities as commander-in-chief, but also in foreign policy, national security and he has to represent the country. Furthermore, the president is elected directly and this causes his office to have increased authority. Mesić is said to have used the authority of this office to safeguard a number of important powers in the new constitution of 2000.847 Western leaders welcomed the new leader in Croatia as the country turned its back on the ‘virulent nationalism and corrupt authoritarianism‘848 which it had experienced under Tuđman. Under Mesić, Croatia’s policy was aimed at integration with the West. Mesić said to cooperate more closely with the West and North Atlantic Treaty Organisation (NATO). Moreover, he said to ‘cooperate closely with the war-crimes tribunal’. Also the approximately 300 000 Croatian Serbs who fled the 1990s Wars were promised a better future. During Tuđman’s rule, a bureaucratic procedure was implemented that withheld most Croatian Serbs from even trying to return to Croatia. Mesić proposed a ‘non-discriminatory system of return that will bypass the issue of citizenship papers’.849 To be able to become a candidate for the presidency one would need at least 10 000 signatures. Furthermore, the voting is to happen within a maximum of two rounds. The first round is for all the candidates that have collected enough signatures. If none of the candidates receives more than 50 percent of the votes another round will start with the two candidates with the highest number of votes. The winner of that round wins the election and is declared president of Croatia.850 The most recent presidential elections in Croatia were in December 2009 and the second round was in January 2010. 12 candidates partook in the first round of which Ivo Josipović ran as the SDP candidate and Andrija Hebrang as the HDZ candidate. The mayor of Zagreb, Milan Bandić who was until then also member of the SDP, was not happy with the SDP candidate and decided to run as an independent candidate. He was subsequently suspended from the party.851 On the side of the HDZ there was a similar problem: Nadan Vidosević, head of the Croatian Chamber of Commerce ran also for presidency and was ousted 846

Widner, 2005b, http://www.princeton.edu/~pcwcr/reports/croatia2000.html, last accessed on 24.02.2014. Ibid. 848 IISS Strategic Comments, 2007, p. 1. 849 Ibid. 850 Antić, 2010. 851 Antić, 2010. 847

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from the HDZ just like Bandić was from the SDP. Not one of the 12 candidates came close to the 50 percent mark and the two leading candidates, Josipović and Bandić, had qualified for a second round.852 Both had different tactics to try and win the second round even though polls predicted a big win for Josipović. Josipović strategy was the same as in the first round and was based on the unsatisfactory results of the privatisation process in which quite a few gained a lot but did not pay the price it was worth.853 Bandić’s strategy was to gain as much support as possible from the right as he was more leaning to the centre and was therefore less left than Josipović. He also tried to gain support from the Catholic Church as he is affiliated with that church while Josipović is agnostic. Furthermore, he wore a crucifix prominently at public appearances in order to gain support.854 Josipović, however, gained support from quite a few of the candidates of the first round. Even more important, he gained the support of the president at that time, Stjepan Mesić, who is a member of the HDZ party. Consequently, Josipović won in all but one county. Bandić, however, received 92 percent of the diaspora votes. Reasons for this are that Bandić really campaigned for their vote and also because he gained a lot of sympathy since he himself was born in Bosnia and Herzegovina. The glaring discrepancy between the diaspora outcome and the outcome in Croatia itself sparked the discussion about the right to vote for the diaspora and especially for the diaspora in Bosnia and Herzegovina.855

5.3 The Croatian parliament The Croatian constitution has laid down the ground rules for the political system in the country.856 According to the constitution, the major actors in the Croatian political system are the president, the prime minister and the parliament. However, the constitution has undergone changes, which have resulted in the changes of the political system. The current parliament, for instance, was changed to a unicameral body after the 2001 constitutional amendment eliminated the Upper House – also known as the Chamber of Counties.857 As stated in the constitution, and as mentioned earlier, the number of seats in parliament can vary between 100 and 160. The 2003 electoral law has set the number of seats that can be voted on via proportional representation to 151. However, not all seats are chosen the same way. The first 140 seats are chosen by 10 equal sized districts of approximately 400 000 voters per district effectively meaning that every district sends 14 MPs to the parliament. District XI consists of three seats that are reserved for the Croatian diaspora, which are mostly 852

Antić, 2010. Ibid. 854 Ibid. 855 Ibid. 856 Committee on the Constitution, 2010. 857 Vlahovic, 2004, p.43. 853

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Bosnians and Herzegovinians with a double passport.858 Consequently, this makes Croatia the only country with more voters than citizens. The final eight seats, or district XII, are reserved for minorities in Croatia and of these eight seats three are reserved for the Serbian minority and the other five for other minorities. In all these districts a five per cent threshold applies in order for parties or independents to send representatives to the parliament.859 In the most recent elections, the parliamentary elections of 2011, there were 285 parties and 28 independent politicians on the ballot.860 Of these 313 candidates only eight coalitions, consisting of 12 political parties, were allowed to send representatives to the parliament as the others did not meet the five per cent threshold. However, there are currently 14 political parties in the parliament and eight independent politicians.861 This is the result of secessions of politicians from political parties. Furthermore, the diaspora voters had an incredibly low turnout, which sparked discussion about the usefulness of their right to vote.862 As mentioned above, the winner of the 2011 elections was the SDP-led Kukuriku coalition. All the parties in this coalition ran independently in the 2007 elections and most of them did not get into parliament then. The losing party was the HDZ, which was the former governing party and lost 19 seats including the seats from their coalition partners: the Citizens Party and DC.863 Another coalition that secured seats in the parliament was the one consisting of the HSP and the Croatian Pure Party of Rights. The name of these parties – namely the ‘rights’ part – refers to the legal and moral reasons that justify Croatia’s independence and autonomy. These are not the only ‘rights’ parties in Croatia, but are the only ones that made a coalition and got a seat in parliament. The other ‘rights’ parties all have very similar programmes, but their leaders could not get along due to different styles and therefore did not make a coalition.864 It is important to note that, different from many other European countries, the coalitions of the parties in Croatia are already made prior the elections instead of afterwards, which makes it easier to create a government. Therefore it is not completely odd that, according to the constitution, governments need to be formed within the short period of 30 days after the president has given the mandate to the aspirant prime-minister. For instance, the current government formed by the Kukuriku coalition was formed just 19 days after the elections.865 This is the second time since 1990 that the HDZ is not part of the governing coalition but has to be content with the role as the largest opposition party in parliament. They first governed 858

Antić, 2011. Committee for Legislature of the Croatian Parliament, 2003. 860 IČ/VLM, 2011, http://www.vecernji.hr/parlamentarni-izbori-2011/dip-za-izbore-prihvaceno-313-kandidacijskih-lista347269, last accessed on 14.01.2014. 861 Sabor.hr eds, 2014a, http://www.sabor.hr/Stranke, last accessed on 14.03.2014. 862 Antić, 2011. 863 Ibid. 864 Ibid. 865 Ibid. 859

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the country from 1990 to 2000 and again from 2003 to 2011 with a coalition of smaller parties. However, corruption scandals during their last term in office are seen as the major cause of their loss in the 2011 elections.866 There will be touched upon these corruption scandals in the chapter on corruption.

5.4 The government The Croatian constitution states in Article 115 that the government can be held accountable by the Croatian Parliament. Furthermore, the constitution also states that the government is formed from the members or parliament. As a result the government requires a majority in parliament to be able to govern. The Kukuriku coalition was the clear winner in the 2011 elections, with 81 seats of the 151 total seats in parliament and formed the government. Due to secessions by two party members, the biggest coalition partner, the SDP, does no longer have the 60 seats it had at the start of their term. Nevertheless, the Kukuriku coalition still has, at the time of writing, the majority of seats with 79 seats and never since the Croatian independence has a government in Croatia been unable to fulfil their four-year term even with members leaving parties.867 The most noteworthy party member to leave the SDP was former Minister of Environment Mirela Holy, who left because of struggles within the SDP party.868 Prime Minister Zoran Milanović, from the SDP, leads the current government. There are four deputy prime ministers, which are also ministers, and 16 other ministers. Even the smaller parties in the Kukuriku coalition have some ministerial positions as can be seen in the table in Appendix I.869 The only exception is the HSU party, which seems to have no ministerial positions. This might be attributed to the fact that HSU is a single-issue political party focused on pensioners, but even our interviewee was surprised they would not at least get one. The HSU, however, does have influence on governmental policy as all salaries in Croatia were cut, but the pensions remained at the same level.870 Noteworthy are the two independent politicians holding ministerial positions. These are, however, experts in their fields and close to the SDP in their way of thinking. For a conveniently arranged overview of the ministers, their political party and their position, see the appendix.871 As notable as the ministerial positions are the figures on support of governmental policies – they are considered to be very unpopular. Just 26 percent of Croatian citizens support the government’s policies while a majority of 69 percent of Croats thinks the current SDP-led government is leading Croatia in a wrong direction. Furthermore, there seems to be a consensus 866

Antić, 2011. Interview 28. 868 Croatian times eds., 2013, http://www.croatiantimes.com/news/General_News/2014-02-26/35140/, last accessed on 17.03.2014; Interview 23. 869 Vlada.hr eds., 2014, http://www.vlada.hr/en/naslovnica/o_vladi_rh, last accessed on 16.03.2014. 870 Interview 28. 871 Ibid. 867

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on the lack of faith in the Croatian government and politicians in general.872 Surprisingly, the former Minister of Environment Mirela Holy is the second most popular politician behind President Ivo Josipović.873 Mirela Holy’s popularity will be tested during the European elections in May 2014, as most people who left a certain party and started their own have not been very successful.874 It is suggested that the government has a problem as the ministers are not experts in their fields. Many of our interviewees stated that if the politicians would be more knowledgeable with their policy area, or hire consultants for certain areas and therefore be less of a homo politicus, then they would reap more rewards.875 Another reason that was given to us for this problem with the government is that many people, within the different levels of government, are working for the money.876 A high percentage of all parents would like to see their children work in the government because it is easy money, but also because there is still a dependency of the people on the state and they expect the government to provide for them – as this is how it worked during the socialist period.877 This may also be the cause, just like policies that have not yet turned out positive results yet, for the low approval rate of the government.878 The experts also believed that smaller political parties will receive more mandates in parliament during the next elections at the costs of the two contemporary big parties. They believe that the citizens are done with promises and want to see results.879 This can already been seen in the local elections where young politicians have become mayors in municipalities and the big national parties have lost significant influence.880 5.4.1 Legislation process Every MP has the right to propose new legislation in parliament. However, most of the time this is done by the government as they have many civil workers working for them to draft a proposal. Nevertheless, if an opposition MP proposes legislation, Speaker of the Parliament Josip Leko should notify the government. Then, the government has a private meeting on the proposed piece of legislation before it is discussed in plenary sessions with the rest of the MPs. The private meeting consists of multiple committees that scrutinise the bill in order to judge its feasibility, but also on its compatibility with the constitution. If the bill passes this meeting, the first reading will take place in plenary session with the MPs. In this first reading the bill is 872

Interview 9; 15; 27; 38; 50. Croatian times eds., 2013, http://www.croatiantimes.com/news/General_News/2014-02-26/35140/, last accessed on 17.03.2014. 874 Interview 28. 875 Interview 9; 23; 27; 37; 48. 876 Interview 37. 877 Interview 10; 23; 37; 48. 878 Interview 48. 879 Interview 37; 48. 880 Interview 48. 873

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introduced, a debate between the parties and trying to reach a conclusion for the final bill. The bill is then taken back by the government and adjusted to the wishes of the parliament. The final bill is required to be submitted to the parliament for a second reading within six months after the first reading otherwise the legislation procedure is suspended. The second reading focuses on the text of the final bill and on the amendments. When there are a lot of new amendments that alter the bill significantly in the second reading, there is a possibility of a third reading before it is published in the Official Journal of the Republic of Croatia and becomes law.881 Croatia has a tradition of tripartism882, in relation to the policymaking process. This includes the involvement of trade unions as well as employers’ associations in policymaking processes and public debates. These organisations often act in advisory bodies to the government, such as in the private meeting before a bill is sent to parliament, or on ad hoc issues when their expertise is required. However, the civil society as a whole remains weak in Croatia.883 Very few civil society actors are active participants in the Croatian public policymaking process. This is the case as they lack the resources to be able to participate effectively and the government has given little to no incentive to do so.884 However, this is contested by the employers who do consider themselves to be actively taking part in the decision-making process,885 but also by politicians who often stated that civil society is very active in Croatia by public debates – online as well as off the internet.886 Furthermore, the current Social Economic Council is being boycotted by the trade unions because the trade unions are at odds with the employers association and the government over the new labour law, which aims to provide more flexicurity887.888 As a result of this, the trade unions see the relationship between themselves, the employers and the government as a problematic one. 889 This boycott, however, is seen as a bad thing by politicians as there is a clear need for a dialogue between the parties and people should accept that the easy ride at the government’s expense is over.890 The trade unions argue that there are still many problems with people going home unpaid while they have done the work and this problem should be solved first before a more flexible labour market is created. This problem is, however, related to the slow pace of the justice system works; reforms to change this are taking 881

Sabor.hr eds., 2014b, http://www.sabor.hr/zakonodavni, last accessed on 13.03.2014. Tripartism is a term that refers to a hybrid form of policy making. During the policy making process both state and nonstate actors (business and labour representatives) are involved through cooperation, consultation, negotiation and compromise. 883 Bache and Tomšić, 2010 , p. 72. 884 Ibid. 885 Interview 17. 886 Association of the Local Democracy Agencies, 2002; Interview 37; 48. 887 Flexicurity is a form of labour market where the employer can be flexible in the way employees are hired or fired, but in the mean while it aims to give the employees a form of job security. 888 Interview 10; 17; 48. 889 Interview 10. 890 Interview 48. 882

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a long time as well.891

5.5 Regions of Croatia Croatia has different sub-national levels of government. There are regional governments, the counties, and local governments, the towns and municipalities. Croatia has 576 of these subnational governmental units: 21 counties (20 counties plus the City of Zagreb), 126 towns and 429 municipalities. The 20 counties are divided into two regions: Adriatic Croatia, which includes seven of the counties located on the Adriatic coast, and Continental Croatia, which includes 13 counties and the City of Zagreb.892 The 1992 ‘Law on the Territories of the Counties, Cities and Municipalities in the Republic of Croatia’ established the counties as units of local government and self-government. The counties were formed by the government in power at that time, because the regions – especially Istria – had pressed for some form of regional independence.893 As a result, the representatives in the council were given their mandates on April 1993 in the first elections for local and regional authorities.894 The central government had considered five factors on how to form the regions: the history, communications and economic interest of a territory plus the number of citizens and the territorial size.895 Each county has their own small parliament called the County Assembly of which the members are elected directly by the electorate. The executive power of the county is headed by a prefect.896 Towns and municipalities have their own representative body called the Local Council and the executive branch is headed by the mayor of the town or municipality. 897 Since 2009, the county president and the mayor of a town or municipality are elected directly. Before 2009 the County Assembly would elect the president and the Local Council would elect the mayor.898 Before the Constitution was changed in 2001, which effectively transformed the Croatian Parliament into a unicameral body, the regions were represented in the Croatian Parliament. Prior to this change the parliament was composed of two chambers: the House of Representatives (currently the only remaining house of parliament) and the House of Counties. Both of the chambers were chosen directly by the electorate and, as stated in the constitution, the House of Representatives had between 100 and 160 representatives and the House of

891

Interview 10. Association of the Local Democracy Agencies, 2002; Interview 37. 893 Bache and Tomšič, 2010, p. 72. 894 Interview 37. 895 Deren-Antoljak, 1993, p. 83. 896 Croatian Parliament, 2001, http://narodne-novine.nn.hr/clanci/sluzbeni/232153.html, last accessed on 17.01.2014. 897 Committee of the Regions eds., 2013, http://cor.europa.eu/nl/about/nationaldelegations/Pages/croatia.aspx, last accessed on 11.03.2014. 898 Bache and Tomšič, 2010, p. 72; Interview 37. 892

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Counties had three representatives from each county. However, there is a discrepancy between the counties regarding territorial size, but also the number of voters. For example, the PrimorjeGorski Kotar county had 296 195 citizens in 2011, while the Lika-Senj county only had 51 022. Apart from this disproportional representation of the counties, there were other problems with the House of Counties: It had little to no influence on the legislative procedures899, slowed down the legislative process and was expensive to maintain for the work they did. These factors may have contributed to the decision on abolishing the House of Counties.900 After the abolishment of the House of Counties, the counties took over the tasks of the house, which included the power to vote on legislation which had already been passed within two weeks of its passing. This, however, is not the only task the counties have. Counties are tasked with the management of secondary and higher education, healthcare, urban planning, economic development, and transport infrastructure maintenance and development at their regional level. Even though they have all these tasks, the institutions of the regions still appear to be quite weak. Smaller regions and regions with fewer resources especially have trouble finding the human resources they need, as well as the financial resources in order to execute these tasks properly. According to the principle of subsidiarity, the central government cannot interfere, but can only monitor the activities of the local governments.901 There seems to be a consensus among experts in the field that to combat this lack of human, monetary, and administrative resources the number of local and regional governments needs to be reduced; they must go through a merger process to become more efficient.902 This way, the people who sit in the regional and local governments for their own gain can also be eliminated and administrative procedures can become more efficient.903 What can be seen as the first tentative step towards this is the establishment of the Croatian County Association in 2003. The Croatian counties have bundled their experience and knowledge together in the Croatian County Association. This association aims to promote regional self-government and supports the economic and social development of municipalities and counties in Croatia by promoting cooperation between the counties. Furthermore, through this association the counties try to speak with one voice towards the government in order to influence the national government’s priorities if they are not in line with the interests of the counties.904 This is needed, as the national government has still a lot of influence over the regions and the regions cannot do much about it on their own.905 However, this association is

899

Deren-Antoljak, 1993, pp. 85-86, pp. 94-95. Interview 6. 901 Bache and Tomšič, 2010, pp.76-80. 902 Interview 6; 37; 43. 903 Interview 6; 37. 904 Interview 37. 905 Interview 6. 900

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fairly weak as a result of internal distrust and the strong influence of the political parties on their counterparts at the county level.906 Furthermore, this association might be helpful to communicate with the national government for the local and regional authorities as it remains often unclear who they can contact, and how they can contact people, if they require assistance from the national government.907 The municipalities and towns also have a number of tasks, but are more basic and less broad than the competences of the counties. For instance, the municipalities and towns have to provide for primary health protection as well as primary education. They have to take care of utility services, housing, fire and civil protection, culture and sports, traffic management and social welfare as well. In 2005, the category ‘large towns’, with a population of 35 000 or more, has been introduced. These large towns have extra responsibilities regarding public roads and the issuing of location and construction permits.908 5.5.1 City of Zagreb The City of Zagreb is a special case as it has both the status of a town as well as the status of a county. As a result of Zagreb having both entities of town and county, it also has the responsibilities of both.909 The City of Zagreb is not to be confused with the separate county for the Zagreb area that surrounds the City of Zagreb.910 For a period of time between 1995 and 1997 the City of Zagreb and the county of Zagreb were one administrative entity. However, the City of Zagreb retrieved their special administrative status after 1997 and soon they had split.911 Unlike other counties, but like towns and municipalities, the executive branch is headed by the mayor of the city.912 Zagreb’s small parliament is also not called a County Assembly or Local Council, but it is called the City Assembly. 913 5.5.2 Plan 21 The Kukuriku coalition announced their coalition agreement Plan 21 at the end of 2011. The last chapter of Plan 21, chapter 21, is on decentralisation policy. This is not the first time Croatia wanted to decentralise their government; Croatia started these reforms with the Law on Local and Regional Self-Government in early 2001. More recently, in 2010 a new approach to foster regional development entered into force giving the counties many of their current

906

Interview 6; 37. Interview 38. 908 Committee of the Regions eds., 2013, http://cor.europa.eu/nl/about/nationaldelegations/Pages/croatia.aspx, last accessed on 11.03.2014. 909 Interview 6. 910 Committee of the Regions eds., 2013, http://cor.europa.eu/nl/about/nationaldelegations/Pages/croatia.aspx, last accessed on 11.03.2014. 911 Map of Croatia eds, 2006, http://www.map-of-croatia-co.uk/, last accessed on 17.01.2014. 912 Croatian Parliament, 2001, http://narodne-novine.nn.hr/clanci/sluzbeni/232153.html, last accessed on 17.01.2014. 913 Interview 6. 907

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responsibilities.914 Chapter 21 of Plan 21 focuses on further decentralisation in order to get policies implemented as close as possible to the citizens, because the Kukuriku coalition believes in the principle of subsidiarity and in a system that is built bottom-up and not the other way around. Furthermore, Croatia is one of the European countries where the local governments receive a very low percentage of the total tax revenue to spend on local projects. With this new plan the national government aims to get the income of the local governments to at least the same level as the average of the European countries. It aims to get to the levels of the developed counties in the EU which allocate 20 to 25 percent of the public finances to regional governments.915 However, three years have passed since the introduction of Plan 21 and its further implementation has been postponed till after the next parliamentary elections.916 Plan 21 has been widely criticised, as a box of empty wishes or just a very general overview of what the government hoped to accomplish sometime in the future. Most of the critical sounds focused on the lack of a structural plan: a lack of targets and how to achieve them.917

5.6 International Criminal Tribunal for the former Yugoslavia The ICTY, International Criminal Tribunal for the former Yugoslavia, is a war court established by the UN in 1993. Following Nuremberg and Tokyo, the ICTY is the third international war tribunal. It was established in response to the war crimes that were then taking place in Croatia and Bosnia and Herzegovina. The court was thus founded while the war was ongoing, hoping that it would contribute to the peace making.918 When the war ended, the court began looking at the atrocities that were committed during the conflicts in the former Yugoslav republics between 1991 and 2001. ‘These include executions, torture, rape, arbitrary mass internment, deportation and displacement, hostage taking, inhuman treatment of prisoners, indiscriminate shelling of cities, and unwarranted destruction of private property.’919 The main objective of the court is to charge the individuals most responsible for the war crimes, rather than blame entire nations or ethnic groups. Furthermore, the ICTY aims to deter future crimes and hopes to render justice to the victims and their families.920 The court is situated in The Hague in the Netherlands. In July 2013 the tribunal had concluded proceedings against 136 of the 161 persons indicted. There are currently there are no outstanding indictments. With 25 persons 914

Kołodziejski, 2013. Kukuriku eds., 2011, http://www.kukuriku.org/plan21/ukratko/politika-decentralizacije/, last accessed on 13.03.2014. 916 Interview 6. 917 Interview 6; 23; 37. 918 Meron, 1997, p. 3. 919 Ibid., p. 2. 920 http://icty.org/sections/AbouttheICTY, last accessed on 08.02.2014. 915

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remaining, of whom four are on trial now, the work at the tribunal will presumably continue until mid-2017.921 Although the work of the ICTY has almost come to its end now, the road was long and tough. The first years of the ICTY can be best described as ‘a battle for survival’. 922 The tribunal was restrained in its powers to investigate and arrest; in addition it suffered from some financial problems. Moreover, Bosnia and Herzegovina, Serbia and Croatia all had no intention to cooperate with the tribunal. The ICTY experienced several setbacks as ‘suspects were sheltered and protected, access to sites where atrocities were committed were obstructed, and witnesses and victims withheld their testimonies from the investigators of the tribunal’.923 The main reason for the unwillingness to cooperate was distrust against the tribunal. This feeling is still present in Croatia as one of our interviewees expressed that the ICTY was a political court, which only indicted some Croatian Generals in order to satisfy the Serbian population.924 Over the years, the ICTY enhanced its arrest powers and with the help of various international organisations was able to continue functioning. One of the international organisations that has supported the work of the ICTY has been the EU. By making cooperation with the ICTY a condition for EU membership, the EU has eased the work of the ICTY. Evidently this was the case for Croatia, but this also applies to Serbia and Bosnia and Herzegovina. As the work of the ICTY is considered to be a very complex and sensitive issue in Croatia, it proved to be one of the main obstacles during the negotiations with the EU. The following section will further elaborate on this topic. Already from the beginning, the work of the ICTY has been a very sensitive issue for Croats. The Croats generally see themselves as victims: they are the ones that were attacked and their country was invaded. Therefore, they do agree with the Serbs being tried by the ICTY, but not with the prosecution of their own political and military leaders. This view was immediately clear with the establishment of the ICTY in 1993, when Tuđman declared his support as it would bring justice to Serbian war criminals.925 Furthermore, several Croats who had committed war crimes against Serbian civilians were not prosecuted by the Tuđman regime.926 The media and politicians presented the war as a ‘Homeland War’, which confirmed and strengthened the view that the Croats had been the victims and it had been their right to fight for the independence of their country. Therefore, the Croats had difficulties understanding why the ICTY indicted their political and military leaders, as they had righteously defended their homeland in the eyes of the Croats. They had the feeling that the ICTY did not understand the reasons and roles performed 921

Report of the International Tribunal for the Former Yugoslavia, 2013, p. 3. Ivkovich and Hagen, 2011, p.4 923 Meron, 1997, p. 3. 924 Interview 8. 925 Fisher, 2005, p. 85. 926 Ibid. 922

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during the war and was therefore biased against them.927 With the signing of the Dayton Agreements in 1995, Croatia and Serbia agreed to comply with the orders of the tribunal, including the surrender of those indicted. However, it was only after strong international pressure that the Tuđman government cooperated, albeit with little effort. In 1996, the Croatian Parliament approved a constitutional law on cooperation with the ICTY, and some Bosnian-Croats were handed to the ICTY. Still, Tuđman stated that the ‘victors of the war should not defend themselves in court’.928 The party of Tuđman, the HDZ, had fierce resistance towards the work of the tribunal. For example, the HDZ claimed that the ICTY lacked jurisdiction over Croatian military operations conducted during the war.929 Since 1990, the HDZ had been the largest party in Croatia, but with the elections in 2000 the party found itself in the opposition. Already in the 1990s Croatia was slowly working its way to EU accession. However, due to the war and policies of the HDZ, negotiations with the EU were halted. In 1996, Croatia had not yet signed an Association Agreement but became part of a newly launched Regional Approach together with five other countries (SAP). The fact that they had a more different, somewhat isolated, status than many other countries in Central and Eastern Europe did not seem to matter to politicians and the general public. This changed when in 1997 many countries were invited by the EU to start accession negotiations while Croatia was grouped with four other Balkan countries. As Croatia considers itself to be a Central European country instead of a Balkan country, the inclusion in this group felt quite uncomfortable. 930 Moreover, the other four countries were poorer than Croatia and their prospect of membership seemed further off. Due to these reasons the HDZ rejected to be part of this group, which further increased Croatia’s isolated status. This rejection and the many economic problems from which Croatia suffered definitely played a role in the defeat of the HDZ at the parliamentary and presidential elections of 2000.931

5.6.1 The Račan Government The year 2000 seemed to mark a new beginning for Croatia, not only in political terms but also in terms of the general atmosphere in the country.932 Instead by the HDZ, Croatia was now ruled by a centre-left government and parliament. The new Račan government was determined to direct its policies in another way than the former government. They wanted to reform the country, to change the image of Croatia internationally, and one of its main foreign policy goals

927

Ivkovich and Hagen, 2011, p. 8. Fisher, 2005, p. 86. 929 Lamont, 2010, p. 1683. 930 Fisher, 2005, p. 83. 931 Ibid. 932 Zambelli, 2010, p. 1661. 928

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was to become a member of the EU. Yet this government also did not agree with Croatia being part of a group of Balkan countries as it would hold Croatia back in the accession process. As there seemed to be no other option than to accept this, Croatia started the same year with the SAA negotiations and signed the NATO’s partnership for peace programme. As the Račan government was determined to accelerate the accession process, it intended to fully cooperate with the ICTY. At first, substantial progress was made. The Račan cabinet was the first of the former Yugoslav nations to take steps to apprehend its own war criminals and adopted a declaration on the cooperation with the ICTY. However, the cooperation with the ICTY soon caused domestic unrest. Although all political parties, including the HDZ, wanted to join the EU, there was barely any consent on how to get there.933 Contrary to the coalition’s wishes, the HDZ stressed for caution in cooperation with the tribunal in order to not diminish Croatia’s power of jurisdiction. This was clear when, although rejected, the HDZ proposed that Croatia would have jurisdiction on the trials regarding operations ‘Flash’ and ‘Storm’.934 The HDZ was supported by the Homeland War Movement, which had taken up a very hostile stance towards the Račan cabinet. This veteran movement organised protests attracting sometimes more than 100 000 people and sent open letters to the public claiming that ‘the assault on the army had to stop’.935 In April 2000 the Declaration of the Homeland War was almost unanimously adopted by the parliament, which shows the complexity and sensitivity of the issue. This declaration stated that ‘the war was just and legitimate, defensive and liberating and not aggressive or conquering and that its goal was to defend Croatian territory within its internationally recognised borders against Greater Serbian aggression’. In the following years, the Račan government had difficulties in meeting the demands of the ICTY. Despite earlier promises, cooperation was not that simple due to several crises. In February 2001 a court in Rijeka issued a warrant for Mirko Norac. This retired army general was considered to be a hero in Croatia, as he had defended the town Gospic and had fought in Operation Storm. However, the court charged Norac with crimes against humanity for his role in the killing of 40 Serbian civilians in 1991. It must be noted that although this did not directly concern the ICTY, this crisis was a major event and influenced the approach of the government towards cooperating with the tribunal.936 Almost immediately when the news of the warrant for Norac became public, demonstrations were organised by the opposition. The indictment of Norac was seen by the protesters as a betrayal of the 1990s Wars by the government.937 The demonstrations were not only a sign of dissatisfaction with the Norac case, but also of dissatisfaction with the increased cooperation of the government with the 933

Zambelli, 2010, p. 1667. Fisher, 2005, p. 86. 935 Ibid. 936 Peskin and Boduszynski, 2003, p. 1126. 937 Ibid. 934

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ICTY.938 Despite the heavy protests, the government stuck to its policy and premier Račan told the media that they would not give in to the pressure of the opposition. Eventually, Norac turned himself in when it was guaranteed that he would not be extradited to the ICTY.939 The Prosecutor of the ICTY, Carla del Ponte, had decided to defer the case to the Croatian judiciary. Finally, the retired army general was sentenced to jail for 12 years. This above mentioned case is remarkable for two reasons. Firstly, because of the fact that the ICTY deferred the case to a national court. Secondly, because the government acted strongly and unified against the nationalists. Some leaders in the coalition were wary of trying their own generals, but still supported Racan in his decisions. In subsequent crises this would not be the case anymore.940 Another crisis occurred in July 2001. In the previous month Carla Del Ponte had requested the Croatian government to arrest and transfer two former army generals: Rahim Ademi and Ante Gotovina. When the media in Croatia became aware of this news, the situation escalated quickly. Although the coalition had supported the government during the Norac crisis, this time it led to a division between the two main political parties, the SDP (Račan) and the HSLS. These two indictments were troublesome for many Croats, as the charges for the first time concerned involvement of the generals in their celebrated ‘Homeland War’.941 Although his coalition was divided, Račan announced that the generals would be arrested and that these requests of the ICTY could not be turned down942. As for the Norac crisis, the opposition and veteran movements threatened with massive protests and four ministers of the cabinet subsequently resigned. Despite his earlier pro-cooperation stance, the premier did not act accordingly. Instead, Račan uttered criticism on the tribunal and failed to arrest the two inductees. At the end of July, Rahim Ademi turned himself in, but Ante Gotovina had disappeared. It has been argued that the government deliberately was slow in apprehending the war criminals so Gotovina could go into hiding.943 Eventually, the Račan government never forcibly sent one of its own war criminals to the ICTY. Moreover, in some following cases the Račan cabinet refused to hand over a defendant to the ICTY.944 The Croatian war criminals which had gone to the ICTY had done this voluntarily.

5.6.2 The return of the HDZ and Ante Gotovina In 2003, the parliamentary elections signalled the return of Tuđman’s HDZ. The party had 938

Peskin and Boduszynski, 2003, p. 1126. World Socialist Web Site, http://www.wsws.org/en/articles/2001/07/croa-j11.html, last accessed on 29.04.2014. 940 Peskin and Boduszynski, 2003, p. 1128. 941 Ibid., p. 1128. 942 Ibid., p. 1129. 943 Peskin and Boduszynski, 2003, p. 1130; Fisher, 2005, p. 87. 944 Fisher, 2005, p. 87. 939

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undergone a transformation under the leadership of Ivo Sanader. Radicals had been forced to leave the party and its focus was now more directed at the centre of the political spectrum. 945 Although the HDZ had advocated for EU membership before, the party was now actually acting like it. Instead of the former strategy of open defiance against the ICTY, the government cooperated closely with the tribunal. The government helped with the voluntary surrenders of several army generals and even arrested and transferred people who had been indicted for war crimes.946 Furthermore, Prime Minister Sanader visited Serbia and Montenegro in 2004, which was the first time since the wars of the 1990s. In 2004 Croatia was officially awarded EU candidate status and the prospect was that the negotiations would start in March 2005. However, in April 2005 the European Council postponed the accession negotiations because of one man: Ante Gotovina. In a letter from Del Ponte, prosecutor of the ICTY, to the ministers of the EU she claimed that ‘Ante Gotovina remains within reach of the Croatian authorities and until such time as he is brought to The Hague, it cannot be said that Croatia is cooperating fully with the International Tribunal’.947 On the basis of this letter, the EU accused the Croatian government of insufficient cooperation with the ICTY. Moreover, the British who had assisted the Croatian secret services in 2003 with locating Gotovina accused the Croats of sabotaging the operation.948 As a consequence, the EU decided that the accession negotiations would not start until Gotovina was located and arrested by the Croatian government.949 The public in Croatia became aware of this decision, which led to slogans such as ‘don’t pay for entry into the EU with Gotovina’. Furthermore, Eurobarometer polls showed a modest decline in support for the EU accession. In October 2004, results showed that 30 percent of the respondents thought the accession to the EU was a good thing and 24 percent a bad thing. In June 2005, the results showed that 27 percent of the respondents said that the accession to the EU was a good thing and 29 percent a bad thing.

950

Before discussing how the case of Ante Gotovina developed

further, it is first important to explain why he is so important for Croats. Ante Gotovina, a former member of the French Foreign legion, decided to return to his home country in 1991. Gotovina joined the Croatian Army and his military skills soon led him to being appointed commander. The reason for the popularity of Gotovina was not primarily because of his contribution to the 1990s Wars, but rather because the ICTY identified him as the

945

Fisher, 2005, p. 88. Lamont, 2010, p. 1684. 947 Loza; Krauthamer; Gardner; Druker, 2005, p. 1. 948 Fisher, 2005, p. 89 Loza; Krauthamer; Gardner; Druker, 2005, p. 1. 949 Lamont, 2010, p. 1696. 950 Eurobarometer Survey 2005.06, http://ec.europa.eu/public_opinion/cf/showchart_column.cfm?keyID=5&nationID=28,&startdate=2004.10&enddate=2005 .10, last accessed on 08.04. 2014. 946

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highest ranking officer leading Operation Storm.951 This operation is so valuable for the Croats as it was the greatest victory during the wars, in which Croatian territory was liberated. The events that followed the operation were the reasons for the charges against Gotovina. After the liberation of the region, Serbian civilians were murdered, forcibly deported, properties were plundered and many Serbian houses were destructed.952 The Tuđman government turned a blind eye to these events, which suggested that it tolerated this kind of behaviour. Precisely this lack of effort to make a stop to the events was the reason for the ICTY to assume that the goal of Operation Storm was to remove the Serbs in Croatia and decided that it had to be investigated. As Gotovina and two other generals were in charge of the operation they were indicted for deliberate ethnic cleansing and alleged participation in the Joint Criminal Enterprise (JCE).953 The alleged aim of the JCE was ‘the permanent removal of the Serb population from the Krajina region’.954 Although all the cases of the ICTY are about individual guilt, for the Croats it feels as if their greatest victory in their war for independence is judged as ethnic cleansing. In a former right-wing magazine it was stated that ‘the majority of Croats are unhappy with the arrest of Ante Gotovina; not only because they consider the general to be innocent, as is every other Croatian general, officer and soldier, but primarily because of the anti-Croat content of the indictment against Gotovina as well as our other generals.’955 For the Croats the cases of Ante Gotovina and also the two other generals are about the legitimacy of their Homeland War. This explains why these cases have led to protests and emotional responses from the Croat society.956 This makes clear that the request of the EU for the arrest and transfer of Gotovina was unacceptable for almost the entire Croatian society. However, it seemed that the Sanader government had no choice if they wanted to become a member of the EU. As the HDZ, the party of Sanader had rejected the indictment, the premier now found himself in a difficult position. In order to remain credible and to ensure domestic political stability, Sanader expressed that it would be best if Gotovina went to The Hague to ‘prove his innocence’.957 The Croatian government was determined to show that it would be fully cooperating and on 26 April 2005, an Action plan between the ICTY and Croatia was initiated.958 Improvement in the process seemed to be made when in August 2005 an alleged supporter of 951

Pavlaković, 2010, p. 1713. Ibid., p. 1714. 953 Ibid., p. 1715. 954 Judgement Summary, http://www.icty.org/x/cases/gotovina/tjug/en/110415_summary.pdf, last accessed on 19.03. 2014. 955 Pavlaković, 2010, p. 1736. 956 Ibid., p. 1715. 957 Lamont, 2010, p. 1697. 958 Roter and Bojinović, 2005, p. 451. 952

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Gotovina was arrested. However, on 1 September Del Ponte called on the EU not to start the negotiations as Croatia had not made any real progress. Furthermore, she criticised the government for the celebration of the then 10-year anniversary of Operation Storm that was held the month before.959 Another setback for the country was on 30 September, when Del Ponte visited Croatia to assess the situation and she expressed disappointment with the government. Therefore, it came as a surprise, when on the meeting of the European Council on 3 October, Del Ponte supposedly had told the EU that Croatia had been fully cooperating with the ICTY for a few weeks now.960 On 4 October 2005, the negotiations were officially opened between the EU and Croatia.961 It is argued that the decision of the EU to start the negotiations with Croatia is the outcome of a deal that was closed between the United Kingdom and Austria.962 The UK, which held presidency at the time, supported membership of Turkey but opposed to open accession talks with Croatia. Austria, which would take over EU presidency in 2006, had threatened to veto the start of negations with Turkey and advocated for membership of Croatia. Eventually, Austria changed its position towards Turkey and in exchange the UK gave up its reservations about Croatia. The EU officially denied this deal. On 7 December 2005, Ante Gotovina was arrested in Tenerife and after three days he was transferred to the ICTY. When this news became public in Croatia mass demonstrations were held in almost every major city. In a statement, Prime Minister Sanader emphasised the innocence of Ante Gotovina by declaring that the general had defended his country legitimately as Croatia had been the victim of aggression.963 Furthermore, the government decided to join forces with the attorneys of Gotovina in order to come up with a strategy for his defence that would lead to the acquittal of the case.964 Gotovina’s trial started on 11 March 2008, together with two other generals from Operation Storm: Mladen Markač and Ivan Cermak. All three generals had pleaded not guilty at their initial appearances. After three years, Cermak was acquitted but Gotovina and Markač were found guilty. The tribunal found that they both had contributed to the JCE and were found guilty for crimes against humanity and violation of the laws or customs of war. In its verdict the tribunal sentenced Gotovina to 24 years of imprisonment and Markač to 18 years. The verdicts caused protests in Croatia and the government in Zagreb said that it would do everything to refute the court’s findings. In May 2011, both Gotovina and Markač filed their appeals and a second trial started. In November 2012 the ICTY gave its long awaited verdict and 959

Vujcic, 2005, p. 4. Fisher, 2005, p.92. 961 European Union, http://www.delhrv.ec.europa.eu/?lang=en&content=66, last accessed on 19.03.2014. 962 Fisher, 2005, p. 92. 963 Lamont, 2010, p. 1698. 964 Vujcic, 2006, p. 1. 960

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acquitted both defendants.965 This news was celebrated in Croatia and the president said that ‘the verdict confirms everything that we believe in Croatia: that generals Gotovina and Markač are innocent’.966 In Serbia the verdict caused opposing reactions and the Serbian minister that deals with the cooperation with the tribunal, Rasim Ljajic, said ‘the UN war crimes court has lost all it credibility’.967 However, not only in Serbia but also in other places the judgment was disputed. Two of the five ICTY judges that had presided over the case expressed dissenting opinions. Their opinions did not matter in the case as the other three judges formed a majority. The two dissenting judges, Carmel Agius and Fausto Pocar, strongly disagreed with the approach of the majority968 and found that they erred.969 Whatever the right judgment was, the case of Ante Gotovina would always remain controversial. For Croats he is a hero that personifies the liberation of their country and who is completely innocent. As the wounds of the war are still present, in Croatia this has strongly influenced the relationship with the ICTY. Working together with the tribunal has been very difficult; it has caused protests and sometimes even emotional responses from the people. As the EU made collaboration with the ICTY a requirement for full membership, it sometimes led to a halt in the accession negotiations. As the Croatian government did comply, although sometimes very reluctant, it seems as if the wish for membership was stronger than the need to protect its military and political leaders.

5.7 Croatia’s accession to the European Union Croatia applied for EU membership in 2003 and on initiative of the Commission, Croatia was given candidate country status by the European Council in 2004. Croatia negotiated with the EU from 2005 until 2011. The country became the 28th EU member state on 1 July 2013. When Croatia was granted candidate country status it started negotiations with the EU to prepare for accession. 970 The accession negotiations covered the adoption and implementation of European legislation and more importantly, the priorities of the acquis. The Commission monitored this process and reviewed the progress made by Croatia through annual reports presented to the Council and the European Parliament. Croatia had to adopt 35 chapters of the acquis before it could join the EU, of which 13 chapters proved to be troublesome and needed considerable

965

ICTY Operation Storm Case information Sheet, 2011, p. 8. BBC, 2012, http://www.bbc.com/news/world-europe-20352187, last accessed on 30.04.2014. 967 The Telegraph, 2012, http://www.telegraph.co.uk/news/worldnews/europe/croatia/9682855/Croatian-hero-AnteGotovina-acquitted-of-war-crimes.html, last accessed on 30.04.2014. 968 Majority’ refers to Judge Theodor Meron, Judge Patrick Robinson, and Judge Mehmet Güney. 969 ICTY, 2012, http://www.icty.org/x/cases/gotovina/acjug/en/121116_judgement.pdf, last accessed on 30.04. 2014. 970 European Commission, 2013, http://ec.europa.eu/enlargement/countries/detailed-countryinformation/croatia/index_en.htm, last accessed on 28.01.2014. 966

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efforts.971 Several interviewees stated that the extension from 31 to 35 chapters should not been seen as if Croatia was monitored more strictly.972 What was to be avoided for Croatia was the experience of Romania and Bulgaria in the EU accession process. Even after their accession, it turned out that the process of fighting against corruption or strengthening of the judiciary was not satisfactory. That was bad both for the countries as it was for the Commission. That caused the Commission to look more closely at candidate countries, not more strictly. The criteria are the same, but the look at it is stronger and more transparent which is to the benefit of Croatia. Consequently, there was an agreement of the member states that post-monitoring, as has been the case for Bulgaria and Romania, was not what they wanted.973 Topics such as the respect for fundamental rights and the rule of law are considered to be some of the most important during the enlargement phase of the EU.

974

These topics are

found in Chapter 23 and 24 and will be discussed below. 5.7.1 Chapter 23 – Judiciary and Fundamental Rights The four main topics of Chapter 23 are an independent and efficient judiciary, the fight against corruption, fundamental rights and EU citizens’ rights. These are all closely linked to the political Copenhagen Criteria. The overall negotiations of the EU with a new country are only opened once these criteria are met.975 The opening of Chapter 23 with Croatia by the EU was delayed due to poor cooperation of Croatia with the ICTY. The latter wished to obtain documents which were initially not given by Croatia. The obstacle was eventually overcome which led to the closing of the chapter.976 In a 2012 report by the Commission it was stated that Croatia is ‘generally meeting the commitments and requirements arising from the accession negotiations in the field of the judiciary and fundamental rights and should be in a position to implement the acquis as of accession’. However, it is stressed that increased efforts are needed to continue strengthening the rule of law, by improving administrative and the judicial system, and to fight and prevent corruption effectively. Moreover, prosecution of domestic war crimes, respect for human rights and the protection of minorities require ‘continuous attention’.977 A multitude of interviews confirmed the image of Chapter 23 being one of the most

971

European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 28.01.2014. 972 Interview 1; 15. 973 Interview 15. 974 Wolgang Nozar, 2012, p. 1. 975 Ibid, p. 2. 976 Interview 1. 977 European Commission, COM (2012) 601 final, p. 7.

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important and toughest chapters that had to be dealt with.978 The rule of law, reform of the judiciary to make it independent on all levels, the fight against corruption, the corruption scandal of Prime Minister Sanader, human rights protection; all these elements are not something that can be checked off from a list. It can be seen as a process of the society altogether. There have been discussions on how the progress made was to be measured, such as the fight against corruption. In the end, it can be argued that the closing of this chapter was a political consideration979 based on the progress reports that were issued by the Commission. The question of how to close Chapters 23 and 24 was troublesome. A success story is also needed, since enlargement is no longer a good seller to the public. EU accession can therefore be compared to the force of a magnet, the closer Croatia came to the targets, the more the country got pulled in.980 5.7.2 Chapter 24 – Justice, Freedom and Security The main topics that are included in Chapter 24 are ‘border control, visas, external migration, asylum, police cooperation, the fight against organised crime and against terrorism, cooperation in the field of drugs, customs cooperation and judicial cooperation in criminal and civil matters’. This should strengthen the EU in being an area of freedom, security and justice.981 The Commission’s report on Croatia’s state of preparedness of EU membership in 2012 stated that Croatia generally met the commitments and requirements arising from the accession negotiations in the field of justice, freedom and security and was to be in a position to implement the acquis as of accession. Work needed to be done in the area of migration, visa policy, border management and the fight against organised crime, including on human trafficking and anti-terrorism, in order to ensure that Croatia completed its preparations for membership by the date of accession.982 The Commission’s report also shows that in the field of migration, alignment with the acquis, preparations for the implementation of the asylum acquis, legislative alignment regarding visa policy, and legislative alignment (concerning borders and Schengen) are all almost complete.983 5.7.3 Commission’s opinion Based on all acquis chapters, and special focus to chapter 23, and 24, the Commission concludes by saying in her 2013 report that Croatia is ‘generally meeting the commitments and requirements arising from the accession negotiations’. The country has demonstrated its ability 978

Interview 1; 15; 29; 32. Interview 1; 15. 980 Interview 15. 981 European Commission, 2013 (A). 982 European Commission, COM (2012) 601 final, p. 12. 983 Ibid., pp. 10-11. 979

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to ‘fulfil all other commitments in good time’ before accession. The Commission’s report on Croatia’s state of preparedness for EU membership in 2012 required ten priority points to be fulfilled before the country was to access the EU in 2013. Since Croatia had completed these requirements in time, the Commission was confident that the country was ready for EU membership.984

5.8 Croatia in the EU The composition of the EU institutions changed when Croatia entered the EU. The number of seats in the European Parliament was temporarily raised to 766 to accommodate the 12 new Croatian parliamentarians, but will change back to 751 as set by the Lisbon treaty after the 2014 European Parliament elections. Croatia will only have 11 representatives in parliament after the elections, effectively losing one seat. This is the same number of seats Ireland and Lithuania will have.985 The division of the 12 seats currently representing Croatia are divided between four political parties after the 2013 European election in Croatia, which had a remarkably low turnout of just 20.75 percent. Both the HDZ and the SDP have five seats and both the Hrvatski laburisti and the HSP have one seat each.986 There were some changes in the Council of the European Union as well. Croatia was given seven votes, which increased the number of total votes in the council from 345 to 352. Furthermore, a qualified majority is now obtained by having 260 votes instead of 255 votes and at least 15 member states voting in favour. Until 1 October 2014, a member state can request the checking of least 62 percent of the EU citizens to be represented by this majority. If this is not the case no qualified majority is obtained. This new system of double majority will be the standard way of obtaining a qualified majority in the council after 1 November 2014.987 All other EU institutions that normally have a representative of every member state had a new Croatian colleague from 1 July 2013 onwards. This includes the Commission, the CJEU and the European Council.988 5.8.1 Croatia and the external EU border With the accession of Croatia to the EU, the external land border of the member states of the EU 984

European Commission, COM (2012) 601 final, pp. 14-15. European Parliament, 2013, http://www.europarl.europa.eu/news/en/newsroom/content/20130610IPR11414/html/Elections-2014-share-out-of-MEPs'-seats-among-28-EU-countries, last accessed on 13.03. 2014. 986 European Parliament, -, http://www.europarl.europa.eu/meps/nl/search.html?country=HR, last accessed on 12.03. 2014. 987 Council of the European Union, http://www.consilium.europa.eu/council/voting-system-at-the-council?tab=Indetail&subTab=Qualified-majority&lang=nl, last accessed on 12.03.2014. 988 Andrew Gardner, 2013, http://www.europeanvoice.com/article/2013/april/mimica-chosen-as-croatia-scommissioner/77096.aspx, last accessed on 12.03. 2014; Court of Justice of the European Union, http://europa.eu/rapid/press-release_CJE-13-85_en.htm, last accessed on 17.03. 2014. 985

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has shifted. The EU now holds a border with Bosnia and Herzegovina and Montenegro. The external land border between Croatia and both countries are respectively 1001 km and 22 km. Croatia also shares a border with Serbia, which amounts to a total length of 355 km. As a result of the enlargement, the total length of the external border of the EU has increased with 327 km. As the figure below shows, Croatia’s border with Serbia, Montenegro, and Bosnia and Herzegovina totals approximately 1377 km. This makes Croatia the member state with the longest external land border as it surpasses Finland (1340 km) and Greece (1248 km).989

Figure 5.2: New external land borders of the EU. 990

The bordering of Croatia with non-EU countries caused the country to implement the EU rules on border controls, on customs, on transit traffic and with regard to food-safety, veterinary and phytosanitary issues.991 Slovenian experts worked in Croatia before its EU accession to provide support with regards to border control and border checks.992 Croatia is not yet part of the Schengen area. Although this is expected to pose difficulties993, Croatia aims to be part of Schengen by 2015. It has been said that Slovenia will continue to help Croatia with applying for Schengen. Until that time, border control will 989

FRONTEX, 2013(A), p. 63. Ibid., p. 41. 991 European Commission, 2013 (B), SPEECH/13/557. 992 Interview 45. 993 PressEurop, 2013, http://www.presseurop.eu/en/content/news-brief/3744131-after-accession-next-comes-schengen, last accessed on 17.05.2014. 990

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continue to operate between the two countries. According to Frontex, the border agency of the EU, this is expected to have moderate impact on the main routes used by irregular migrants.994 Due to the mountainous area between Croatia and Bosnia and Herzegovina, analysts expect a continued flow of illicit small arms from the Western Balkan countries, where a large number of weapons is stored in private households. The influx of weapons from the Western Balkans to Central and Western Europe might increase due to the shifting of the EU customs border to Croatia.995 Other challenges lie in the prevention of illegal border crossing, because of the length of the Croatia and Bosnia and Herzegovina border, many crossing roads and links between organised crime groups on both sides of the corner. This is also fuelled due to the fact that the Croatian international borders, except the one with Hungary, were established quite recently ‘over an intricate road network built without border considerations at the time of the Yugoslav Republic’.996 Frontex recognises the security implications for the region with Croatia joining the EU. However, irregular migration trends in the Western Balkans or linked with the region will continue to be influenced the most by developments at Greek and Bulgarian borders with Turkey.997

Moreover, based on the location of the main countries of origin of irregular

migration to the EU for the past five years, the borders that are most likely to deal with illegal border crossing will be the Southern Mediterranean coast next to the Turkish border.998 To finance actions at the new external borders of the EU for the implementation of the Schengen acquis and external border control, a Schengen Facility was created as a temporary instrument to help Croatia between the date of accession and the end of 2014. Article 31 of Croatia’s Accession Treaty stipulates that in 2013 and 2014 a total sum of respectively 40 million euro and 80 million euro is made available for this by the EU.999

5.9 Law enforcement 5.9.1 Croatian police force Before the 1990s the Yugoslav militia acted as the police in Croatia, while serving the interests of the Communist Party. Before the outbreak of the war in 1992, only the Ministry of the Interior was legitimised to use armed force. When the war broke out, the Croatian government allowed for the National Guard Corps to be established as part of the police. Hence, for a period of two years the police was not only responsible for its regular duties, but also for defence. Therefore, 994

Frontex, 2013(A), p. 63. Ibid., p. 54. 996 Ibid., p. 40. 997 Frontex, 2013(B), p. 6. 998 Frontex, 2013(A), p. 64. 999 European Union, 2011, p, 66. 995

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the police also performed a military role.1000 The Croatian police force was affected by transformations in society. Moreover, it had to withstand the Serb-dominated Yugoslav Army, the influx of Bosnian refugees, governance by a right-wing party for 10 years, and the transition into a market economy. Moreover, the war caused a lot of Croats to join the police and army. Because a lot of people were needed, the requirements to join were lowered. The double role that the Croatian police played resulted in a powerful sense of camaraderie and loyalty among the officers. All these factors contributed to a certain degree of corruption within the police force after the war. Several acts, such as the Criminal Procedure Code in 1997 and Police Law in 2001, were signed in order to strengthen hiring standards, to increase the amount of police training, to strengthen the code of silence and to consolidate the official rules. In short, these measures were intended to democratise the police.1001

5.9.2 Ministry of the Interior The Croatian Ministry of the Interior deals with several administrative and other tasks related to a wide range of topics. These include policing, tracing and capturing of criminals and their bringing before the authorities, maintaining of public order, conducting of crime investigations, road traffic safety, state border protection, movement and stay of aliens, travel documents, safeguarding at gatherings, nationality affairs, issuing of identity cards and driving licences, procurement of weapons, explosives, protection of the constitutional order and supervision over security agencies.1002

5.9.3 General Police Directorate The Croatian police force is a public service within the Ministry of the Interior and carries out tasks laid down by law. The General Police Directorate is an administrative organisation within the ministry and is responsible for carrying out the police activities. The head of the directorate is the General Police Director. The ministry has about 26 000 staff members and 20 000 men and women make up the national police force.1003 The directorate’s headquarters is situated in Zagreb. Tasks of the General Police Directorate include the screening and analysis of the state of security and criminal developments, the harmonisation, guidance and supervision over the work of the directorates and police administrations, participating in complex operations, 1000

Kutnjak Ivkovic e.a., 2000, pp. 55-56. Kutnjak Ivkovic, 2012, pp. 372-373. 1002 Policija (A), -, http://www.mup.hr/default.aspx?id=1257, last accessed on 24.02. 2014. 1003 Interpol (A), -, http://www.interpol.int/Member-countries/Europe/Croatia, last accessed on 24.02.2014. 1001

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providing for the implementation of the international agreements on police cooperation and other international acts, organising and conducting criminal forensics operations, setting prerequisites for police academy’s work, adopting equipment and technical standards, and setting prerequisites for police readiness in the state of emergency.1004

5.9.4 Police Administrations Police administrations deal with the police activities locally in accordance with their county’s territory. The administrations are divided into four categories, which consist of 20 police districts. The first category includes the Zagrebačka County Police Administration. The second category includes the Splitsko-dalmatinska, Primorsko-goranska, Osiječko-baranjska, and Istarska County Police Administration. The third category includes the Dubrovačkoneretvanska, Karlovačka, Sisačko-moslavačka, Šibensko-kninska, Vukovarsko-srijemska, and Zadarska County Police Administration. Lastly, the fourth category includes the Bjelovarskobilogorska, Brodsko-posavska, Koprivničko-križevačka, Krapinsko-zagorska, Ličko-senjska, Međimurska, Požeško-slavonska, Varaždinska, and Virovitičko-podravska County Police Administration.

Figure 5.3: The Croatian police counties.1005

5.9.5 Current state of play of the police The Croatian police force is described as ‘modernised, professional and well respected’.1006 1004 1005

Policija (B), -, http://www.mup.hr/1259.aspx, last accessed on 24.02.2014. Policija (C), http://www.mup.hr/1265.aspx, last accessed on 24.02.2014.

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Within the last ten years the police force has improved in many aspects. An expert in the field said that this can, for instance, be seen in a sense of (internal) procedures, quality of work and the way citizens are treated. There is a certain level of democratisation and advancement of its capacity. Generally, the police will do their job when a crime is reported. It is only incidental that they do not do their work.1007 Some critical remarks can be made as well. There have been cases of mistreatment and beating of citizens, alledgedly by the police. Although there is a certain level of advancement, the problem is that the internal control still protects policemen. The solidarity amongst policemen affects their objectivity, causing them to lose their critical judgement. Low wages and bad working conditions might be the root of these problems. The police school is a common getaway if there are not enough funds for further education.1008 A second observation is that the police now has authority over devices that were previously in the hands of the secret service. They now have access to lists of phone calls and messages, meaning that they can link people together. Moreover, the police is able to retrieve the data of movement through mobile phone signals. In practise, this entails that the police has the ability to trace people.1009 5.9.6 Incidence of crime Multiple researches have found that the incidence of crime in Croatia is low. Two recent reports state that Croatia ‘is widely considered very safe with low crime rates’.1010 Secondly, a research was conducted on the basis of Interpol data for Croatia. When looking at murder, forcible rape, robbery, aggravated assault, burglary, larceny and motor vehicle theft – the FBI’s index crime – it was found that in 2000 ‘the crime rate in Croatia is low compared to industrialised countries’.1011 It is not possible to look at comparisons from recent years as Interpol has removed the statistics from its website. Interpol wants to prevent people from making incorrect comparisons between countries due to differences in data collection per country.1012 Thirdly, Eurostat also discourages making comparisons between countries for similar reasons. However, based on figures, trends can be seen. Eurostat has published the number of crimes reported by the Croatian police. When taking 2004 as a starting year with 85 416 reported crimes, every year since has had fewer (reported) crimes. When looking at the most recent years, in 2011 75 620 crimes were reported by the police, and in 2012 72 171 crimes were reported. Based on

1006

OSAC, 2013, https://www.osac.gov/pages/ContentReportDetails.aspx?cid=14383, last accessed on 24.04.2014. Interview 32. 1008 Ibid. 1009 Ibid. 1010 OSAC, 2013, https://www.osac.gov/pages/ContentReportDetails.aspx?cid=14383; https://www.osac.gov/Pages/ContentReportDetails.aspx?cid=15381, last accessed on 24.04. 2014. 1011 Robert Winslow, 2000. 1012 Interpol (B), http://www.interpol.int/FAQs, last accessed on 24.04.2014. 1007

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these figures, it can be concluded that a negative trend in the amount of reported crimes is visible.1013 Fourthly, in the Commission’s 2013 Monitoring Report on Croatia, it is stated that ‘the legal and institutional framework for the suppression of […] organised crime is adequate’. This has been strengthened with the introduction of the Criminal Code on 1 January 2013.1014 All in all, Croatia can generally be seen as a safe country where the legal and institutional framework that affects the functioning of the police is in place. 5.9.7 Croatian armed forces As described in the previous paragraph, Croatia’s police was responsible for both policing as the the military defence during the war. The Yugoslav Army was generally serving Serbian interests. Therefore, Croatia’s army is, just as the country itself, a young body. The army falls under the responsibility of the Ministry of Defence, which was established according to the Decree of Internal Organisation of the Ministry of Defence. The Minister of Defence is Ante Kotromanović. The Croatian military is officially called Armed Forces of the Republic of Croatia. The Croatian military consists of three branches: the Croatian Army, the Croatian Navy, and the Croatian Air Force and Defence. 1015 Croatia became a member of the NATO in 2009, four years before joining the EU. Before that time, Croatia was already contributing to the NATO-led Kosovo Force (KFOR). It is currently providing logistical support to NATO-led operations in Kosovo. Moreover, it has been contributing to the International Security Assistance Force (ISAF), led by NATO, in Afghanistan since 2003. Currently, around 300 Croatian soldiers, diplomats and military police officers are working for ISAF. Moreover, Croatia is taking part in the fight against terrorism, in which intelligence and analysis is shared with NATO. On top of that, national counter-terrorist capabilities are enhanced and border security is improved. Regarding UN-led operations, Croatia contributes troops to missions in the Golan Heights, Cyprus, Sudan, Liberia, Lebanon, Western Sahara and Kashmir.1016 In terms of defence and security sector reform, Croatia has adopted a Long-Term Development Plan for the restructuring of its Armed Forces. This should result in professional, mobile, deployable and financially viable forces that are interoperable with the rest of the forces assigned to NATO by its member states. Croatia is also cooperating with NATO on improving the coastguard, border policing activities, military training, military education and English language

1013

Eurostat, 2014, http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=crim_gen&lang=en, last accessed on 24.04.2014. 1014 European Commission, COM (2013) 171, p. 7. 1015 Ministry of Defence of the Republic of Croatia, 2008, http://www.morh.hr/en/about-us.html, last accessed on 24.02.2014. 1016 NATO, -, http://www.nato.int/cps/en/natolive/topics_31803.htm?selectedLocale=en, last accessed on 29.04.2014.

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training.1017

5.10 Conclusion Croatia has a semi-presidential system with the president as the head of state and the primeminister as the leader of the government. National politics are characterised by the two major contemporary parties the HDZ and SDP. These parties barely have any dialogue with each other, but dominate national politics of which the SDP is now the coalition leader. However, this might change with the rise of new parties that can be expected to receive more mandates in parliament at the cost of the HDZ and SDP. Local and regional governments are characterised by the inability of carrying out their responsibilities without support from the national government. The reason for this is the lack of financial, human, and administrative capacity of these sub-national governments. Furthermore, these sub-national governments are unable to provide resistance against the national authorities if these adopt new legislation which can have far-reaching consequences for the local and regional authorities. Adding to this, quite a few politicians on local level do little to improve the situation for their constituency. With Croatia’s accession to the EU on 1 July 2013, there is hope that Croatia’s future will look brighter than it does now. Difficult topics on the Judiciary and Fundamental rights and Justice, Freedom and Security (Chapter 23 and 24 of the acquis respectively) have been successfully closed and now adhere to the EU’s standards. This means the legislation is also in place. EU accession is the start of a long process, which up until now has not been finished and requires more time. But this does not count just for Croatia, but for all member states. Major benefits of EU accession on Croatia will appear on the long term. In that respect, there will be improvements regarding the rule of law, the standards of the society in terms of human rights and democratic institutions. But Croatia will also be able to more successfully fight corruption with the help of mechanisms that were not at Croatia’s disposal before accession. Another difficult topic for Croatia to comply was the ICTY. This was the case as they did not perceive their soldiers, officers and commanders of the 1990s Wars as criminals, but as rightful defendants of their country. This opinion, however, was not shared by the EU and the EU made cooperation with the ICTY a prerequisite for membership. Of all the ICTY cases the case of Gotovina is perhaps the most controversial one. This Croatian general had allegedly participated in ethnic cleansing and was indicted. He was, however, acquitted and this news was welcomed with open arms in Croatia. Serbia, on the contrary, had lost all faith in the ICTY after this judgment. Furthermore, two of the five judges assigned to the Gotovina case were against the acquittal of Gotovina.

1017

NATO, -, http://www.nato.int/cps/en/natolive/topics_31803.htm?selectedLocale=en, last accessed on 29.04.2014.

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6. Foreign policy In this chapter Croatia’s main objectives of foreign policy will be discussed, with a special focus on the foreign, security and defence policy. The chapter continues with addressing the political relations that Croatia has with other countries through international organisations and treaties. The political relationship of Croatia with neighbouring Serbia, Bosnia and Herzegovina and Slovenia will subsequently be thoroughly analysed. Furthermore, Croatia’s perspective on recent developments in Ukraine will be examined.

6.1 Main objectives of Croatian foreign policy In 2006 the main objectives of Croatian foreign policy were defined as ‘full EU and NATO membership, enhancing relations with neighbouring third countries, developing bilateral and multilateral international cooperation and promoting Croatia and its economy’.1018 Croatia revises these foreign policy objectives every six months as they have to be adapted to every new EU presidency.1019 In 2012 the Croatian Foreign Service consisted of almost 1 500 employees, 50 embassies and 23 consulates.1020 Croatia considered NATO and EU membership to be in its best interest. By joining NATO in 2009 Croatia was able to protect its national security. The Croatian government believes that national security cannot be protected by Croatia itself and that Croatia therefore has to operate within the NATO framework.1021 Being a relatively small country, Croatia considered EU membership as the best way to develop and ensure a good future and to protect its national interests. Croatia therefore joined the EU in 2013. Croatia analysed the costs and benefits of entering the EU and decided that they will profit from EU membership in the long term. Croatia believed that the possibilities of their economic, political, scientific and cultural development are greater within the EU. Therefore, maintaining good relations with all of the EU members is a key priority of Croatia’s foreign policy.1022 Croatia also has ‘a special interest in permanent stabilisation and democratisation of South Eastern Europe, in ensuring permanent peace and development, establishing good neighbourly relations based on equality and reciprocity, and to solve all open issues remaining after the break-up of Yugoslavia in finding a political way based on international law’.1023This includes the promotion of post-conflict construction of democratic institutions, not only in the

1018

Republic of Croatia, 2013, http://us.mfa.hr/?mh=182&mv=1074, last accessed on 21.05.2014. Interview 54. 1020 European Commission, (2007). Screening Report Croatia. Chapter 31- Foreign, security and defence policy. 1021 Republic of Croatia, 2013, http://us.mfa.hr/?mh=182&mv=1074, last accessed on 21.05.2014. 1022 Ibid. 1023 Ibid. 1019

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region but also in North Africa. Due to its own experiences in this area, Croatia is able to help other countries. Whereas Slovenia used bilateral issues to hamper the accession of Croatia, Croatia stated that it will never use bilateral issues within the negotiation framework of future accessions of Serbia, Montenegro, and Bosnia and Herzegovina to the EU. These bilateral issues should be solved outside the negotiation framework.1024 Croatia stated that it wants to develop political and economic relations with all democratic countries in the world, in accordance with Croatia’s national interests. Croatia therefore aims to develop bilateral and multilateral international cooperation. Concerning bilateral relations, Croatia wants to maintain good relations with big countries like the US, Russia, China, Australia, and New Zealand.1025 Multilateral international cooperation takes the form of participating in the activities of international organisations. The Croatian government wants to strengthen Croatia’s role in various organisations that are of interest to Croatia, namely EU, NATO, UN, Council of Europe (CoE), and the Organisation for Security and Cooperation in Europe (OSCE). For example, Croatia aims at strengthening the human rights protection through their membership at the CoE.1026 Lastly, Croatia wants to promote itself and its economy. The Croatian government wants to strengthen its national identity and create an image of Croatia as a modern, dynamic, democratic and tolerant Mediterranean and Central European country. The government believes that this will contribute to the realisation of certain foreign policy goals. One of the key activities is the cultural promotion of Croatia.1027 Croatia wants to promote its economy by increasing Croatian export and attracting foreign investments. This goal can be illustrated by the upcoming car industry; a new car brand which is called ‘Remetz’ is quite successful. 1028 Croatia also wants to invest more money in research and development (R&D).1029

6.2 Chapter 31 - Foreign, security and defence policy As part of Croatia’s accession to the EU, Croatia had to align its foreign policy with Chapter 31 of the acquis. This Chapter concerns foreign, security and defence policy and consists of political declarations, actions, and agreements. Croatia therefore has to participate in the Common Foreign and Security Policy (CSFP) and the Common Security and Defence Policy (CSDP). The CSFP and CSDP are based on various legal acts, international agreements and political documents. Member states must be able to ‘conduct political dialogue in the framework of CFSP, 1024

Interview 54. Ibid. 1026 Republic of Croatia, 2013, http://us.mfa.hr/?mh=182&mv=1074, last accessed on 21.05.2014. 1027 Ibid. 1028 Interview 54. 1029 Republic of Croatia, 2013, http://us.mfa.hr/?mh=182&mv=1074, last accessed on 21.05.2014. 1025

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to align with EU statements, to take part in EU actions and to apply agreed restrictive measures’.1030 No major difficulties in complying with Chapter 31 have occurred.1031 The CFSP is the foreign policy of the EU. The CFSP mainly deals with trade and commercial policy, but also with other areas such as funding for third countries. CFSP decisions require unanimity among the member states in the Council of the European Union. Yet, once an agreement is reached, specific aspects of these decisions can be further decided by qualified majority voting. Since 2001, there has been regular political dialogue between the EU and Croatia concerning the CFSP.1032 The CSDP has become a significant part of the CFSP and deals with defence and military issues. Following the end of the Cold War and the conflicts in the Balkans, it became clear that the EU had to engage more in conflict prevention and (civilian) crisis management. Due to the fact that the EU itself has limited military capability, member states are responsible for their own territorial defence. The majority of EU members are also members of NATO, which is compatible with the CSDP. Croatia actively participates in the CSDP framework since 2004.1033

6.3 Strengths and weaknesses of Croatian foreign policy The Croatian foreign policy has certain strengths and weaknesses. An interviewee mentioned that one of Croatia’s strengths is the post-conflict building of democratic institutions.1034 Croatia’s experience and knowledge in this area can be useful to help other countries that go through a similar experience. In contrast, it is stated that an important weakness of the Croatian foreign policy is the lack of coordination between foreign policy and other policy areas. 1035 Croatia is, for example, not fully aware of the effect that certain foreign policy actions have on its economy; Croatia has to be aware of its economic position during a discussion on the protection of human rights in, for instance, Libya. This lack of coordination is due to Croatia’s small administration. The staff of EU departments within the multiple ministries is too small, which causes a tunnel vision: the staff can only deal with one thing at a time. Furthermore, the lack of budget is a structural problem, and the workload is too high in comparison with the salary. This indicates that the system will need to change in order to improve and strengthen Croatia’s foreign policy. One suggested solution to this problem is to employ students straight out of college, because they work hard and do not demand a high salary. This could be an effective measure: youth employment will diminish and the budget does not have to be increased. 1030

European Commission, 2007, Screening Report Croatia. Chapter 31- Foreign, security and defence policy, p. 2. Ibid. 1032 Ibid. 1033 Ibid. 1034 Interview 54. 1035 Ibid. 1031

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Whether this measure will be taken and will have a positive impact, remains to be seen.1036

6.4 International organisations and Croatia As mentioned above, Croatia aims to realise multilateral international cooperation through participation in international organisations. Croatia focuses mainly on Atlantic integration. Before Croatia was able to join international organisations such as NATO and the EU, it had to deal with the negative impacts of the 1990s Wars and the dissolution of Yugoslavia. Croatia had to, for example, improve the human rights and anti-discrimination situation, and the relations with neighbouring countries Serbia, Slovenia, Montenegro and Bosnia and Herzegovina.1037 Croatia currently receives support from different organisations and donor programmes, and is a member of several international organisations. Croatia receives support from the EU, the European Bank for Reconstruction and Development, the International Bank for Reconstruction and Development, the International Monetary Fund and the United States Agency for International Development. A list of international organisations of which Croatia is a member can be found in Appendix II.

6.5 Croatia’s political relationship with its neighbouring countries In this section, Croatia’s multilateral political relations with its neighbouring countries will be discussed, as well as the bilateral political relations with three of its neighbouring countries: Serbia, Bosnia and Herzegovina and Slovenia. The multilateral political relations between Croatia and its neighbouring countries are characterised by the aftermath of the 1990s Wars. After these wars, more than three million people in Croatia, Serbia, Montenegro, and Bosnia and Herzegovina were displaced. These four countries signed the Sarajevo Declaration in 2005, and they are called ‘Partner Countries’. The aim of the Declaration is to find solutions for refugees and displaced persons on the territory of the former Yugoslavia following the 1991-1995 conflicts. Almost half a million of these people are still displaced.1038 The Sarajevo Declaration also deals with other topics, such as data exchange and statistics, pensions and con-validation rights, and housing and property issues. International organisations such as the UNHCR, the EU and the OSCE, as well as the US have been helping with the process.1039 The ownership of this process is increasingly in the hands of the countries concerned, instead of the international community that might possibly cancel financial aid

1036

Interview 54. NATO, 2009, http://www.nato.int/cps/en/natolive/topics_31803.htm, last accessed on 17.01.2014. 1038 Sarajevo Process, 2012, pp. 1-2. 1039 Ibid. 1037

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during previous years.1040

6.5.1 Political relations with Serbia The bilateral political relations between Croatia and Serbia started in 1996, when Croatia and Serbia formally recognised each other at the end of the Croatian War of Independence. This recognition resulted in an agreement between the foreign ministers of both countries, which intended to improve relations between the countries, including simplifying border crossings.1041 The bilateral relations between Croatia and Serbia are partly maintained through embassies. Croatia and Serbia have an embassy in Belgrade and Zagreb respectively. The 1990s Wars have left scars upon both countries which are still not healed. These issues, amongst others, concern victims of war, refugees, property rights of Serbs, missing persons, border disputes and war crime trials.1042 The problems that Serbian returnees in eastern Croatia encounter are dealt with in the chapter on human rights in Croatia. Politically speaking, the bilateral relationship between Croatia and Serbia seems to have normalised. This is illustrated by high level visits between both countries in 2013. The general trend is that both countries are looking ahead.1043

6.5.1.1 Court of Justice lawsuits One of the most notable political issues between Croatia and Serbia nowadays concerns the lawsuits that both countries have filed against each other at the International Court of Justice. Croatia sued Serbia in 1991 over the killing of Croats during the war. In response, Serbia sued Croatia in 2010 over the killing of Serbs during the war, as well as during the Second World War. Due to political reasons, neither lawsuits have up to now been dropped, nor have they come to court.1044 In a 2013 meeting between Croatian President Josipović and his Serbian counterpart Nikolić, the latter urged Croatia to drop its genocide lawsuit. In return, Serbia would drop its own genocide suit against Croatia. The Serbian president said that this withdrawal would ‘establish overall peace’ between the nations. However, according to the Croatian president, the resolving of 1 689 missing persons needs to be finished first. 1045

1040

Interview 15. The New York Times, 1996. 1042 Interview 29. 1043 Ibid. 1044 The Economist, 2014, http://www.economist.com/blogs/easternapproaches/2014/03/international-court-justice, last accessed on 18.05.2014. 1045 Marija Ristic, 2013. 1041

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6.5.1.2 Opening of EU negotiations for Serbia As of 21 January 2014, the negotiations with Serbia on EU accession have been opened. On this day, the President of the European Council, Herman van Rompuy, met with the Prime Minister of Serbia, Ivica Dačić. Van Rompuy stated that he was impressed by Serbia’s progress – in particular on normalising relations with Kosovo - over the 12 months prior to the official opening of the negotiations. However, Van Rompuy underlined that strengthening the rule of law should continue. Special focus was given to the reform of the judiciary system, and the fight against corruption and organised crime. Van Rompuy concluded his speech by saying that ‘the opening of the accession negotiations will be significant for not only Serbia, but for the whole region’.1046 Jose Manuel Barroso, president of the Commission, also had kind words for Serbia on the day the accession negotiations were opened, but also underlined the challenges for Serbia in the areas of rule of law, and the fight against corruption and organised crime. He points out the ‘challenges that lie in public administration reform, independence of key institutions, media freedom, anti-discrimination, and the protection of minorities’.1047 Lastly, the Commissioner for Enlargement and European Neighbourhood Policy, Štefan Füle, was in line with Van Rompuy and Barroso and was pleased with the opening of negotiations. However, he requires Serbia to ‘remain fully committed to the normalisation of relations with Pristina [Kosovo] and continue to deliver on implementation of all dialogue agreements’. He also stated that reforms need to be finalised and alignment with the acquis pursued, with special focus given to Chapters 23 (Judiciary and Fundamental Rights) and Chapter 24 (Justice, Freedom, and Security) ‘which will firmly anchor reforms in the area of rule of law’.1048 In these press releases by three important EU officials, no comments are made on the relations between Croatia and Serbia, only on the relations between the latter and Kosovo. Apparently, there are no major frictions between Croatia and Serbia which require special notice by these three EU officials. This does not mean that the tension has disappeared, as is demonstrated by the two lawsuits that the countries have filed against each other and have not been dropped, yet it is in huge contrast with the relations between the two countries in the 1990s. An EU with Serbia as one of its member states will further the interdependency of Croatia’s and Serbia’s economy. This has been part of the recipe for peace in Western Europe since 1945. In that respect, it is to be hoped that Serbia will join the EU and that the problematic relations between the two countries will belong to the past. Croatia supports Serbia and the other countries in the region in their integration into the 1046

European Council, 2014 EUCO 19/14. European Commission, 2014 (A), IP/14/52. 1048 European Commission, 2014 (B), MEMO/14/41. 1047

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EU. Croatia has signed the Declaration on the Promotion of European Values in South Eastern Europe which states that its supports the EU accession of neighbouring countries.1049 Serbia is therefore not afraid that Croatia might use its veto right to block the closing of certain acquis chapters, as Slovenia is said to have done during the Croatian accession phase. In addition, Serbia makes use of the experience that Croatia has as a result of the negotiation process of joining the EU, for example regarding Chapter 23 and Chapter 24.1050 The director of the Serbian governments’ European Integration office says that his Croatian counterparts are ‘very motivated to help us’ and ‘on the working level, relations are just fantastic’. The Croatian officials are eager to get Serbia in the EU.1051 This shows that a more cooperative relation is visible, instead of a conflictive relation. 6.5.2 Political relations with Bosnia and Herzegovina The Bosnian and Herzegovinian and Croatian political relations started when both countries recognised each other in 1992. Croatia has three consulates in the Bosnia-Herzegovinian cities, these are Banja, Mostar, and Tuzla. The embassy can be found in Sarajevo. The only consulate of Bosnia and Herzegovina in Croatia is located in Zagreb, just as their embassy. The border between Croatia and Bosnia and Herzegovina is for both countries the longest border with another country. Some areas around this border are claimed by both countries. Currently, there are various committees working on these issues.1052 6.5.2.1 Pelješac Bridge One of the difficulties in the relationship between Croatia and Bosnia and Herzegovina lies in the fact that the southern Croatia is intersected by a small strip of coast around the Bosnian town of Neum, which forms the single access point to the sea for Bosnia and Herzegovina. Only through its territorial waters is the southernmost part of Croatia connected to the rest of the country, as the image below shows. The former Croatian government came with the idea to build a bridge which would cross the Adriatic to connect with the Croatian exclave. Bosnia and Herzegovina opposed this plan because it feared that its only access to the rest of the Adriatic would be blocked. In 2012 the plans were cancelled, but only to get new attention in 2013. The Croatian Minister of Traffic stated that the construction of the bridge could start in 2015.1053 An expert in the field stated that Bosnia and Herzegovina is not against the building of the bridge as long as the Bosnian

1049

Sabor, -, http://www.sabor.hr/Default.aspx?art=47289&sec=765, last accessed on 18.05.2014. Interview 29; 30; 33; 48; 54. 1051 Tim Judah, 2014. 1052 Interview 49. 1053 Croatian Times, 2013. http://www.croatiantimes.com/news/Business/2013-1211/34880/Peljesac_bridge_is_best_solution_to_connect_the_south_of_Croatia, last accessed on 13.04.2014. 1050

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territory and border are respected.1054

Figure 6.1: The Pelješac Bridge.1055

The Commission demanded a pre-feasibility study regarding the bridge. A contractor concluded that the bridge might be the best solution. However, the Commission requires more of these studies. Croatia has to demonstrate that it has taken all the elements into consideration in order for the bridge to be co-funded by the EU. Croatia has to prove how such a bridge could fit into the broader picture of connecting the infrastructure in the EU.1056

6.5.2.2 Bosnia and Herzegovina, Croatia, and the EU Croatia and Bosnia were both members of the Central European Free Trade Agreement (CEFTA) and were able to easily conduct trade, but this changed when Croatia joined the EU. The European Commissioner for Enlargement and Neighbourhood Policy, Štefan Füle, stated that Bosnia and Herzegovina will benefit from Croatia’s joining the EU, because it brings the common market of the EU at the doorstep of Bosnia and Herzegovina.1057 However, Croatia’s EU membership resulted in an explicit new border, which caused problems for people living alongside the border. For example, due to regulations on meat, the imports and exports of meat could no longer continue as they did during the time both countries were a member of CEFTA.1058 To solve these issues, multiple bilateral agreements were signed between Croatia (EU) and Bosnia and Herzegovina. According to Füle, these agreements create a ‘good basis for this to 1054

Interview 49. BBC. 2007, http://news.bbc.co.uk/2/hi/europe/7062107.stm, last accessed on 21.04.2014. 1056 Interview 15. 1057 European Commission, 2013 (B), SPEECH/13/557. 1058 Interview 33; 54. 1055

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happen in accordance with our rules and our high standards’. This will make sure that Bosnia is not left behind as its Croatian neighbour develops alongside the EU requirements. The Agreement on Border Crossing Points fixes places of border crossing points and ‘is in full compliance with the EU requirements regarding border controls of persons and of goods’. The Local Border Traffic Agreement enables persons living in an area of 5 km or less from the border to cross to the adjacent country ‘under easier conditions than in the case of normal border crossings’. The agreement also provides for a revision clause to extent this border area to up to 30 km.1059 Füle encourages Bosnia and Herzegovina to transpose EU laws regarding the export of agricultural products of animal origin. This way, the country will be able to export milk and meat products to Croatia and the EU more easily. The administrative control structures have to comply with the EU food safety standards. The EU has granted Bosnia and Herzegovina a special transit regime for the export of these agricultural products to third countries through the Croatian port of Ploče.1060 Croatia is said to be open and willing to assist other countries, such as Bosnia and Herzegovina, in their European integration track.1061 This is demonstrated by Croatia’s signing of the Declaration on the Promotion of European Values in South Eeastern Europe.1062 Croatia shares its accession experience with Bosnia and Herzegovina by means of assistance programmes. For example, 70 000 pages of translated legal documents have been transferred from Croatia to Bosnia and Herzegovina. EU accession for Croatia proved the other Western Balkan countries that it is possible to join the EU. This has been confirmed by multiple experts, who stated that Croatia’s accession is psychologically very important for Bosnia and Herzegovina. In that context, Croatia’s accession gave a positive incentive to other Western Balkan countries. Moreover, Croatia’s step is seen as a major improvement for the region.1063 6.5.2.3 Recent riots in Bosnia and Herzegovina Riots in February 2014 in especially Sarajevo, but also other Bosnian cities gained intensive media coverage throughout Europe. Described as the worst civil unrest in Bosnia since the 1991 to 1995 war, protesters set government buildings on fire and fought with the riot police. The protesters are unsatisfied with the political system as well as the current high unemployment rate.1064 Bosnia and Herzegovina’s political system is described as complicated and that is what

1059

European Commission, 2013 (B), SPEECH/13/557. Interview 33; 54; European Commission, 2013 (B), SPEECH/13/557. 1061 Interview 33; 48; 54. 1062 Sabor, -, http://www.sabor.hr/Default.aspx?art=47289&sec=765, last accessed on 18.05.2014. 1063 Interview 49; 50; 54. 1064 Reuters, 2014, http://www.reuters.com/article/2014/02/07/us-bosnia-unrest-idUSBREA160UU20140207, last accessed on 10-04-2014. 1060

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the protesters have been expressing their dissatisfaction at.1065 The riots can also be linked to the recent Sejdić v Finci case in the Bosnian judicial system. According to the Council of Europe, the case concerns the situation where ‘prohibiting a Roma and a Jew from standing for election to the House of Peoples of the Parliamentary Assembly and for the State Presidency amounts to discrimination and breaches their electoral rights’.1066 The central Bosnian federal government, in cooperation with the other federal governments, were not able to emulate one shared position. It is not possible to change the Bosnian constitution in order to make it possible for ethnic minorities to run for higher public office positions. Therefore, the EU and Bosnia and Herzegovina are now looking for other ways to solve the Sejdić v Finci case and to continue Bosnia and Herzegovina’s European integration process.1067

6.5.3 Political relations with Slovenia Croatia and Slovenia have seen each other as strategic partners in the process of succession from Yugoslavia. A mutual recognition agreement between both countries was signed in 1991. In 1992, diplomatic relations between both countries were established. A Free Trade Agreement was signed in 1997 and was put into effect in 2001.1068 Slovenia appears to have a good relationship with its southern neighbour. Both countries have an embassy in each other’s capital; Croatia has two honorary consulates in Maribor and Koper, and Slovenia has an honorary consulate in Split. The Slovenian embassy in Zagreb is one of the biggest bilateral embassies of Slovenia.1069 Another practical example of these solid relations comes to expression in the cultural relations that both countries have with one another and are even regarded as exceptional. The website of embassy of the Republic of Slovenia in Zagreb states that the cultural cooperation with Croatia is ‘the most developed among all of Slovenia’s neighbouring countries’. This can be explained through the linguistic, cultural and geographic proximity, but also due to close ties that both countries developed in former Yugoslavia.1070 What also exemplifies the exceptional cultural relation between the countries is that Slovenian artists come to Croatia and vice versa. This exchange has become easier since Croatia has become part of the EU.1071 Another element in which the relationship is said to be good concerns the police

1065

Interview 49. Council of Europe, -, http://www.coe.org.rs/eng/news_sr_eng/?conid=1545, last accessed on 10.04.2014. 1067 Interview 49. 1068 World Bank, 1999, WT/REG55/1. 1069 Interview 45. 1070 Embassy of the Republic of Slovenia Zagreb, -, http://www.zagreb.veleposlanistvo.si/index.php?id=1165&L=1, last accessed on 09.04.2014. 1071 Interview 45. 1066

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cooperation, which is said to be regarded as ‘the highlight’ of the relation with Croatia and the other Balkan states. Information is exchanged on a weekly basis and is therefore more direct than the defence cooperation, which mostly takes place through the NATO.1072

6.5.3.1 Recent political issues As mentioned before, the relationship between the two countries is generally perceived as good, but is characterised by multiple issues. When Slovenia joined the EU in 2004, it got itself into a powerful position; since all EU member states have to agree on the accession of a new country, Slovenia would be able to block Croatian membership in the future. Several interviewees confirm that Slovenia has indeed used this power on several occasions.1073 Slovenia raised reservations on various chapters that concerned border issues, fisheries and free flow of capital. The country knew that if the EU was to adopt these chapters, it would be official.1074 However, despite Slovenia’s presumed blocking of Croatia’s EU accession, Slovenia is also said to have assisted Croatia during the accession process.1075 For a number of years the political relations were affected by unresolved issues from the past.1076 The four main issues, which will be discussed below, concern Piran Bay, Krsko Nuclear Power Plant, the Croatian-Slovenian border, and Ljubljanska Banka. The border dispute over the Piran Bay caused tension between the two countries. Slovenia borders on the Adriatic, but has to cross Croatian or Italian waters to reach international waters. Slovenia wishes to have a corridor through the Croatian waters to get access to the international waters. Access to the international waters is said to be ‘of vital interest’ for Slovenia. The country wants to keep what it has always had as it ‘has always been a maritime state in which access to the high seas was never an issue‘. Economic problems might arise if access to the international waters is lost.1077 Croatia was hesitant to agree on creating this corridor. One expert has stated that Croatia has never intended to control the contested area.1078 An agreement that was close to being signed on this subject was to cede 80 percent of the Piran Bay and a corridor to open sea to Slovenia.1079

1072

Interview 45. Interview 1; 33; 45; 48; 50; 54. 1074 Interview 45. 1075 Interview 45; 54. 1076 Interview 45. 1077 Ibid. 1078 Interview 58. 1079 European Commission, COM (2004) 257 final, pp. 35-36. 1073

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The following map shows the disputed area between Croatia and Slovenia, with the Piran Bay being the area between Croatian and Slovenian coast.

Figure 6.2: Disputed area between Slovenia and Croatia. 1080

A separate part of the above mentioned agreement sought to offer a solution for the Krsko Nuclear Power Plant. This part of the agreement was eventually signed in 2002, after ten years of negotiations. The plant is now owned, run and used on an equal basis as a result of the agreement. The agreement also regulated all outstanding financial matters between the Croatian Electricity Company and the Slovene Electric Company arisen from issues from 1998 until 2002.1081 Something that also needs to be dealt with is the storage of nuclear waste. Croatia is said to not have taken care of their half of this waste and have not yet made their decision on how to handle this. Slovenia has offered to store Croatia’s share at their storage near the plant.1082 There are several other ongoing border disputes. In former Yugoslavia there was no disagreement on the land border, as this was registered in the cadastral map. However, the sea was never the border between the two republics. That explains the current difficulties that both countries are facing on this subject. Since 2012, remaining border disputes are under arbitration by three judges that have been suggested by the EU and two judges from Croatia and Slovenia. The prime ministers of both countries have agreed to accept whatever judgment the 1080

Wikimedia, 2011. http://commons.wikimedia.org/wiki/File:Bay-of-Piran_maritime-boundary-dispute.SVG, last accessed on 28.04.2014. 1081 European Commission, COM (2004) 257 final, pp. 35-36. 1082 Interview 45.

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panel reached, without the possibility of appeal. Judgement is expected in the autumn of 2014.1083 A fourth issue is about the Ljubljanska banka in which Croats were not given back their savings. The dispute concerned a sum of 172 million euro. The dispute dates back to before the breakup of Yugoslavia. An expert has claimed that bilateral issues such as the one concerning the Ljubljanska banka ‘should remain bilateral issues’. In her opinion, the difficult situation was not kept separately from the EU negotiation process.1084 An agreement, named the Memorandum of Understanding, was signed on 8 March 2013, which stipulated that Croatia agreed to suspend all legal proceedings against the Slovene bank in return for Slovenia’s ratifying of Croatia’s EU accession treaty. This decision has been hailed by Herman Van Rompuy, the president of the European Council, as a sign of the ‘maturity’ of the Croatia-Slovenia relations, and as an example for the whole Western Balkan region.1085 The Commission has also welcomed the signing of the Memorandum, as it ‘defines a mutually acceptable solution to the issue of transferred foreign currency savings of the Ljubljanska banka in Croatia’.1086 The former prime-minster of Slovenia, Borut Pahor, is said to have re-established the trust between Croatia and Slovenia, especially by signing the arbitration agreement. Although some EU pressure appears to have been present in this case, most effort seems to have come from the countries themselves as there has also been a referendum on the topic.1087 One interviewee has nuanced the importance of these political issues. He said that these disputes are on a different level as they are only mentioned during election periods; otherwise, ‘nobody bats an eye’.1088 In sum, these issues are important on a political level, but might only concern the average Croat during election periods. 6.5.4 Political relations between the Netherlands and Croatia Since the writers of this report are Dutch, it is interesting to discuss the political relationship between Croatia and the Netherlands. The Netherlands and Croatia have maintained diplomatic ties since 1992.1089 In 1996 the Dutch embassy in Zagreb was opened, which is supported by honorary consuls in Opatija, Split and Dubrovnik. The Netherlands supported Croatia’s efforts to join the EU, for example through bilateral 1083

Interview 45; EurActiv, 2012, http://www.euractiv.com/enlargement/agreement-judges-decide-slovenia-croatiaborder-dispute-news-510223, last accessed on 18.05.2014. 1084 Interview 33. 1085 Euractiv, 2013 (A). 1086 European Commission, COM (2013) 171 final, p. 14. 1087 Interview 45. 1088 Interview 58. 1089 Government of the Netherlands, 2013, http://www.government.nl/issues/international-relations/croatia, last accessed on 15.04.2014.

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projects with government bodies and NGOs. The Dutch government, however, was in favour of very strict compliance with the Copenhagen Criteria. As a result, they critically evaluated Croatia’s accession process. In various interviews this approach was named ‘strict but fair’. 1090 This ‘strict but fair’ approach was applied by the Dutch government because it wanted to avoid the mistakes that have been made with Romania and Bulgaria. According to the Dutch government, these two countries were accepted into the EU for political reasons before adequate measures were taken to reform their judicial system. During Croatia’s accession process, the Dutch government underlined the importance of the implementation of Chapters 23 and 24 of the acquis. The main issues of these chapters were good governance, rule of law, human rights, the judicial system, the fight against corruption, and regional cooperation.1091

6.6 Conclusion Croatia has occasionally clashed with neighbouring countries since its independence. The 199195 war conflicts left marks upon the people, the country and the region for years to come. Border disputes, lawsuits and problems with war returnees have characterised and still characterise Croatian politics. However, Croatia and the region are looking forward and expect that better times are ahead. An important structural policy goal is the aim to ensure permanent peace and development, establishing good neighbourly relations and to solve all open issues that remained after the break-up of Yugoslavia. This can be seen in Croatia’s support in Serbia and Bosnia and Herzegovina in their effort in joining the EU. Furthermore, Croatia has a special interest in permanent stabilisation and democratisation of South Eastern Europe. It promotes the post conflict building of democratic institutions, not only in the region, but also in North Africa. Subsequently, Croatia wants to promote its economy by increasing Croatian export and attract foreign investments. Furthermore, The Croatian government wants to strengthen its national identity and create an image of a modern, dynamic, democratic and tolerant Mediterranean and Central European Country because it believes that this will contribute to the realisation of its foreign policy goals.

1090

Interview 1; 30; 54. Volkskrant, 2013, http://www.volkskrant.nl/vk/nl/2668/Buitenland/article/detail/3385108/2013/01/29/Kamer-steunttoetreding-Kroatie-tot-EU.dhtml, last accessed on 17-04-2014. 1091

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Part IV The economy

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7. The economic transition of Croatia During the beginning of the 1990s several Central and Eastern European countries started a process of transition. Croatia was one of them and aimed to create a market economy and a parliamentary democracy. Since the initiation of the process, the Croatian government has implemented policies to remove macroeconomic imbalances, to establish a market economy and to catch up with the EU and the global economy.1092 Furthermore, a process of privatisation, liberalisation and restructuring was initiated to make the Croatian economy a functioning, competitive and internationally orientated market economy.1093 This chapter provides an understanding of Croatia’s economic situation during the last two decades. In the discussion of Croatia’s economic development since its independence, there will be touched upon different elementary elements determined for Croatia’s economic performance, such as privatisation, the foreign investments and the investment climate. However, since these subjects are of major importance of Croatia’s economic development, these topics are pointed out more comprehensively in sections organised for these elements alone.

7.1 Croatia’s macroeconomic situation since the 1990s During the first years of the transition period circumstances negatively influenced the process. The war violence created a risky investment climate and slowed down the reconstruction process of Croatia as a whole. Due to the transition, the wartime crisis, and an outdated economic structure the Croatian economy had to cope with several problems during the first years after independence in 1991: the production volume decreased, export routes were strained, the unemployment rates increased and the privatisation process took off slowly.1094 There were several reasons for this situation, from trying to find the most effective economic policy model, to the emergence of corruption.1095 One of the most important problems that occurred during these first years was the high unemployment rate. The decreasing industrial production and the wartime crisis intensified this rate. During 1991 the number of unemployed people increased to 280 000, which amounted to 15 percent of the labour force.1096 In addition, more than 700 000 citizens were retired and the number of disabled people had increased as a consequence of the war conflicts. These two factors further constrained economic growth in Croatia during the first years of the 1990s. 1092

Vidučić, 2000, p. 47. Feletar and Stiperski, 1996, p. 439. 1094 Ibid., p. 439. 1095 Ibid., p. 443. 1096 Feletar and Stiperski, 1996, p. 443. 1093

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Other macroeconomic indicators confirmed the image of a stagnating national economy since Croatia’s independence in 1991. In the five years after independence Croatia’s GDP, Gross Domestic Product, decreased with approximately one-third. Furthermore, the country had to cope with a high inflation rate.1097 This economic crisis was caused by a weak banking system, an old industrial structure and limited international competitiveness. As a consequence the industrial output fell dramatically.1098 Croatia followed a stabilisation programme to solve its economic problems, set out by the International Monetary Fund (IMF). After five years the country had made important steps towards a stabilised and functioning economy. Even during wartime inflation was kept relatively low, after an inflation rate of 1616 percent in 1993 it was brought back to 3.7 percent in 1995. Furthermore, market measures were introduced, privatisation proceeded and market oriented reforms and regulations were implemented.1099 The government’s main purpose during the first phase, until the mid-1990s, was to stabilise the inflation rate, because they believed this would encourage the macroeconomic stabilisation process. This conviction was confirmed in 1992, when the government decided to abandon the policy based on stabilisation. Immediately, the inflation rate rose. Therefore, the government decided to implement a new inflation rate policy in December 1992.1100 To give a positive impulse, and an investment incentive to entrepreneurs, the government decided to eliminate the losses of key public enterprises. Furthermore, the HNB, the Croatian National Bank, introduced a strict monetary policy. All these measures resulted in a stabilised exchange rate, a moderate inflation rate and the foreign exchange rate reserves of the HNB rose from 200 million dollar in 1993 to 1.44 billion dollar in 1995.1101 The second phase of stabilisation aimed at restructuring the real and financial sectors of the Croatian economy. The stabilisation of these sectors, combined with a stable inflation rate, should lead to economic growth.1102 Despite the relative success of the first restructuring phase, the second phase revealed warning signs. The total amount of unpaid bills rose from 1.1 billion kuna, the official Croatian currency since June 1994, to 7 billion kuna in 1996. Furthermore, both GDP and industrial growth slowed down in 1994 and 1995. Due to the lower production rates in the industry sector, exports decreased which resulted in a big trade deficit. In addition, the current account became negative too, falling into a deficit.1103 In 1995 the current account was in deficit by 1.45 billion dollar. The government did not receive revenues, because the

1097

Franicevic and Kraft, 1997, p. 669. Ibid., p. 669. 1099 Ibid., p. 670. 1100 Ibid. 1101 Ibid., p. 671. 1102 Ibid. 1103 Ibid., p. 672. 1098

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unemployment rate rose to 14.5 percent in 1995.1104 These indicators showed the lack of Croatia’s industrial competitiveness. The trend of a stable inflation rate in combination with downward economic indicators, such as GDP growth, production, current account balance, low employment and investment drought, continued for several years in Croatia. Even during the second half of the 1990s the development gap between Central and Eastern European transition countries and EU member states continued. The absence of radical changes in production, technology and exports in the real sector constrained the development of these countries, including Croatia.1105 After the first stage of reconstruction the Croatian economy had to cope with several declining movements. Between 1995 and 2000 GDP growth stocked, the current account balance worsened, the gross foreign debt in terms of GDP rose from 20.2 percent to 51.7 percent, the unemployment rate kept rising up to 20.5 percent and the trade balance remained negative.1106 In short, the Croatian economy had to cope with enormous problems during this period.1107 Croatia’s balance of payments explains why its economy declined in the period 19952000. First, Croatia had a permanent trade deficit that became larger every year, due to the growing amounts of imports against a stagnating amount of exports. During these years export revenues remained at 4.5 billion dollar, while imports rose to almost nine billion dollar in 1999.1108 The export flows were constrained due to the following reasons: the lack of institutionalised relations between the EU and the CEFTA, with Croatia as one of its members, the decreasing competitiveness as a consequence of high labour costs and the slow pace of restructuring and privatisation, the post-war reconstruction.1109 Tourism was the only economic sector that positively contributed to the current account. In 1998 2.7 billion dollar was earned in the tourism sector, which amounted to 68.8 percent of the total export of services that year.1110 Dalmatia was the main tourist area and suffered from the Kosovo war violence in 1999. This resulted in a decline of tourism revenues between 1998 and 1999 of 391 million dollar.1111 Despite this decline in revenues, the sector still could contribute positively to the current account. Moreover, the foreign investments inflow ratio increased. When war tensions diminished, foreign direct investment (FDI) increased 29.5 times between 1993 and 1999, from 46 million dollar to 1.36 billion dollar within seven years.1112 1104

Jovančevćic, 2000, p. 326. Vidučić, 2000, p. 49. 1106 Jovančevćic, 2000, p. 326. 1107 Ibid., p. 325. 1108 Ibid., pp. 327-328. 1109 Vidučić, 2000, p. 50. 1110 Jovančevćic, 2000, p. 327. 1111 Ibid., p. 328. 1112 Ibid., p. 329. 1105

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The central government budget deficit proved to be another source of instability. While foreign exchange reserves increased, the external debt of Croatia quadrupled between 1993 and 1999. The foreign debt rose from 0.8 billion kuna in 1994 to 33 billion kuna in 2000. The total governmental debt amounted to 50.6 billion kuna in 2000. The government was not able to cover its debt from domestic sources either. One of the biggest contributors to the domestic debt was the pension fund. The high level of unemployment entailed a huge amount of earlyretired people. Moreover, the war had increased the number of disabled people. In 1999 almost 54 percent of the people liable to receive pensions was retired and almost 23 percent was disabled.1113 These groups had to receive social subsidies from the government, making it a huge domestic cost. Another reason for this huge cost was the growing size of the grey economy in Croatia in combination with the decreasing governmental contribution to the pension fund as part of austerity measures.1114

7.2 Croatia’s economy heading to the start of the EU integration process The convergence criteria for the euro were formulated in the Maastricht Treaty, which was signed in 1992 and entered into force in 1993. Since these criteria are formulated to ensure that the economy of a member state can integrate without difficulty into the monetary regime of the euro zone without disrupting its price stability, each member state has to meet the conditions that are formulated in the convergence criteria in order to adopt the euro as its currency and to take part in the European Monetary Union (EMU). These conditions measure the consumer price inflation rate, budget deficit as percentage of GDP, the public debt as percentage of GDP, the long-term interest rate and the deviation from the central exchange rate.1115 Price stability shows that inflation is controlled and the convergence criteria demand that the harmonised index of consumer prices (HICP) cannot be more than 1.5 percent above the rate of the three best performing member states.1116 Other criteria are that the government deficit as percentage of GDP cannot be over three percent, the government debt as percentage of GDP cannot be more than 60 percent, the long-term interest rate cannot be more than two percentage points above the rate of the three best performing member states, and that the member state participates in ERM II (European Exchange Rate Mechanism) for at least two years without severe deviations (less than 15 percent fluctuation) from the euro.1117 Formally only four criteria are mentioned in Article 121 of the Treaty: price stability, government finance, exchange rate stability and long-

1113

Jovančevćic, 2000, p. 332. Ibid., p. 332. 1115 Sabic, 2006, p. 284. 1116 European Commission, 2014 (C). 1117 Ibid. 1114

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term interest rates, which is due to the fact that government finance comprises government deficit and government debt.1118 Croatia has not yet, on the moment of writing this report, fulfilled the requirements formulated in the convergence criteria. Eurostat displays that the HICP inflation rate of Croatia was 3.4 percent in 2012.1119 According to predictions of the IMF Croatia’s budget deficit will remain over 3.5 percent throughout the medium term.1120 Furthermore, Croatia’s government deficit was five percent in 2012.1121 The statistics for 2013 were not yet available at the time of writing. Croatia’s government debt as percent of its GDP was 55.5 percent in 2012, which was below the maximum of 60 percent that is stated in the convergence criteria.1122 However, one can notice that this percentage has grown continually from 2009, when the government debt as percent of GDP was only 36.6 percent. If the annual growth of the government debt will continue in the same way as the period from 2009 to 2012, the maximum of 60 percent will be passed in the following years. According to the prognosis of the 2013 Economic Program of Croatia this number will continue to be below the maximum of 60 percent until 2016. 1123 Croatia has not fulfilled a two-year membership within ERM II. Croatia has a long way to go in order to meet some of these criteria. Therefore, it will not be able to adopt the euro within a short period of time. Once Croatia meets all the conditions it will become a member of the EMU, as Croatia does not have the right to opt out of implementing the euro.1124 Until Croatia is to adopt the single currency, the European Central Bank (ECB) and the Commission, who will create convergence reports every two years, will monitor Croatia’s economy.1125 Although Croatia will not be able enter the monetary union on a short term basis, there are other aspects of monetary integration. The HNB is member of the European System of Central Banks (ESCB) and its staff members have been participating as observers at meetings of the General Council and the ESCB Committees.1126

7.3 Croatia towards EU membership In 1993 the EU created opened up formal procedures for eastern enlargement of the Union during the Copenhagen European Council. Four years later, during the Luxembourg European Council of 1997, the enlargement process was launched with the ‘first wavers’: the Czech Republic, Hungary, Poland, Slovenia, Estonia and Cyprus. Five years later Romania, Slovakia,

1118

Faulend, Loncarek, Curaviç and Sabic, 2005, p. 6 Eurostat, table: tec00118. 1120 IMF: 2012 http://www.imf.org/external/pubs/ft/scr/2012/cr12302.pdf p.5. 1121 Eurostat, table tec00127. 1122 Eurostat, table tsdde410. 1123 Ministry of Finance 2013, p. 95. 1124 ECB 2013. 1125 Ibid. 1126 Ibid. 1119

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Bulgaria, Lithuania and Latvia became part of the enlargement process, but Croatia was still not part of it.1127 In contrast to the developments of these transition countries, Croatia had not even joined the CEFTA and was therefore not able to sign an association agreement with the EU.1128 The most important reason why Croatia remained isolated in this international setting was its military operation Operacija Oluja (Operation Storm) in August 1995. Furthermore, Croatia’s lack of political and democratic reforms constrained rapprochement to the EU. However, if only Croatia’s economic indicators had been taken into account, the country would have been allowed to join the accession programme of the EU. In terms of microeconomic criteria, pointed out by the EU during the Maastricht Treaty of 1993, Croatia came even closer to the economic targets than Bulgaria and Romania.1129 In contrast, these countries already became part of the EU’s enlargement policy in 1997. After the Croatian government pointed out EU integration as one of its main priorities in 2003, it took one year before Croatia acquired the official status of an EU candidate country for membership, confirmed by the European Council in June 2004.1130 The SAA, Croatia’s stabilisation and association agreement with the EU, was ratified in September 2004, while it already had been signed in 2001. The SAA entered into force in 2005 and set out Croatia’s main objectives towards EU integration. In combination with the Commission’s ‘Opinion on Croatia’s Application for Membership of the European Union’1131 and its official ‘Pre-accession Strategy for Croatia’1132 the Croatian government received a profound guideline to integrate successfully, and within a short timeframe, into the EU. During the first years of the 2000s the Croatian population broadly supported these developments. Until 2004 an annual report on the citizens’ attitude towards EU integration showed that 70 percent of the Croats supported this path. However, the 2004 report showed that public support declined to 50 percent due to a failing communication strategy of the Croatian government to its citizens.1133 Despite, the falling public support, Croatia pursued its pro-EU integration policy approach. In 2005, Croatia’s integration programmes merged into one implementation and monitoring instrument for integration called ‘The National Plan for Integration’. This programme was meant as a co-ordinating instrument along the Copenhagen Criteria. According to the Commission Croatia had to meet certain economic criteria. First, Croatia needed to have a functioning market economy. Secondly, Croatia’s economy had to be capable to cope with

1127

Vidučić, 2000, pp. 57-58. Ibid., p. 58. 1129 Ibid., p. 58. 1130 Samardzija, p. 54. 1131 European Commission, COM (2004) 257 Final, Brussels. 1132 European Commission, COM (2004) 657 Final, Brussels. 1133 Samardzija, pp. 54-55. 1128

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competitive pressures and market forces within the EU.1134 To meet the economic criteria for EU accession the Croatian government had abandoned its economic policy of general macroeconomic stabilisation of the 1990s. During the first years of the 2000s the core objective of this policy had become fiscal consolidation and structural adjustment.1135 In line with EU criteria, the policy’s aim was to increase competitiveness and employment as a result of structural reforms. According to Croatia’s GDP growth since the economic crisis of the late 1990s the country’s economic development was in line with the government’s core objective. Between 1996 and 2004 Croatia achieved an average growth rate of 3.7 percent.1136 The main impetus for this growth was the increased private consumption during this period. Furthermore, increased investment in roads and housing contributed to this average GDP growth. Croatia’s stable inflation rates during the years 2000-2004 were another positive sign of Croatia’s economic development. According to the Commission, Croatia had been successful in maintaining low rates of inflation, with a 2.2 percent inflation rate during 2002.1137 One of the reasons why the inflation rate had remained stable was Croatia’s exchange rate policy. Since the end of the 1990s the HNB adopted a monetary policy of ‘managed floating’. Annually the exchange rate of the kuna against the euro appreciated during the tourism season, which occurs during summer, and depreciated during the winter. This resulted in an exchange rate that fluctuated around six percent.1138 Furthermore, Croatia’s monetary policy since 2000 had changed to become more in line with EU standards and to ensure macroeconomic stability. This change was introduced as a result of an expansionary fiscal policy of Croatia. The government decided to cut expenditures, to reduce public wages, and to reform capital expenditures.1139 Finally, also Croatia’s trade liberalisation contributed to its positive economic development. Since 2000 Croatia had joined the World Trading Organisation (WTO) and had made several free trade agreements with EU and European Free Trade Agreement (EFTA) countries. However, Croatia still had to cope with a negative trade balance in 2002.1140 Nevertheless, there were still important elements for which Croatia had to introduce reforms. According to the Commission, Croatia had already adopted the basic elements to cope with competitive pressures, but the country still had to improve its fiscal consolidation and

1134

European Commission, COM (2004) 657 Final, p. 38. Ibid., p. 43. 1136 Ibid., p. 43. 1137 Ibid., p. 45. 1138 Ibid., p. 45. 1139 Ibid., p. 46. 1140 Ibid., p. 53. 1135

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accelerate its privatisation process in order to improve its business environment.1141 The areas where Croatia still had to make improvements were its high budget deficit and its increasing public debt. Furthermore, the stable macroeconomic situation, with low inflation rates, had to be translated into a sustainable development of the real sector of Croatia’s economy.1142 The real sector’s further development had to be achieved by a faster implementation of reforms in terms of privatisation and restructuring of economic sectors. One of these reforms had to be pointed at Croatia’s industry. It was necessary to increase its competitiveness in order to cope with external pressures of the international markets.1143 The EU’s most urgent call for Croatia was to introduce high quality legislation for all reforms. According to the EU, the success of the process depended on the quality of the country’s rule of law. Furthermore, the Commission emphasised the importance of stable institutions in Croatia’s preparation for further European integration.1144 While other Central and Eastern European countries had acquired EU membership during the enlargement rounds of 2004 and 2007, Croatia was still in the accession phase. The main reason why Croatia could not continue its negotiations with the EU was related to its role during the Yugoslav wars of the 1990s. The EU obliged the Croatian government to acknowledge the ICTY. Another reason was related to Croatia’s diplomatic relation with its neighbouring country Slovenia. Slovenia blocked further negotiations with Croatia on EU membership, because there still existed two border conflicts between the countries. However, when negotiations between the EU and Croatia restarted in 2009, the international economic situation had changed radically compared to 2004. The international economic crisis had also affected the Croatian economy. While Croatia’s GDP had risen with 2.4 percent in 2008, it declined since the global economic and financial crisis hit Croatia in 2009. During the first quarter of 2009 the Croatian economy’s GDP dropped with 6.7 percent.1145 The annual decline of GDP in 2009 amounted to 5.8 percent. Moreover, Croatia’s investments and private consumptions suffered a sharp decline. These indicators both had shown a positive result over 2008, but during 2009 private consumptions declined with 8.5 percent and investments even more with 11.8 percent.1146 Also Croatia’s industrial consumption suffered from the economic crisis. The industrial output contracted with 10 percent over 2009. Even after a year, during 2010, the economy was not yet recovering. However, the economy did not decline as sharply as it had done during the preceding years. Furthermore, there were more economic indicators that influenced the economic 1141

European Commission, COM (2004) 657 Final, p. 50. Samardzija, p. 56. 1143 Ibid., p. 57. 1144 Ibid., p. 57. 1145 European Commission, 2011 (A), p.6. 1146 Ibid., p.6. 1142

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stability negatively. Due to a declining oil price and falling food prices the Croatian annual inflation rate fell from 5.8 percent in 2008 to 2.2 percent in 2009.1147 The disinflationary process was even slowed down by the increase in the prices for gas, tobacco and medical services. Moreover, the crisis also hampered the Croatian labour market. The labour market still suffered from structural problems, such as high unemployment rates. The unemployment rate of Croatia rose from 13.2 percent in 2008 to 16.4 percent halfway 2010.1148 This high rate affected the labour market negatively, as it limited Croatia’s improvements on incentive structures and a flexible and secure labour market. In addition, the government had to continue lending from the HNB to offer social benefits to its unemployed citizens. In 2010 the budget deficit amounted to 5.2 percent of Croatia’s GDP. The high budget deficit was a main concern of the EC. Croatia was urged to make more efforts to stop the continuing rise of the budget deficit. According to the Commission the government’s budget planning was still weak. It remained a challenge for Croatia to ensure medium term fiscal stability.1149 Despite these negative macroeconomic indicators Croatia also showed positive economic development, especially in the context of meeting the economic convergence criteria of the EU. In November 2009 Croatia further reformed company registration procedures. It became easier, for both domestic and foreign entrepreneurs, to enter Croatian economic markets. Furthermore, the legal system was improved by accelerating court procedures. The Commission even concluded that Croatia had a functioning market economy.1150 Furthermore, the Commission argued that Croatia’s economy had developed to a certain extent that it would be able to cope with competitive pressures and market forces from within the EU. The Commission positively regarded the attitude of Croatia’s government towards a comprehensive reform programme to reduce structural weaknesses. Finally, the Commission evaluated the government’s economic programme as appropriate to cope with the consequences of the global economic and financial crisis.1151 However, even a few years before entering the EU’s internal market, Croatia had to speed up the structural reform progress in the fields of the labour market, the fiscal area, the government’s social policy, the investment climate and the country’s fiscal sustainability.1152 The most recent macroeconomic indicators show a slightly more positive image of the Croatian economy. After Croatia suffered several years due to the global economic and financial crisis, its economy is currently slowly recovering. Following the contraction of the years 20082010 the Croatian annual GDP growth in 2012 stabilised at 0 percent. Over a three-year period, 1147

European Commission, 2011 (A), p. 8. Ibid., p. 8. 1149 Ibid., p.9. 1150 Ibid.,p.14. 1151 Ibid., p.14. 1152 Ibid., p. 14. 1148

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from 2008 until 2011, GDP declined with 10 percent.1153 Furthermore, GDP components contributed negatively to the overall annual GDP of Croatia in 2011. Investment activity declined with 7.2 percent and public consumption declined with 0.2 percent, compared to 2010. However, the trade balance contributed positively to Croatia’s GDP by expanding its exports with 2.2 percent against a smaller increase in imports of one percent. Furthermore, the 2011 FDI inflow was higher than in 2010. Nevertheless, the FDI level of 2011 still remained below the level of 2008, before the recession had started. Finally, the decrease in employment continued during 2011. According to the Commission, the employment rate contracted by 4 percent in 2011, resulting in an unemployment rate of 13.5 percent.1154 In December 2011 Croatia was allowed to sign the EU Treaty of Accession. Subsequently, the Croatian government organised a national referendum to vote on Croatia’s EU accession. The referendum turned out to be positive with two-third of the Croatian population voting in favour of its country’s EU membership. A 2012 Commission declaration stated that Croatia’s key economic challenge remained the provision of the conditions for sustainable growth, while keeping macroeconomic stability.1155 According to the Commission Croatia’s economy suffers from a large external debt and needs further fiscal consolidation. These two problems caused a constrained macroeconomic policy that cannot strengthen Croatia’s international competitiveness.1156 The fiscal consolidation needs to be ensured by reforms in the country’s expenditures towards a more growth-oriented trend. The government should introduce reforms in the areas of privatisation, the restructuring of the corporate sector, the labour market, the government’s social policy, education and public administration to ensure economic growth.1157 Despite positive expectations of Croatia as a new member of the EU, 2012 again proved to be a year of economic decline. After the economy’s decline in 2011, the GDP rate fell by 2 percent in 2012. Domestic demand further decreased, private consumption fell by 3 percent and the total amount of investments decreased again in 2012 with 4.6 percent. Furthermore, the unemployment rate increased even further to 15.9 percent in 2012.1158 One of the few sectors that contributed positively to Croatia’s real GDP in 2012 was tourism, an export service. Nevertheless, the Commission made hard statements on Croatia’s economic situation. According to the Commission Croatia’s economic recovery ‘is further slipping away’.1159 The economic forecast for 2013 confirmed this expectation. GDP prospects for 2013 and

1153

European Commission Directorate-General for Economic and Financial Affairs, 2012, p.17. Ibid., pp. 17-18. 1155 Ibid., p. 17. 1156 Ibid., p. 17. 1157 Ibid., p. 17. 1158 European Commission Directorate-General for Economic and Financial Affairs, 2013 (A),p. 98. 1159 Ibid. 1154

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2014 are negative, with a one percent decline in 2013 and possible marginal 0.2 percent growth for 2014. In addition, ‘the unemployment rate will rise even further, the household indebtedness will continue to grow, the inflation rate will be around 3 percent and private and public consumption is likely to decrease in 2013’.1160 Even Croatia’s EU accession in June 2013 could not give the economy a powerful stimulus at such a short term. It remains to be seen if Croatia’s EU membership will be the first step towards medium term macroeconomic stability.

7.4 Croatia’s economic programme 2013 – 2017 When the global economic and financial crisis took off in 2008, Croatia was one of the many EU member states that faced the consequences. Since 2009, the economy has been in decline for four consecutive years. Like other EU member states, Croatia had to cope with declining trade and finance rates. Furthermore, when economic conditions worsened, Croatia’s household consumption and public and private investments declined. These four years of recession resulted in a 10 percent decline in the country’s output.1161 The economy stagnated in 2011, with a GDP growth of 0.0 percent, and further declined in the following year. GDP decreased by 2.0 percent in 20121162, as a result from a decrease in household consumption and the gross fixed capital formation. In contrast, during the years previous to the crisis these two indicators were the main force behind the Croatian economic growth. In contrast to the official prospects, which suggested a real GDP growth of 0.8 percent in 2012, the economic conditions in Croatia worsened.1163 Furthermore, the flash estimates on the growth of Croatia’s GDP during the last quarter of 2013 show a 0.6 percent decline compared to the last quarter of 2012.1164 The weak economic performances of 2012 had negative consequences for the country’s labour market. The total number of employed citizens decreased by 2.4 percent. This decrease was primarily the result of declining employment in the manufacturing, construction and trade sectors. In December 2012, the unemployment rate of Croatia stood at 20.9 percent, the second highest rate of the newest EU member states since 2004.1165 According to the CBS the registered unemployment rate rose to 21.6 percent in December 2013. 1166 The bad conditions of the Croatian labour market resulted in higher social costs for the Croatian government. The deteriorating public finances resulted in budget deficits and higher public debt ratios. In 2012 the fiscal deficit amounted to 3.8 percent of GDP. Despite the deficit, the Croatian government had made improvements in its budget balances. According to a World Bank report on Croatia’s economy, the previous fiscal deficit was 5.5 percent of GDP. As a result 1160

European Commission Directorate-General for Economic and Financial Affairs, 2013 (A), p. 99. The World Bank, Report No. 77630-HR, 2013, p. 3. 1162 Ministry of Finance, 2013, p. 8. 1163 Ibid., p. 8. 1164 Croatian Bureau of Statistics, 2014 (A). 1165 The World Bank, Report No. 77630-HR, 2013, p. 3. 1166 Croatian Bureau of Statistics, 2014 (A). 1161

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of higher Value Added Tax (VAT) rates and improved tax compliance, the revenues increased. However, the government had to spend too much money on social subsidies in the healthcare and pension sector.1167 Furthermore, the international credit rating agencies Moody’s and Standard & Poor’s downgraded Croatia’s credit rating in 2012.1168 The high debt to GDP ratio of 69 percent in 20121169 contributed to this negative conclusion of both agencies. In addition, with a fiscal deficit of more than three percent and a public debt to GDP ratio of more than 60 percent. In addition to the negative domestic economic indicators, Croatia also faced difficulties in maintaining its export rates at a high level during the previous years of recession. In 2011, the current account deficit was 0.9 percent of GDP. However, due to an increase in the trade of services, mainly in the tourism sector, the balance of payments balanced in 2012, with a small surplus of 0.1 percent of the GDP.1170 Moreover, the Croatian economic indicators of 2012; an average inflation rate of 3.4 percent, a modest inflow of foreign capital and the increased international reserves of the HNB, were slightly positive. However, the FDI rate still has not returned to the level before the financial and economic crisis hit Croatia in 2008.1171 Despite modest positive perspectives for the Croatian economy in 2013 and the accession to the EU, the Croatian government still had to adopt a new economic programme to stimulate reforms and pursue sustainable growth for the period 2013-2017. The strategy has been outlined along recommendations of the Commission and the World Bank. In addition, the programme is part of the overall EU’s Europe 2020 target.1172 Croatia’s accession to the EU, and bringing the country’s economy in line with the Commission’s recommendations and the EU average, was not the only reason to adopt a new economic strategy. First, the external risk of possible shocks in the international economic environment could possibly hamper the Croatian economy. This refers to the euro zone crisis and the deteriorating status of the financial situation of European countries. Secondly, the economic programme takes into account the domestic risk of disappointing developments regarding the growth of public companies and the recovery of the investment climate.1173 In the context of potential risks on the global and domestic level, the key challenge of the 1167

The World Bank, Report No. 77630-HR, 2013, p. 3 Ibid., p. 3 1169 Ibid., p. 3 1170 Ministry of Finance, 2013, p. 9 1171 The World Bank, Report No. 77630-HR, 2013, p. 3. 1172 Europe 2020 is the European Union’s ten-year growth strategy. It is about overcoming the financial and economic crisis and creating the conditions for a different type of growth, which is smarter, more sustainable and more inclusive. The key targets are divided into five main objectives related to member states’ employment, R&D, climate change and energy sustainability, education and fight against poverty. European Commission, Europe 2020, http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/index_en.htm, last accessed on 20.02.2014. 1173 Ministry of Finance, 2013, p. 17. 1168

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2013 economic programme of Croatia is to maintain fiscal sustainability. A stable fiscal situation should lead to medium-term macroeconomic stability and should create circumstances for economic recovery and a stable economic growth.1174 For the coming years Croatia aims to consolidate its public debt and the cost of financing the interests of this debt. This will bring along austerity measures on the expenditure side of the public budget. It is important to be aware of the potential damage of austerity measures. These need to be modest, so that they will positively affect investments and growth. To avoid such consequences, special attention is paid to the efficiency of public spending. These expenditures are primarily focused on improvements and growth in the water and transportation infrastructure, healthcare, and education.1175 On the other side of the budget, regarding the revenues, the VAT rate has increased from 23 to 25 percent in order to increase tax revenues. The Tax Administration also initiated activities to minimise the effect on growth and the creation of jobs through the grey economy and to combat against tax evasion. All these measures, both on the expenditure and revenue side of the budget, are taken in line with the Commission’s recommendations.1176 According to the World Bank Group focusing on Croatia, the country’s main stimulant for short-term economic growth would mostly come from the EU funds for investment projects. The accession into the EU gives Croatia the possibility to use subsidies in order to improve regional development in the country. The Croatian contribution to the EU common budget amounted to 0.5 percent of GDP.1177 In contrast, Croatia received 1.2 percent of GDP from available EU funds in 2013.1178 Croatia as a net receiver of EU budget enables the government to pursue further fiscal consolidation, since a large share of the public investments can be paid by EU funds. However, the Commission recommends Croatia to stimulate primarily the private sector to invest in the country’s economy. Furthermore, an expert argued that sustainable long term economic growth cannot be based only on the use of EU funds.1179 Furthermore, according to the Commission, fiscal consolidation needs to be accompanied by public policies promoting the private sector. This has to lead to a more stable investment climate for private entrepreneurs. More investments should eventually lead to more innovations, which subsequently would bring along a higher productivity and a more competitive Croatia on the international scale. According to the 2013 Economic Programme of Croatia, the Commission and the World Bank, the Croatian economy could benefit from a science and technology centre, as well as from functioning as a gateway to Europe and as a trade and 1174

Ministry of Finance, 2013, p. 18. Ibid., p. 18. 1176 Ibid., p. 19. 1177 Ibid., p. 23. 1178 The World Bank, Report No. 77630-HR, 2013, p. 7. 1179 Interview 53. 1175

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logistics hub.1180 Therefore, Croatia’s new economic strategy aims to establish a knowledgebased economy in which entrepreneurship, innovations and investments are encouraged. Next to Croatia’s economic fiscal consolidation, the country aims to strengthen the economy’s competitiveness. On the international ranks of competitiveness Croatia’s position has been declining in comparison to other Central and Eastern European member states of the EU. On the 2013 Global Competitiveness Survey Croatia ranked 81 out of 144, a lower position compared to 2012.1181 Furthermore, the Croatian private sector share of GDP remained at 70 percent, while comparable EU member states’ private sectors achieved a higher share.1182 To improve this situation the World Bank urges Croatia to start restructuring programmes and to ease the procedures for new businesses creation and old firm exit. These measures should reshape the economy into a more innovative, knowledge-bases economy. To achieve such objectives, the World Bank provides Croatia with assistance to improve its public administration, its management of public enterprises, its regulatory supervision of private companies and R&D, and innovation support.1183 Furthermore, Croatia has implemented an incentive system for small and medium enterprises (SMEs) to promote faster development at the national and regional level. The incentive system’s main objectives are related to new employment, enhancement of competitiveness of the economy, and Croatia’s export.1184 The Croatian government has also adopted The National Innovation Strategy 2013-2020 and the Action Plan 2013-2014 to support the objectives of the incentive system.1185 The 2013 Croatian economic programme, the World Bank’s observations and Commission’s recommendations on Croatia’s economy make clear that Croatia follows an economic reform policy in line with the general economic opinions and ideas of western institutional powers. The economic structural reforms are aimed at a better investment climate, more innovation, a more instant role for the public sector, and improving efficiency.1186 This economic line of thinking is also reflected in the main obstacles to the Croatian economy, formulated in accordance with the Commission and the World Bank. According to 2013 Croatian economic programme the low participation in the labour market represents a significant obstacle to growth. This is connected with another obstacle, namely the restructuring and privatisation of state-owned companies, as this can potentially benefit the labour market force’s chance to obtain a new job. Croatia is also lagging behind in terms of its investment in

1180

The World Bank, Report No. 77630-HR, 2013, p. 7. Ibid., p. 17. 1182 Ibid., p. 17. 1183 Ibid., p. 17. 1184 Ibid., p. 17. 1185 Ministry of Finance, 2013, p. 56. 1186 Ibid., p. 42. 1181

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R&D and the persuasion of the decline of greenhouse gas emissions.1187 Again there is a correlation between the slow pace of Croatia’s restructuring and the privatisation process. When these two points are approached seriously, each can benefit from the other’s improvements. Furthermore, the bad performance of Croatia’s education system and the high rate of poverty and social exclusion hamper the growth of the economy. Also, further investments in the infrastructure have to be made in order to improve Croatia’s attractiveness for foreign investments. The most important obstacle to economic growth seems to be the restructuring and privatisation process of Croatia. This process already started during the first years of the 1990s, but has not caught up yet with average EU standards. The state aid system needs to be reformed in order to make the countries’ important public companies less dependent on state subsidies. Furthermore, the efficiency and reputation of the Croatian Privatisation Fund (HFP) has to be improved. During the last years several high officials and members of the HFP have been accused, and some have even been convicted, of bribery and other corrupt activities.1188 However, the Commission positively evaluated Croatia’s efforts to privatise the shipbuilding industry during 2013. The government and the participating companies already agreed on the sale of Kraljevica Shipyard, Brodosplit-Shipyard Inc., and 3. Maj Shipyard during 2013. Despite these positive developments, the Commission urged Croatia to speed up the process with regard to the privatisation of the Croatian Railways (HŽ), HŽ Infrastructure, HŽ Passenger Transport1189, the Hrvatska postasnka banka and Croatia osiguranje.1190 More than a year after the formulation of Croatia’s economic challenges and the implementing solutions to these challenges, the Commission has pointed out a more positive economic forecast compared to the previous five years. According to the latest economic forecast of the Commission,1191 macroeconomic tendencies will reflect growth in 2014 and 2015. Croatia’s real GDP is forecast to grow by 0.5 percent in 2014 and this positive development is expected to increase in 2015 with a GDP growth rate of 1.2 percent. This is a remarkable tendency, since the latest forecasts on Croatia’s economic performances in 2013 show a GDP contraction of 0.7 percent.1192 As in 2013, domestic demand will contribute negatively to Croatia’s annual GDP growth in 2014. However, the growing net export of goods and services and public investment rates are expected to be the main drivers of Croatia’s growth in 2014. The recovery of economic activity in the EU area is the main reason of Croatia’s export growth in 2014. The public investments will rise as a result of increasing EU funds revenues. 1187

Ministry of Finance, 2013, p. 42. no author, http://daily.tportal.hr/tema?keywords=Croatian+Privatisation+Fund+(HFP), accessed on 20.02.2014. 1189 The World Bank, Report No. 77630-HR, 2013, p. 18. 1190 Ministry of Finance, 2013, pp. 82-83. 1191 European Commission Directorate-General for Economic and Financial Affairs, 2014, pp. 68-69. 1192 Ibid., p. 68. 1188

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The fragile domestic demand is expected to contribute negatively to the private investments on a short-term basis.1193 Private consumption will therefore contribute negatively to Croatia’s GDP in 2014. Furthermore, the labour market rigidity and the continuing deleveraging of households will result in a structural high unemployment rate. This rate is likely to stabilise at around 17.6 percent in 2014 and decrease somewhat in 2015.1194 According to the Commission’s economic forecast, Croatia’s main challenges remain the stabilising and the diminishing of the high fiscal deficit and public debt. The ratio of public debt to GDP is forecast to rise to 67.4 percent in 2014 and to 68.7 percent in 2015.1195 In contrast, the public debt ratio in 2010 amounted to 44.9 percent to GDP. However, it has to be acknowledged that this is similar to other EU member states, such as the Netherlands and France, as a result of increased governmental expenditures. This increase has to be seen in the context of Europe facing the consequences of the financial and economic crisis that took off in 2009. Moreover, Croatia needs to be aware of the heightened competitive pressures since EU accession. According to the Commission, this is already evident in Croatia’s trade sector.1196 In the context of Croatia’s accession into the EU, the country also has to adapt to its CEFTA exit and the consequences for its international trade with non-EU neighbouring countries.

7.5 Privatisation After its independence Croatia tried to modernise its economy through several important measures. One of the most important measures was the privatisation programme set up by the government to privatise socialist companies. Former Yugoslav companies were not in state hands, but were officially the property of the collective labour force.1197 To privatise these enterprises the Croatian government adopted the Privatisation Act in 1991 and set out the goal to privatise socialist enterprises within 18 months. The act did not cover the transformation of enterprises from the banking and financial sector.1198 This short-term objective was part of the ruling party’s choice, the HDZ, to opt for a fast and decentralised approach of privatisation. The companies were autonomous in pointing out their transformation toward becoming a competitive market oriented company. However, the process was controlled by the Agency for Restructuring and Development.1199 The agency took strict control over the process, because companies were obliged to transmit their privatisation plans to them. Subsequently, the agency decided on the approval of companies’ requests. This procedure enabled the state to keep a certain control on the privatisation process. 1193

European Commission Directorate-General for Economic and Financial Affairs, 2014, p. 68. Ibid., p. 68 1195 Ibid., table II. 1 1 . 1, p. 69. 1196 Ibid., p. 69. 1197 Hiller and Drezga, 1996, p. 390. 1198 Ibid., p.396. 1199 Čučković, 1993, p. 726. 1194

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Croatia’s economic history of socially led companies, also called the worker management system, played a significant role in the privatisation procedure. First, workers were entitled to buy, at a discount, the shares of company up to 50 percent. However, in the end the main motivation for employees to opt for assets was the hope to be able to keep their jobs.1200 The second group eligible to participate in the ownership transformation were other citizens or legal entities.1201 This meant that investors, from both domestic and foreign markets, could buy shares of former socialist companies. The former owners of enterprises were also entitled to receive a share of the enterprise they had managed. When these three groups had not bought all shares of a company the remaining part would be bought by three state funds.1202 On 30 June 1992, after the 18-month term of privatisation, it became clear that these three state funds had received a relative large share in former socialist companies. Many large industrial enterprises had opted to become public enterprises by transferring large shares of their assets to the three state funds. This development did not show a process of marketization of the Croatian economic sectors. In contrast, it showed a process of reetalisation1203 Therefore, according to a conducted interview, Croats prefer to label this process as the ‘transformation’ of companies, rather than privatisation.1204 On the one hand, employees, investors or former owners of the companies did not buy shares in large amounts. On the other hand the privatisation process was slowed down by the state agency responsible for the speed of the process. In 1992 the Agency for Restructuring and Development had approved only 64 percent of the 2 444 privatisation plans. Of all businesses, 1 082 did not even hand in a plan to the agency.1205 During and after the Privatisation Act was carried out several factors hampered the privatisation process. At first war violence deteriorated the investment climate in Croatia. Both domestic and foreign investors’ incentives declined and the demand for socialist led companies’ assets decreased due to uncertainty and risks related to the war. Due to the war, personal incomes dropped drastically and this resulted in pessimistic future expectations of individuals. Furthermore, the highly risky conditions, due to the war, in Croatia did not create any incentives for foreign capital to enter the Croatian market. During periods of war violence the Croatian government was not able to respond sufficiently.1206 The ruling parties did not make any attempt to make the terms easier for small shareholders of companies.1207 The interplay of war periods and weak governmental privatisation policy resulted in a 1200

Čučković, 1993, p. 728. Ibid., p. 726. 1202 Franicevic and Kraft, 1997, p. 675. 1203 Ibid., p. 675. 1204 Interview 5. 1205 Hiller and Drezga, 1996, p.398. 1206 Interview 5; 13; 53. 1207 Franicevic and Kraft, 1997, p. 678. 1201

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complex polarisation. On the one hand a class of new owners, managers, and entrepreneurs emerged who tried to lead successful private companies. On the other hand there were still many state owned enterprises. The interests of both private entrepreneurs and state owned companies would easily come into conflict, because both actors had completely different visions and purposes, especially in terms of market dominance and mutual competition. 1208 However, not only the war had caused trouble for the privatisation process. Another important reason for the poor performance of privatisation was the Croatian legal framework.1209 The legal framework did not include a good market regulation framework. For example, there did not exist an anti-monopoly law that could prevent the formation of state and private monopolies;1210 until 1995 there did not exist a legal act to avoid power abuse by monopolies. Furthermore, Croatia’s competition agency was just established in 1997.1211 As a result there were no legal constraints for the state to take over a large share of former socialist companies. Critics have argued that this first step should not be seen as an intermediary step between a socialist- to a market economy, but as a step towards an economy in which the state has adopted the management role.1212 Another important reason of Croatia’s slow privatisation process was the efficiency of the process. While the official goals of privatisation were economic growth, increasing employment, technological modernisation, efficient management, entrance to international capital markets and the reduction of public debts and subsidies, these goals were hardly met. 1213 Former state owned firms with new private management had little efficiency benefits, because, despite their new owners, the internal functioning was the same as in socialist times.1214 Furthermore, the public view of Croatia’s privatisation proves its negative image in Croatia’s society. Privatisation is regarded in line with mafia, corruption, outright theft, egoism, nepotism and localism.1215 This image has been confirmed during an interview.1216 After the first years of independence the Croatian government had to improve its privatisation policy substantially to restructure the economy. Other obstacles that hindered the privatisation of socialist companies were outlined by companies participating in the transformation programme supervised by the agency. According to these companies the following factors slowed down privatisation: privatisation legislation, shortage of capital, taxation policy, lack of adequate education and inadequate financial and 1208

Franicevic and Kraft, 1997, p. 678. Čučković, 1993, p. 730. 1210 Ibid., p. 730. 1211 Interview 35. 1212 Čučković, 1993, p. 730. 1213 Franicevic and Kraft, 1997, p. 678. 1214 Ibid., p. 678. 1215 Ibid., p. 679. 1216 Interview 13. 1209

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credit policy.1217 The participating companies’ main criticism was not related to the question if privatisation had to take place at all, but to the method of privatisation adopted by the government.1218 Their complaints were divided into three main parts. First, they criticised that the implementation of the privatisation legislation package had resulted in the etatisation of economic sectors.1219 Secondly, the legislation package was considered to insufficiently protect private ownership and to create a competitive market environment.1220 Finally, the high taxation rates as a result of governmental decisions, related to the desperately needed state income for war objectives, discouraged citizens to buy shares of companies or to set up their own private enterprise. Furthermore, high taxation would have had a negative influence on economic growth too.1221 Beside the constraining effects of the war, the legislation package, the tax system, and the supervising role of the government, the transition of people’s mind-set slowed down the privatisation process. Field research in Croatia made clear that this societal change proved to be the most difficult change for Croats themselves.1222 The attitude of Croats had to change suddenly. People needed to adopt a market-oriented mentality, in which they had to measure loans in terms of repayment and job security related to their own productivity and achievements. Since Croatia’s independence, managers and employees had to cope with competition and job security, which had been abandoned in socialist times.1223 Furthermore, the transition from a classless society to a society with classes had to be made. All these changes affected and brought new uncertainties to people’s lives. Hence, the HDZ’s choice to privatise socialist companies within an 18 months programme proved to be illogical. The first years of the privatisation process already showed its slow pace. Furthermore, political, economic and societal indicators brought to the fore the difficulty of becoming a fully-fledged market economy. The Croatian government decided to change its privatisation policy in 1996. Since 1996, public companies are privatised via a more modern system than the initial form of insider buyouts. To modernise the economic sectors’ companies had to be privatised within a system of public auctions and tenders.1224 These privatisations were successful after the government decided to allow the acquisition of assets of companies against frozen foreign currency deposits.1225 However, despite this success a large number of companies were still in state 1217

Čučković, 1993, pp. 730 – 731. Hiller and Drezga, 1996, p. 410. 1219 Čučković, 1993, p. 731. 1220 Ibid., p. 731. 1221 Ibid., p. 731. 1222 Hiller and Drezga, 1996, p. 409; Interview 5; 13; 40; 53. 1223 Hiller and Drezga, 1996, p. 409. 1224 European Commission, COM (2004) 657 Final, p. 42. 1225 Ibid., p. 42. 1218

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hands. In 1998, when economic crisis hit Croatia, fiscal pressures forced firms to start privatisation programmes. These developments were also visible in Croatia’s macroeconomic indicators. Between 1993 and 1999 the private sector’s share in GDP rose from 30 percent to 60 percent. The economic crisis changed this pattern. After the crisis of the late 1990s the state owned 6.1 percent more tangible assets than before the crisis took off. In 2001 tangible assets were for 71.3 percent in public ownership. During the first years of the 2000s, the amount of state-owned companies decreased from 1 860 to 1 056 companies.1226 There was still a high state ownership in Croatia, especially in the tourism sector. Again, the most constraining element of Croatia’s privatisation process related to the governmental approach towards privatisation, the HFP that was not able to complete the privatisation process.1227 The new President Mesić wanted to increase the privatisation process by eliminating corruption within the HFP.1228 Therefore, in 2003 the government adopted a proposal to change HFP’s competencies in order to complete Croatia’s privatisation process. After a long bureaucratic struggle in the Croatian Parliament, these changes were accepted and implemented. However, there still remained a strong role for ministries in starting and approving privatisation projects. Furthermore, the strong governmental role and the slowly implemented measures delayed the preparation of new privatisation programmes.1229 Thus, the 2003 HFP’s structure and competences change did not speed up the privatisation process’ pace. At the end of the decade the privatisation fund’s portfolio still consisted of 768 companies.1230 In a period of seven years less than 300 companies were privatised. The privatisation of assets, under the auspices of the HFP, made limited progress.1231 The lack of interest among potential investors and in some cases the unrealistic sale conditions resulted in this slow pace.1232 During the entire first decade of the 21st century these problems with Croatia’s privatisation process came to the fore and were subject to criticism from the Commission. According to the Commission, Croatia did not complete the whole privatisation process when it was accepted that Croatia could join the EU in 2013.1233 The economic crisis that hit Croatia in 2008 further hindered this process. Foreign investors had even less confidence in doing business in Croatia. Also domestic demand lagged further behind.1234 After more than 20 years 1226

European Commission, COM (2004) 657 Final, p. 47. Interview 13. 1228 Interview 13. 1229 European Commission, COM (2004) 657 Final, p. 47. 1230 European Commission, 2011 (A), p. 10. 1231 Ibid., p. 10. 1232 Ibid., p. 10. 1233 European Commission, COM (2012) 601 Final, p. 5. 1234 Interview 40. 1227

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of privatisation Croatia still has to speed up its structural reforms in some economic areas, regarding the privatisation of certain companies.1235 This process still proceeded at a low pace due to a bad investment climate, an uncertain legal environment, long procedures, unpredictable administrative decisions and a high amount of non-tax fees.1236

7.6 Foreign Direct Investment FDIs have played an important role in Croatia’s economy during the last two decades. During the 1990s, FDIs turned out to be a significant factor for growth and development in Croatia. 1237 The combination of low interest rates of the recession in the developed world and the political and economic reform of Croatia stimulated the international flows of capital to Croatia. These foreign investors were relatively new for Croatia, since it had only gradually opened its economy to other countries after the socialist regime was abandoned. The main challenge for Croatia was to foster a friendly investment climate for foreign entrepreneurs and to create a framework for foreign investment that would maximise the positive contribution to both Croatia’s and the company’s development and minimise its costs.1238 Since foreign investors acquired a lasting interest in a company operating in Croatia, and not in their home country, FDI has to be considered as something different than trade or capital inflows.1239 Because of this lasting interest FDIs are very welcomed in most developing or transition countries. The capital inflow, knowledge, experience and expertise of the investor can, both directly and indirectly, stimulate the country’s economic development. During the first half of the 1990s, the potential benefits of FDIs could not be fully exploited due to war violence. The instable political situation harmed Croatia’s investment climate. Croatia was regarded as a unsafe country full of risks. This negative impression has influenced the flow of FDIs to South Eastern Europe more negatively than that of FDIs to Central and Eastern European countries during the 1990s.1240 The official figures on Croatia’s FDI demonstrate the slow start of the FDI inflow into Croatia. In 1993 the total FDI inflow amounted to only 101 million euro, this amount rose to 394 million euro in 1996 and to 1.1 billion euro in 2000.1241 During this decade the total number of FDIs multiplied more than tenfold. Especially during the last years of the 1990s, when the war had officially ended, international investors entered Croatia. In 1999 the violence in Kosovo caused a decline in Croatia’s FDI. This decline proved investors’ cautiousness in their investments into a former conflict area. Nevertheless, when 1235

European Commission, COM (2012) 601 Final, p. 5. Ibid., p. 5. 1237 Sohinger and Harrison, 2004, p. 57. 1238 Ibid., p. 57. 1239 Ibid., p. 57. 1240 Estrin and Milica, 2013, p. 10. 1241 Sohinger and Harrison, 2004, p. 59. 1236

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conflicts ended in neighbouring countries too, FDI ratios stabilised and finally rose to 1.5 billion euro in 2001.1242 As a result of peace, Croatia’s transition process proceeded and important political, judicial and economic reforms were implemented. These reforms stabilised the Croatian FDI rates in two ways. On the one hand, reforms enabled foreign investors to enter the Croatian market more easily. On the other hand, the restoration of peace and basic security, the start of economic recovery and moderate improvements in Croatia’s business climate fostered FDI growth.1243 In contrast to the 1990s, when FDI was concentrated in the privatisation of companies, most of the FDIs during the first years of the 2000s were focused primarily on the service sector, especially financial services and retail and wholesale trade.1244 The amount of FDI inflow further increased during the first years of the 2000s. In 2003, when the economy was recovered from the post 9/11 recession, the FDI inflow rose to 1.7 billion euro.1245 In the following years FDI amounted to 1.3 billion euro in 2005 and even increased to 4.2 billion euro in 2008.1246 The spectacular increase in Croatia’s FDI inflow was driven largely by Croatia’s improved investment climate, economic growth and the country’s negotiation talks on EU membership. Moreover, according to the Organisation for Economic Cooperation and Development (OECD) report of 2007, the FDI had a positive impact on Croatia’s long-term employment. An increase in FDIs during the second half of the 1990s resulted in lower employment figures, because foreign investors acquired privatised companies and restructured them first. In the medium- and long-term, foreign investments would result in an increase in productivity and improved competitiveness brought along more employment in Croatia.1247 After more than 10 years of immense FDI growth, Croatia faced a serious decline in FDI inflow during the last years of the 2000s. From 2008 onward, FDI rates declined due to the impact of the global economic crisis. The crisis hit the home countries of many foreign investors severely. As a consequence, investors decided to withdraw from new investment projects in less developed nations, such as Croatia. After 2008, a substantial decline in FDI inflow can be noticed in the most Eastern European countries: Bosnia and Herzegovina, Bulgaria, Macedonia, Montenegro, Romania and Serbia had to cope with declining FDI rates.1248 Gradually implemented reform programmes, in both Croatia as investors’ homelands, reversed this negative trend. After a 42 percent decline in FDI in 2009 and an 88 percent decline

1242

Sohinger and Harrison, 2004, p. 59. Estrin and Milica, 2013, p. 9. 1244 Hunya and Skudar, 2007, p. 9. 1245 Ibid., p. 11. 1246 United Nations Conference on Trade and Development (A), 2013, p. 4. 1247 Hunya and Skudar, 2007, p. 9. 1248 Estrin and Milica, 2013, p. 18. 1243

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in 2010, the figures of 2011 showed more positive trend. The FDI inflow rose from 330 million euro in 20101249 to 1.1 billion euro in 2011.1250 According to the United Nations Conference on Trade and Development, Croatia has confirmed its status as an attractive country for FDI during the past years. This positive image emerged during the first years of the 2000s when FDI inflow to Croatia rose tremendously. Croatia’s rates on FDI were remarkably higher than those of its neighbouring countries.1251 At the end of 2011, the country’s inward FDI stock amounted to 48 percent of Croatian GDP.1252 However, Croatia’s figures on FDI inflow could not meet the high rates before the economic and financial crisis hit Europe. In addition, prospects for the FDI figures of 2013 are not positive. For the first three quarters of 2013 the total FDI inflow is estimated at 530 million euro. It is likely that the total amount of FDIs in 2013 will be substantially lower than in 2010, when FDI inflow amounted to more than 1 billion euro. Official releases on the whole of 2013 have not been published yet at the time of writing. In line with official declarations of the HNB on the Croatian GDP growth, the central bank assumes that FDI rates are expected to recover gradually in 2014 and 2015.1253 Expected factors that should contribute to this potential FDI growth are Croatia’s EU membership, an improved investment climate, and intensified privatisation efforts, according to an HNB analyst.1254

7.7 Purchasing power parity Economic indicators on a given country, in this case Croatia, demonstrate the extent to which the country’s economy is developing, whether there is established growth or decline. However, most economic figures, for example the GDP rate, are real figures and do not give an understanding of Croatia’s relative economic position compared to its neighbouring countries, other EU member states or global economic powers. To compare the relative wealth of countries, economic reports often use the index of the purchasing power parity (PPP) of a country’s currency. The PPP shows the relative value of a currency compared to other currencies. In short, it is a way to compare the purchasing parity of different countries. In this report, the analysis of the PPP is chosen over GDP per capita, because the PPP is more advanced in taking into account the different consuming patterns between wealthy and developing countries. In economic reports, the PPP index is often based on the US dollar. For the purpose of this report, the EU28 will function as the index 100. This analysis demonstrates Croatia’s economic position compared to other global actors. 1249

United Nations Conference on Trade and Development (B), 2013, p. 216. United Nations Conference on Trade and Development (A), 2013, p. 4. 1251 Estrin and Milica, 2013, p. 19. 1252 United Nations Conference on Trade and Development (A), 2013, p. 4. 1253 Dalje – English edition, http://dalje.com/en-economy/fdi-in-first-nine-months-of-2013-eur-530-million/494978, accessed on 17.03.2014. 1254 Ibid. 1250

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The Eurostat figures show that Croatia has made a positive development in terms of its PPP during the last ten years. Since 2002, when Croatia’s first attempts were made to start the EU integration process, Eurostat has been taking Croatia’s purchasing parity into account. When the EU28 is the average index figure 100, Croatia’s PPP is still under the EU’s average. In a ten year period, Croatia’s PPP rose from 53 in 2002 to 62 in 2012. During this period, Croatia’s peak was established in 2008 with an index of 63. When the global financial crisis hit Europe, Croatia’s PPP index decreased to 59 in 2010, but showed a slight increase in 2011 (61) and 2012 (62).1255 On the one hand, Croatia has a strong currency when compared to its neighbouring countries Serbia and Bosnia and Herzegovina. Serbia’s index cipher increased from 32 in 2005 to 26 in 2012. Bosnia and Herzegovina’s annual figures show a weak currency that balanced below 30 during this period. 1256This may give a potential reason why the Commission does not yet consider these countries’ economies capable to enter the internal market of the EU. On the other hand, Croatia’s figures lag behind its other neighbouring countries that became EU members in 2004. In particular Slovenia’s PPP figures show Croatia’s weak position in an EU context. In 2002, Slovenia’s index was 83 and increased to 91 in 2008. This means that Slovenia almost reached the average EU level. However, since the crisis hit Europe, Slovenia PPP index declined to 84 in 2012. This declining pattern since the economic crisis was not visible in Slovakia. Even after 2008, Slovakia’s PPP figures continued its positive development that started in 2002. In 2002, Slovakia’s PPP index had amounted to 54, just one point higher than Croatia’s 2002 index of 53. Compared to Croatia, Slovakia’s growth pattern was more stable and faster. In 2012, after a ten-year increase of its PPP, Slovakia’s index amounted to 76. 1257 In light of other, more developed, countries, Croatia lags behind significantly. The Netherlands’ average PPP index figure during 2002-2012 balanced around 130, the US’ PPP figures were even higher with an average of 155. Also Japan’s PPP index was higher than the EU28 average, but showed a negative trend since 2002, ranging from 114 in 2002 to 105 in 2012. 1258 However, these figures are not used as an indication that Croatia should have caught up with the above-mentioned countries during the period discussed here. On the contrary, these figures are only included to show Croatia’s position on a global scale. For Croatia, it is more important to focus on the figures of other Central and Eastern European member states of the 1255

Eurostat (2013), http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00114, last accessed on 02.05.2014. 1256 Ibid. 1257 Ibid. 1258 Eurostat (2013), http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00114, last accessed on 02.05.2014.

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EU. In this context, Croatia performs relatively well, because its figures are quite similar to the figures of Estonia, Latvia, Lithuania and Poland. 1259

Table 7.7: GDP per capita in purchasing power parity. 1260

7.7.1 Price levels Croatia has relatively low price levels. Eurostat calculates price levels in comparison with the EU28 average, setting the EU28 average at 100. When the index for a certain country lies above 100, it means the country is relatively expensive. When the index for a country lies below 100, it means the country has relatively low prices. In 2012 the index for Croatia was 69.9, which meant prices in Croatia were below EU average. In the period between 2006 and 2009 the index was constantly above 70 and reached its highest point (76.3) in 2009.1261

7.8 Investment climate Croatia’s investment climate is currently one of the main constraining factor to the country’s economic growth.1262 Since the end of the 1990s Wars , investors increasingly considered to start businesses in Croatia. Nevertheless, the country’s investment climate did not improve and still has a poor reputation nowadays. Both academic research1263 of the World Bank and the US government1264 and field research brought this problem to the fore.1265

1259

Eurostat (2013), http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00114, last accessed on 02.05.2014. 1260 Ibid. 1261 Eurostat, Table: tec00120. 1262 Interview 5; 40, 53. 1263 Doing Business 2014 Economy Profile Croatia, pp. 10-11. 1264 Bureau of Economic and Business Affairs, 2013 Investment Climate Statement, p. 1. 1265 Interview 35; 40; 53.

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According to the US government’s official guideline for doing business in Croatia, the structural problems of Croatia’s economy hinder the attractiveness to invest in the country. The most prevailing problems are the country’s bureaucracy, the bad performances of state-owned companies, corruption and the inefficient judicial system.1266 These problems were to a large extent the cause of Croatia’s five years economic recession, according to the statement of the US government. 1267 Furthermore, research in Croatia has brought to the fore that the above mentioned problems hindered the economy’s development to a large extent. Therefore, there is a legitimate reason why foreign investors do not regard Croatia’s investment climate as highly attractive. One interviewee argued that the country’s business environment has a bad record abroad, because it is associated with corruption and nepotism. Furthermore, foreign investors have to cope with long administrative and judicial procedures, the authorisation of licences, Croatia’s large bureaucracy and the big gap between official procedures and the outcome of procedures in practice.1268 This

brief

classification

of

Croatia’s

investment

climate

demonstrates

that

improvements are necessary. Despite Prime-Minister Milanović’ statements on radical improvements in this area in 2011, the image of the business environment in Croatia has not been improved. It was the Croatian government’s intention to start legislative and administrative reforms to reduce the obstacles to investment.1269 This should have led to more foreign investments in the tourism sector, Croatia’s infrastructure and the start of several energy and environmental projects.1270 Moreover, the 2013 EU accession was expected to result in an increasing interest among transnational corporations to do business in Croatia. These high expectations have not yet become true, since Croatia’s CEFTA exit still outweighs the short-term trade advantages of Croatia’s EU membership.1271 From Croatia’s EU accession, the establishment of free tax zones was one of the government’s measures to improve the investment climate. However, based on field research, such a measure will not increase the country’s investment climate reputation abroad. Tax measures will not be sufficient enough to attract investors, according to an interviewee. Croatia needs stable policies that will be maintained for several years.1272 Furthermore, the fiscal conditions of Croatia need to improve before investors will seriously consider starting a business in Croatia.1273 In 2013 the Croatian government implemented a new ‘Act on Investment Promotion and 1266

Bureau of Economic and Business Affairs, 2013 Investment Climate Statement, p. 1. Ibid., p. 1. 1268 Interview 40. 1269 Bureau of Economic and Business Affairs, 2013 Investment Climate Statement, p. 1. 1270 Ibid., p. 1. 1271 European Commission Directorate-General for Economic and Financial Affairs, 2014, p. 69. 1272 Interview 2; 40. 1273 Interview 53. 1267

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Development of Investment Climate’. One of the key purposes of this act was the development of the SME sector to sustain larger investment projects.1274 Based on information gained through the conduct of interviews, it can be argued that the role of SMEs needs to get more attention. SMEs can function as the driving force for a country’s economy and are essential during the execution of large construction projects.1275 The newly adopted act has been evaluated positively by the World Bank. According to a World Bank Working Group, Croatia adopted five important reforms between June 2012 and June 2013. They argue that the improvements in the areas of starting an enterprise, the tax paying system, international trade, the enforcement of contracts and resolving insolvency, has made Croatia more open to business actors.1276 Furthermore, they note that these reforms have been more significant than all reforms undertaken by Croatian governments during the period 2007-2012.1277 Hence, one of the authors of the Working Group argued that Croatia showed significant political will to further improve its investment climate for local entrepreneurs. The continuation of economic reforms, and in particular regulatory reforms, shows the government’s commitment to establish economic growth, the author argued.1278 As part of the government’s newly adopted act two investment agencies have been established in Croatia: The Agency for Investments and Competitiveness (AIK Invest) and the Croatian Agency for SMEs and Investment (Hamag Invest). The central aim of these agencies is the promotion of investment. Both agencies function as independent bodies under the supervision of the Ministry of Entrepreneurship and Crafts. However, research in Croatia has shown that there are negative opinions on the effectiveness of these bodies. One of the complaints has been that both AIK Invest and Hamag Invest cannot operate in Croatia’s nontransparent business climate.1279 The sectors are still dominated by the largest and most powerful companies. As a result, monitory bodies cannot successfully approach other, smaller and less dominant, companies to negotiate about potential investments projects. If the central problems of Croatia’s business environment are not resolved, such bodies cannot achieve development, argues an interviewee.1280 Despite the government’s willingness to improve the investment climate, there still seem to be major obstacles. The most severe problems are corruption and nepotism.1281 Furthermore, the investment climate is affected negatively by dragging law procedures, an unstable political climate, regularly changing procedures and regulations, problems with local 1274

Ministry of Entrepreneurship and Crafts, 2013, p. 3. Interview 40. Interview 53. 1276 The World Bank Press Release, 2013, p. 1. 1277 Ibid., p. 1. 1278 Ibid., p. 1. 1279 Interview 40. 1280 Interview 40. 1281 Interview 5; 40; 53. 1275

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governments and with the entitlement of private property.1282 These negative elements are also taken into account by the US government’s statement on Croatia’s business environment. According to the US government, investors are still facing problems with rigid labour laws, difficult permitting procedures and high parafiscal charges. However, there are still sectors that potentially can foster Croatia’s economic development. Several interviewees argued that the transport sector is a potential driving force of the economy.1283 Moreover, the tourism sector in Croatia’s coastal areas and the food processing industry in the Dalmatian region are sectors that may be able to generate wealth.1284 But on balance, there can be argued that Croatia first needs to reform various elements of its economy before it will become attractive to potential investors.

7.9 Underground economy In addition to corruption, Croatia had to cope with a large share of economic activities in the economy’s informal sector, first during its transition period and then during the accession period to EU membership. After Croatia’s independence, corruption and the large underground economy hampered the economic growth. These two phenomena are interrelated concepts and have a stimulating effect on each other. During the last two decades both phenomena’s share in the Croatian economy has gradually declined. When Croatia’s transition process started there were several factors that affected the tendency towards growth of the underground economy. The lack of democratic, economic and regulatory institutions influenced the growth of Croatia’s informal sector. Furthermore, the high unemployment rates and low rates of economic growth stimulated the unofficial economic activities in Croatian economic sectors.1285 During the 1990s there was a general pattern between Croatia’s economic growth and the size of the underground economy. There exists a negative correlation between the GDP and the underground economy. When Croatia’s GDP declined annually during the first years after independence, the underground economy flourished. Croatia’s GDP declined between 1990 and 1991 with more than 20 percent and the underground economy’s ratio GDP increased from 14.37 percent in 1990 to 28.15 percent in 1991. The following years the GDP growth remained negative and simultaneously the informal sector grew to a 36.88 percent share of Croatia’s GDP in 1993. When Croatia’s economic performances improved at the second half of the 1990s, the underground economy’s ratio to GDP declined. In 1994 the share was still 25.45 percent, but

1282

Interview 5; 13; 27; 40. Interview 5; 27. 1284 Interview 5; 27. 1285 Ott, 2002, p. 5. 1283

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this ratio declined annually and was finally reduced to 6.81 percent in 2000. 1286 In sum, in the 1990-1995 period the informal sector amounted to an average of 25 percent of GDP and in the period 1996-2000 to an average of about 10 percent of GDP.1287 Although these figures of the 1990s are clear, the difficulty of measuring the underground economy’s share to GDP has to be taken into account. Several academics use different methods to measure these figures. Nevertheless, the figures are relatively equal to each other and sketch the same pattern.1288 During the first decade of transition, the size of the underground economy increased. Especially the privatisation of socialist companies into private enterprises had to cope with irregular activities. Due to a lack of political will, the non-existence of an effective and independent judiciary, and the insufficient public control such activities were not punished.1289 The weakness of Croatian institutions, which was not legally able to enforce citizens to pay taxes or to administer labour, was the main reason for the lack of control on the underground economy’s growth during the 1990s. However, the positive effects of the transition progress in Croatia initiated the gradual decrease of the underground economy’s share to GDP. When the war ended, the hyperinflation was kept under control, several reform programmes took off, the stabilisation and restructuring strategies continued and the government’s ethical function was pursued to a much higher extent; the informal sector’s size diminished. These developments formed the basis of Croatia’s increasing political stability, economic growth and stringent judicial framework during the 2000s. Furthermore, when Croatia’s negotiation period for EU membership took off, the Commission frequently recommended the Croatian government to continue the political, economic and judicial reforms. According to the EC, a well-developed rule of law and independent courts result in a more effective strategy to curb down corruption and to diminish non-official economic activities.1290 The figures on Croatia’s underground economy during its transition phase proof the Commission’s argument. However, there exist great discrepancies between the figures on Croatia’s shadow economy in 1990s and the 2000s. These differences are the result of newly adopted methods to measure the informal sector’s size. These new figures showed a higher share of the underground economy to Croatia’s GDP since 2000, ranging from about 33 percent in 2000 to 28 percent in 2013.1291 Despite the differences in the official figures, the general pattern of the underground economy’s development continued. The reform programmes for the Croatian economy proved to be successful during the 2000s. Furthermore, the economic growth between 2003 and 2008 1286

Ott, 2002, p. 9. Ibid., p. 21. 1288 Ibid., pp. 9-11. 1289 Nastav and Bojnec, 2007, pp. 30-31. 1290 COM(2013) 171 final, p. 15. 1291 Schneider, 2013, p. 6. 1287

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caused the decline of the informal sector. During these five years the annual GDP growth improved and the informal sector’s ratio to GDP declined from 32.3 percent in 2003 to 29.6 percent in 2008.1292 However, the global financial and economic crisis, that hit Europe in the autumn of 2008, had negative consequences for the informal sector role in the Croatian economy.1293 Since the economic performances of 2009 were released in the EU member states’ official annual reports, there can be noticed an overall increase in the underground economy’s share to GDP in all member states. In this sense, the increase of the Croatian underground economic sector cannot be related only to the Croatian government’s behaviour. Therefore, the figures on Croatia’s shadow economy improved recently, because the European economy’s performance gradually improved too during 2013. This movement resulted in a lower share to GDP of Croatia’s informal sector, a decline from 30.1 percent in 2010 to 28.4 percent in 2013. However, in the context of the underground economy’s share to GDP, Croatia’s figures are still lagging behind the EU average. A report on Europe’s underground economies shows an average EU size of the underground economy of 18.5 percent to GDP, while Croatia ranks third (behind Romania and Bulgaria) on this list with its 28.4 percent to GDP.1294

7.10 Conclusion On the basis of the profound analysis of Croatia’s macroeconomic development during the last 24 years, there can be concluded that Croatia has made major improvements during this period. There has to be taken into account that Croatia’s economic orientation changed revolutionary when the country became independent in 1991. Suddenly, the perception of economy changed from a socialist to a market-based one. While Croatia tried to reform its macroeconomic policy, the structure of its economic sectors and its citizens economic behaviour, the country had to cope with the war effects during the following years in the 1990s decade. Therefore, it can be argued that it has been already a major achievement that Croatia became an EU member within less than 25 years after its independence. Especially during the post-Tuđman era, the Croatian governments, presidents and its citizens have shown significant will to integrate within the EU. This will was translated into a large amount of economic reform programmes during the first years of the 2000s. In accordance with the Copenhagen Criteria and further EU guidelines, Croatia experienced economic growth. Especially the service sector, in specific the tourism sector, the country’s increasing FDI inflow rates and the increase of the private equity prices contributed positively to Croatia’s annual GDP growth. Due to other 1292

Schneider, 2013, p. 6. Kearney and Schneider, 2013, p. 6. 1294 Schneider, 2013, p. 6. 1293

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obstacles in Croatia’s accession process to the EU, the country could not accede to the EU already in the 2005-2010 period. After a period of relative prosperity in Croatia, the economy had to cope with the consequences of the global financial crisis that hit Europe in 2008. As a result, Croatia nowadays faces already five years of consecutive GDP decline. This recession is further caused by the bad performances of the private equity market, which collapsed in 2008, the low amount of construction projects started, the high social costs as a consequence of the high unemployment rate and the low investment rate among both foreign and domestic private entrepreneurs. Therefore, Croatia tries to reform its economic policy in accordance with the World Bank and the EU. Despite these negative economic tendency, Croatia was allowed to join the EU in 2013. At the moment of writing this report, it is still too early to measure the economic effects of Croatia’s EU accession. Nowadays, Croatia first has to cope with the declining revenues from former CEFTA trade agreements. The Commission expects that positive effects on intra EU trade for Croatia’s economy will be visible only in the medium- and long term. In the end, when taking into account Croatia’s main obstacles to economic growth, it can be argued that Croatia still needs to improve its economic significantly. However, in this sense, it has to be acknowledged that Croatia is also dependent of other major EU member states’ economic performance.

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8. The infrastructure of Croatia Besides being a pre-condition for EU accession, the modernization of Croatia’s infrastructure is an important factor of competitiveness, as Croatia has a strategic position at the junction of the north-west and south-east transport and transit corridor.1295 In addition to a road and railway network, several large rivers run through the country, which provide opportunities for inland waterway transport. Furthermore, Croatia is also adjacent to the Adriatic Sea. Deep bays, like the bay where the Port of Rijeka is located, create opportunities for maritime transport.1296 Croatia’s strategic position is also of importance to the EU. Several of the ten panEuropean corridors, which are important transit routes within Europe that run via road, rail and water, are going through Croatia. These are the European Corridors Vb, Vc, VII and X.1297 In addition, the EU has plans to further integrate Croatia’s network within the Trans-European Transport Network (TEN-T), which is an EU project that integrates most important established routes within the EU in order to realise a single, multimodal network.1298 The map below provides an overview of Croatia’s main traffic and development axis.

Figure 8.1: Croatia’s traffic and development axes. 1299

Due to the country’s favourable location, there are opportunities for Croatia to become a major 1295

European Commission, 2013 (C). South East European Transport Axis Cooperation (SEETAC), 2010, pp. 3-10. 1297 Ibid, pp. 3-10. 1298 Martellato, 2011, p. 52. 1299 Ministry of the Sea, Tourism, Transport and Development, 2007, p.11. 1296

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transport hub within Europe. The transport sector could become a driver of economic growth. In order to achieve this, the country has to modernise its transport sector to meet international standards and to integrate its infrastructure into the TEN-T.1300 With exception to the motorways all transport routes need further development.1301 Furthermore, the infrastructural coverage between the regions needs to be improved. When Croatia joined the EU, the Instrument for Pre-accession Assistance (IPA) programme for transport became a convergence programme which receives money from the European Regional Development Fund.1302 The programme aims to improve the integration of the Croatian transport networks within the European transport network and to develop a more balanced and interconnected network that covers all sectors of transport.1303

8.1 Road network When compared to the railways or waterways, the road network is technically cohesive and there are good connections with remote parts of the country and neighbouring countries.1304 The road network provides a good connection with neighbouring countries and the main motorways connect Croatia’s major cities and many of the remote parts of the country are accessible by car. However, the roads in these remote areas are often unpaved. Over the years, the Croatian government has allocated most of its funds for infrastructure to improve the road network. Between 2001 and 2009 approximately 670 kilometres of new motorways were built, which made the Croatian road network more of equal standard with the EU road network.1305

1300

Ministry of the Maritime Affairs, Transport and Infrastructure 2012, p.7. Ministry of Finance 2013, p. 43. 1302 European Commission, 2013 (C). 1303 Ibid. 1304 Ministry of the Maritime Affairs, Transport and Infrastructure 2012, p.32. 1305 World Bank Group 2013, p.6. 1301

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Figure 8.2: Croatia’s road network 1306

The road infrastructure in Croatia is, with the exception of a couple of motorways, owned by the state. There are four companies in Croatia that operate the motorway network, of which three are privately owned. The Hvratske autoceste d.o.o. is a state owned company which operates on a national level. It manages motorways A1, A3, A4, A5, A10, A11, A12 and A13.1307 The company Autcesta Rijeka-Zagreb d.d. is in charge of the motorway between Zagreb and Rijeka. It operates the A6, A7, a part of the A1 and the Krk bridge.1308 Bina Istra d.d. operates the A8, A9 and the motorways in Istria (also referred as the Istrian Y, which connects the northern parts of Istria county to the southern parts). Autocesta Zagreb-Macelj d.o.o. manages the A2, the motorway between Zagreb and Macelj. The overall condition of the roads in Croatia can be described as good, especially when compared to other types of infrastructure like the railways.

8.2 Railway network The railway infrastructure was heavily damaged during the war, which caused a decline in the amount of traffic. By the end of the 1990s Croatia became politically and economically more stable and was able to take advantage of its strategic location at an intersection of European transit corridors.1309 Croatia’s railway network includes two European transit corridors and one Croatian main corridor. The most significant corridor is the Pan-European Rail Corridor X, which runs 1306

Jones Lang Lasalle, Agency for Investments and Competitiveness, Antal International, KPMG, 2013, p.9. Association Europeenne des Concessionnaires d'Autoroutes et d'Ouvrages a' Peage, 2012, p.1. 1308 Croatia National Report on the Motorways, 2011, p.1. 1309 The World Bank, 2013 (A), p. 27. 1307

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between Salzburg in Austria and Thessaloniki in Greece via Austria, Slovenia, Croatia, Serbia, Macedonia and Greece. Corridor Vb, which is a connection between the Port of Rijeka with Zagreb and the Hungarian border, is also described as a key route.1310 The railways in Croatia are state owned and therefore have been dependent on state investments. From 2002 the annual average investment in the railway infrastructure was 129 million euro.1311 In 2008 the Croatian railway system suffered from the financial crisis, which caused a decline in financial aid from the state.1312 This has resulted in a decrease in maintenance of the railway infrastructure. The railway infrastructure is currently in a poor condition.1313 The current railway infrastructure components in Croatia are often technically outdated when compared to EU standards. For example, the technical problems with interlocking systems have decreased the speed of some tracks to only 30 kilometres an hour1314 and the Ministry of Maritime Affairs, Transport and Infrastructure foresees that 70 percent of the locomotives will need to be replaced within the next decade.1315 Furthermore, the railway system should become more energy efficient and sustainable.1316 There have been several attempts to improve the competitiveness of the railway system. In 2012 the Ministry of Maritime Affairs, Transport and Infrastructure approved a reform programme which comprised the division of Hrvatske Željeznice (HZ, Croatian Railway Company) into three parts: HŽ Infrastructure, HŽ Passenger Transport and HŽ Cargo.1317 These parts have become separate companies. The Croatian railway system has been restructured in order to prepare these companies for liberalisation.1318 So far the attempts to privatise any of these companies have failed. The improvement of Croatia’s railway system is a Croatian and EU priority. The IPA programme for transports lists the improvement of the railway system as a priority axe. The Europe Strategy 2020 and the Fourth Railway Package also oblige Croatia to modernise its railway system and to implement a restructuring plan.1319 The main objective of these programmes is to integrate Croatia’s railway system further in the European transport system by improving its coordination and connectivity and to synchronise its operational standards with those of the EU.1320 Croatia will be able to use EU funds to realise these objectives, which 1310

The World Bank 2013 (A), p. 27. Ministry of the Maritime Affairs, Transport and Infrastructure 2012, LBA p.14. 1312 The World Bank 2013 (A), p.9 1313 Interview 20; 27; 40. 1314 Interview 20. 1315 Ministry of the Maritime Affairs, Transport and Infrastructure 2012, p. 18. 1316 The World Bank 2013 (A), p. 11. 1317 Ministry of Finance 2013, p. 36. 1318 Ibid., p. 83. 1319 Pamela Luica, 2013. 1320 European Commission, 2013 (C). 1311

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totals 2.4 billion euro for the Croatian transport sector from 2014 to 2020.1321 In order to receive these EU funds, Croatia will need to present a comprehensive transport plan. For now, only a few projects have been realised and many projects to improve the railway infrastructure are still waiting for approval.1322 The World Bank foresees three challenges for Croatia in restructuring its railway system.1323 The first challenge is to make sure that the investments in the railway system will reap their rewards. Although the railway system has received a significant amount of state aid it has remained uncompetitive. The World Bank has its doubts whether such an investment model will be sufficient. The second challenge the World Bank foresees is the effectiveness of the implementation of the new legal and institutional framework for the development of the railway for the industry itself. The adoption of this framework will not necessarily mean that its competitiveness will improve. Lastly, the railway industry has to fulfil the vital task to become independent from government subsidies for their operating costs so the budget can be invested in development.1324 Although the improvement of the railway network will face several major challenges, it will be beneficial for Croatia’s transport network. An improved rail network, as projected in the figure below, will improve the country’s logistics. There are plans to improve the railroad connections from Port of Rijeka, which has potency to become an important logistics centre due to its strategic position. However, these goals can only be realised when there is enough money to invest in the infrastructure. Most of the plans are still being taken into consideration and for now there has not been an approval yet of EU funds in order to improve this railway connection.1325

1321

Pamela Luica, 2013. Interview 20. 1323 The World Bank 2013 (A), p. 12. 1324 Ibid., 12. 1325 Interview 20; 43. 1322

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Figure 8.3: TEN-T Railway map 2008 (left) and TENT-T Railway map horizon 2020 (right).1326

8.3 Inland waterways

Figure 8.4: Croatia’s main inland waterways. 1327

Croatia has several inland waterways and ports, with a combined length of 805.2 kilometres, of which 287.4 kilometres is classified of IV class waterway, which means that the waterway has a

1326 1327

South East European Transport Axis Cooperation (SEETAC) 2010, pp. 15-16. Ministry of Maritime Affairs, Transport and Infrastructure, 2012 (B).

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minimum depth of 2.5 metres for at least 300 days a year.1328 The rivers that run through the country are the Danube, Sava, Drava, Kupa and Una. The Danube is the longest river within the EU. It originates in Germany and flows from there in south eastern direction via various European countries into the Black Sea. The Danube is marked as Pan-European Corridor VII. The Sava River originates in Slovenia, from which it flows via Croatia and Bosnia and Herzegovina to Serbia, where it joins the Danube. The Drava River originates in the Alps, from which it flows to Slovenia and Croatia until it discharges with the Mur River at the borders with Hungary. The Kupa River starts at the county of Gorski- Kotar, at the border with Slovenia and joins the Sava River in the city of Sisak. The Una originates in the Lika region and flows through the border area with Bosnia and Herzegovina, before it spills into the Sava River. The river ports got damaged during the war, causing their infrastructure to be in poor condition. In addition, a lack of maintenance during the years after the war has also affected the navigability of the waterways. Therefore, they are under-utilised.1329 For example, the restrictions on transport for the Sava River, which are caused by war debris and high levels of sediment, can also be seen as a big obstacle for river transport as it has caused a decline of the amount of freight transport on the Sava River during the last decade. In other ports, like Vukovar, Orsijek, Sisak and Slovonski Brod the transport of river cargo grew between 2000 and 2008. According to experts in the field, the government is currently working on removing the bottlenecks of inland waterways.1330 Transport through the inland waterways is also hindered by the fact that there is no internal connection between the Sava and the Danube River. For a long time, there have been plans to create a canal between the two rivers near the city of Vukovar, but these plans have not been realised.1331

8.4 Seaport infrastructure Croatia’s coastline is 1 777.7 kilometres long (even 4 012 kilometres when one includes island coast) which makes it possible to facilitate a large amount of ports and harbours.1332 There are seven seaports that have enough capacity to accommodate ocean-going ships. These seaports are located in Pula, Rijeka, Zadar, Šibenik, Split, Ploče and Dubrovnik.1333 The port of Rijeka fulfils an important position within the restructuring plans that aim to 1328

Ministry of Maritime Affairs, Transport and Infrastructure 2012 (A), p.18. Ibid., p. 20. 1330 Interview 27. 1331 Ibid. 1332 Croatian Chamber of Economy transport and communications department 2010, p. 1 1333 Ibid., p. 1 1329

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put Croatia on the international transport map. Due to its geographic position and capacity for large ships due the depth of the water, there are big opportunities for Rijeka to become a gateway to Europe. According to the Croatian Chamber of Civil Engineers the Port of Rijeka can be reached six days earlier from the Suez Canal than the sea ports of northern Europe, like Hamburg and Rotterdam.1334 While the distance between the Suez Canal and the North Sea is 3 375 nautical miles, the distance between the Suez Canal and the Port of Rijeka is 1 260 nautical miles. Annually 800 million tons of cargo is transported via the Suez Canal, of which only a small part goes through Adriatic ports like Rijeka.1335 One of the main reasons for this is the poor quality of the port’s surrounding infrastructure, in particular the railways.1336 Therefore, the Croatian Chamber of Civil Engineers foresees major opportunities for Croatia to become a transport gateway when the Rijeka Port and its surrounding infrastructure are being restructured. This opinion is shared by several experts in the field of economics.1337

8.5 Airport infrastructure The international airports of Croatia are located in Zagreb, Split, Dubrovnik, Pula, Rijeka, Zadar and Osijek.1338 The airports of Brac and Losinj can only be used by smaller planes. The airport of Zagreb has the highest amount of passengers. In 2012, 2 323 904 passengers used this airport.1339 Many international airline carriers, like Lufthansa, British Airways, Air France and Qatar Airways have flights to Croatia. However, some carriers only fly to Croatia during the summer months due to summer tourism. In the last couple of years, there has been growing interest from foreign investors to invest in Croatia’s airport infrastructure.1340 In 2013, Bouygues and Airport de Paris invested in a project to improve the Airport of Zagreb. There were also other foreign investors interested in this project. Figure 8.5: Airports in Croatia 1341

1334

Dušek, 2012, p. 7. Ibid., p. 9. 1336 Ibid., p. 11. 1337 Interview 9; 27; 40. 1338 Ministry of Maritime Affairs, Transport and Infrastructure, 2012 (B). 1339 Eurostat, table avia_paoa. 1340 Lovrić and Lončarević, 2013, pp. 1-2. 1341 Croatia-Official.com 2007 http://www.croatia-official.com/Travelling-to-Croatia.html, last accessed on 20.02.2014. 1335

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8.6 Water infrastructure in Croatia According to the World Bank, the entire urban population and 97 percent of the rural population in Croatia had access to improved water sources in 2012.1342 This means that a person has at least access to 20 litres of improved water a day. Improved sources include household connections, public taps or standpipes, boreholes, protected dug wells or springs and the collection of rainwater.1343 Vendors, water tankers and unprotected wells and springs are examples of unimproved water sources. Therefore, the access to clean water in Croatia can be considered good. However, there are still some deficiencies in the water supply in terms of network losses and the removal of wastewater due to inadequate sewage systems. The water distribution pipes are often old and in need of replacement. In addition, the collection of wastewater is still non-existent in some municipalities. Therefore, Croatia’s water management is not yet in line with the environmental EU standards.1344 Several projects have been launched to resolve these issues. Some of these projects were able to use funds from the IPA. The development of wastewater management infrastructure and improvement of water supply and wastewater integrated management systems were listed as priority axes under the IPA Environmental Protection Operational Programme (EPOP) in Croatia. The project in Brodsko- Posavska country to tackle the network losses in the water supply system is one of these projects that have received pre-accession funds. The network losses in this county are estimated to be 43 percent due to water distribution pipes that are 15 to 40 years old.1345 As mentioned above, many municipalities in this county do not have a sufficient wastewater collection system. The project tries to tackle these problems by improving the connections to the water supply and sewage system and the construction of a wastewater treatment facility in Slavonski Brod. Other large projects that have applied for EU funds consist of the establishments of county waste management centres in the counties of Istria and Primorsko – Goranska and several cities, like Knin and Sisak.1346

8.7 Telecommunication infrastructure The telecommunications network in Croatia has gradually improved since the second half of the 1990s as an increased number of remote areas became covered by the network. Nowadays, 1342

The World Bank, 2013 (B), http://wdi.worldbank.org/table/3.5. last accessed on 22.05.2014. World Bank Indicator List, 2014, http://data.worldbank.org/indicator/SH.H2O.SAFE.RU.ZS. last accessed on 22.05.2014. 1344 Pinsent Masons Water Yearbook 2011-2012, 2011, http://www.globalwaterintel.com/pinsent-masons-yearbook/20112012/part-ii/13/. last accessed on 22.05.2014. 1345 European Commission Regional Policy Project Examples, 2014, http://ec.europa.eu/regional_policy/projects/stories/details_new.cfm?pay=HR&the=72&sto=2178&lan=7®ion=ALL&ob j=ALL&per=2&defL=EN. Last accessed on 22.05.2014 1346 European Commission, 2012, http://ec.europa.eu/regional_policy/thefunds/ipa/croatia_environment_en.cfm Last accessed on 23.05.2014; Interview 6; 37. 1343

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about 40 percent of the people in Croatia have a fixed- line and the number of mobile phones has exceeded the amount of people living in Croatia.1347 In 2012, there were 1.64 million main telephone lines in use and 4.97 million mobile phones in Croatia.1348 In 2012, Croatia had 729 420 internet hosts and 2.2 million internet users. In 2013, 65 percent of the households had an internet connection.1349 This is below the average of the EU28, which was 79 percent in 2013. In 2013, 29 percent of the population between 16 and 74 had never used the internet.1350 The infrastructure for mobile internet in Croatia has undergone significant changes during the last decade and it develops in accordance to the latest technology. The network population coverage of Hrvatski Telekom’s 2G network is almost 100 percent and its 3G network covers 81 percent.1351 In 2012 the company was the first in Croatia to launch the LTE (Long-Term Evolution) technology based 4G network and was among the first 4G network operators in Europe. According to Hrvatski Telekom’s coverage map their 4G network is currently covering the larger cities in Croatia and their surrounding areas.1352 According to Vipnet, the operator has got a national coverage of GSM (Global System for Mobile), GPRS (General Packet Radio Service) and EDGE (Enhanced Data rates for GSM Evolution) networks, and 81 percent of HSPA (High Speed Packet Access) coverage.1353 Additionally, Vipnet was the first operator in the Croatian market to introduce HSPA + Dual Carrier technology, which allows faster data transfer speeds (up to 21 Mbit/s for downloading, and 5,7 Mbit/s for uploading data). Currently, over 50 percent of Vip’s 3G network has HSPA+ functionality, meaning that this technology is available in almost all cities in Croatia. In 2012, Vipnet also has launched a 4G LTE network.1354 Internet hotspot connections can be found in larger cities and the amount of internet hotspots continues to grow. In 2013 the Croatian Ministry of Tourism announced a programme called ‘Hotspot Croatia’ in order to provide the most frequently visited parts of towns in touristic areas with internet hotspots.1355 The project aimed to create 269 hotspots offering free Internet access in 244 such sites along the coast and 25 in continental parts of the country.

1347

CIA, 2014. Ibid. 1349 Eurostat, Code Tin00134. 1350 Eurostat, Code Tin00093. 1351 T-Hvratski Telecom (A), 2012. 1352 Ibid. 1353 Vipnet, 2014. 1354 Ibid. 1355 Ministry of Tourism Croatia, 2013. 1348

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8.8 Conclusion As a result of unequally divided state funding some components of Croatia's infrastructure are more developed than others. While the road network and communication infrastructure are in good condition, other components, like the railway network, have become obsolete and are in need of restructuring. Especially in the last couple of years, Croatia has been working on the improvement of its infrastructure. This is can be seen in the current projects to improve Croatia's water utilities, the plans for improving the railway infrastructure and the removal of bottlenecks in inland waterways. Croatia is eligible to apply for EU funds to improve its infrastructure. Therefore, Croatia's accession to the EU can be seen as an opportunity to improve the country's infrastructure. Croatia has a favourable geographical position in terms of transport, as three European corridors run through the country and as the Port of Rijeka is, in comparison to other European ports like Hamburg and Rotterdam, fast to reach from the Suez Canal. The improvement of the infrastructure will be beneficial for the transport sector and, due the potential of this sector, a big contribution to the economy as a whole.

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9. Economic Sector Performance This chapter provides a comprehensive analysis of Croatia’s main economic sectors. The recent development of these sectors, their contribution to Croatia’s overall economic growth, their role in society and the main shortcomings within these sectors will be discussed.

9.1 The banking sector During its transition period, one of Croatia’s key objectives was the development of a healthy banking system.1356 However, the transition of the banking system was not part of the Privatisation Act of 1993. These reforms of the banking system were executed by the HNB.1357 Croatia’s central bank already existed as a federal central bank as part of Yugoslavia. After Croatia’s independence the HNB acquired a national and independent status. The central bank is solely responsible to the Croatian Parliament by submitting annual reports.1358 The HNB’s main responsibilities are determining Croatia’s money supply, the liquidity of banks, the maintenance of foreign payments and liquidity, the supply of banknotes and coins and the supervision and regulation of banks.1359 The most important feature of HNB’s reforms regarding the banking system was the liberalisation of market entry to the banking sector in 1990. In 1989, a major reform had already taken place in the banking sector. The 1989 Law on Associated Labour, which formed the basis for self-managed socialism, was abolished. The reform legislation of the banking sector made the transformation of socially owned banks into joint-stock companies possible.1360 This resulted in legalised forms of various ownership with private enterprises officially accepted in the Croatian banking sector. Hence, when the reforms took place during the 1990s four forms of bank management existed: old state banks founded before 1989, new state banks founded after the 1989 reform legislation, privatised banks, and new private banks established after the 1989 reforms. Despite these earlier reforms, the structure of the Croatian banking system changed radically since the 1990 liberalisation. Former socialist banks gradually came into state hands due to free entry into the market, because there was a lack of potential private buyers. In addition, the introduction of private management changed the market orientation of old banks. In short, the reforms led to a change in management climate in the banking sector, from a reactive to a proactive market competitive stance.1361 Despite the initiated reforms that made it easier for foreign and domestic investors to

1356

Kraft and Tırtıroğlu, 1998, pp. 282 – 283. Jovančevćic, 2000, p. 335. 1358 Ibid., p. 335. 1359 Ibid., p. 335. 1360 Kraft and Tırtıroğlu, 1998, p. 285. 1361 Ibid., p. 286. 1357

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enter the banking sector, the sector still relied heavily on the state. Since liberalisation in 1990, the banking sector grew from 22 banks operating before 1990 to 56 banks operating after four years of liberalisation (1995).1362 The core of the sector was made up of mainly state controlled regional and national banks.1363 The two largest national banks and three largest regional banks, all in state-hands, controlled 71 percent of the total assets available in the banking sector in 1995. This percentage shows the slow pace of the liberalisation process in the banking sector. Furthermore, banks had to cope with large packages of bad, non-performing loans.1364 These non-earning loans counted for approximately 60 percent of the portfolios of Croatian banks.1365 This led to high administrative costs and low efficiency. Clients had to cope with the structural problems of the banking sector as well, because interest rates on the available assets were high.1366 These structural problems did not facilitate an easy entry of new private banks into the sector. The banks entering the sector were too weak to compete with the older, state-owned banks. In 1995, 24 private banks, out of 56 banks in total, had only a marginal 10 percent share of all total assets available in the banking sector.1367 The structural problems of the banking sector had serious consequences for other economic sectors. Due to the high interest rates domestic investors lacked incentives to borrow money for further investments. Moreover, between 1994 and 1996 the nation’s four largest banks had destabilised the system, because of their liquidity problems and unbalanced budgets.1368 This eventually resulted in slow improvements in terms of wealth and prosperity, but also in human rights and media freedom. Croatia found itself in an impasse and failed to attract foreign investors. The government decided to change the banking structure in order to stabilise the Croatian economy in 1996. The government started a rehabilitation procedure for four large banks, the Slavonska, Splitska, Rijecka and Privredna bank. As a result of their rehabilitation, the banking sector made significant step towards stabilisation. Interest rates declined, foreign banks entered the Croatian banking sector and the position of small and medium sized banks was strengthened.1369 Furthermore, Croatia’s political situation stabilised after years of war. Croatia received its first credit rating in 1997 as a result of peace and reconstruction. These circumstances led to the entry of six foreign banks in 1997, compared to only one bank in 1996.1370 1362

Kraft and Tırtıroğlu, 1998, p. 285. Franicevic and Kraft, 1997, p. 680. 1364 Ibid., p. 680. 1365 Ibid., p. 680. 1366 Ibid., p. 680. 1367 Kraft and Tırtıroğlu, 1998, p. 287. 1368 Jovančevćic, 2000, p. 337. 1369 Ibid., p. 337. 1370 Jovančevćic, 2000, p. 338. 1363

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However, the 1998 economic crisis hit the banking sector again. Despite important improvements during 1996-1998 several elements caused the second banking crisis of the 1990s. Banks still had bad credit policies, high interest rates and a lack of management experience. Managers did not have enough knowhow to cope with mergers, acquisitions, bankruptcy and the insolvency of banks.1371 Even the entrance of foreign banks could not avoid this crisis. Their role was still marginal, because there still existed limits on foreign ownership. The 1998 confidence crisis occurred, because the HNB failed to supervise the sector. Thereby, the HNB failed to provide useful information about the banking sector and its banks and had no control of banking liquidities. To solve the crisis the banking sector needed an advance in its privatisation process, a recapitalisation round and an increase in financial discipline.1372 Regardless of the crisis, foreign banks gradually entered the banking sector during the late 1990s and the first years of the 2000s. In 2004, foreign banks controlled more than 90 percent of Croatia’s total banking assets.1373 Their presence raised competitiveness in the banking sector and the supply of a wide range of financial products and services. As a result of increased competitiveness, the average credit and deposit interest rates fell from 10.1 percent in 1998 to 6.5 percent in 2001.1374 The HNB stabilised the banking sector following the confidence crisis. During 2000-2004 a professional management approach resulted in a growing confidence in Croatia’s banking system.1375 However, the banking sector was still dominated by a small amount of banks. In 2004, there were 42 banks operating in the sector from which six banking groups had a dominant role. The two leading banking groups possessed nearly 50 percent of the sector’s total assets.1376 The high amount of foreign currency deposits weakened the stability of the banking system. Too many deposits, 88.5 percent of total deposits in 2004, were indexed to foreign currencies. Even the governmental deposits were for more than 70 percent indexed in the euro exchange rate during 2004.1377 When Croatia and the EU started negotiations for EU membership in 2005, the banking sector had to reform on the basis of the EU’s convergence criteria. One of these requirements was further privatisation of the banking sector. In 2009, the banking sector was almost completely privatised with 91 percent of the sector’s assets possessed by foreign actors. 1378 Only two banks remained state-owned out of the total amount of 32 participating banks in the sector. Furthermore, the four largest banks had a total market share of 65 percent. Based on 1371

Jovančevćic, 2000, p. 338. Vidučić, 2000, p. 55. 1373 European Commission, COM (2004) 657 Final, p. 49. 1374 Ibid., p. 49. 1375 Ibid., p. 50. 1376 Ibid., p. 49. 1377 Ibid., p. 50. 1378 European Commission, 2011 (A), p.11. 1372

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these figures, the Commission concluded that market concentration remained high but did not hinder market competition.1379 However, there were still vulnerabilities threatening the stability of Croatia’s financial sector. As a result of the global financial and economic crisis, lending to the private sector slowed down. In contrast, the government had to borrow more money during the crisis years to re-capitalise banks and to be able to provide social securities to Croatian citizens. The HNB introduced new structural reforms during 2011 and 2012 to stabilise the banking sector. This resulted in a stable financial sector from 2011 onwards. Croatian banks’ lending to the private sector slightly increased and the capital adequacy ratio of the banking sector stood at a high level of more than 19 percent at the end of 2011.1380 In addition, in 2012 the HNB succeeded to maintain a solid exchange rate and financial stability. Furthermore, the national banking sector remained well capitalised.1381

9.2 Service sector The service sector is the largest sector in terms of GDP and employment. In 2010 the service sector comprised over 60 percent of Croatia’s GDP and over 50 percent of the labour market.1382 Transportation accounts for a large part to Croatia’s service industry. This is due to Croatia's geographic position that provides opportunities for international transport and throughput and because of the tourism industry. The percentage of accommodation and food service activities in Croatia was much higher than the EU27 average in 2010. The tourism industry is also responsible for Croatia’s relatively high share in accommodation service activities.

1379

European Commission, 2011 (A), p.11. European Commission Directorate-General for Economic and Financial Affairs, 2012, p.21. 1381 European Commission, COM (2012) 601 Final, p. 5. 1382 World Trade Organization 2010, p.2. 1380

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Figure 9.1: Croatia’s and the EU27’ service sector compared, 2010.

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9.2.1 Tourism in Croatia Now that Croatia has joined the EU, its tourism industry has access to a greater market, as more potential visitors from EU member states no longer require a visa1384, nor do citizens of Japan, China, India and Brazil. Also, EU funding has provided Croatia with better opportunities in their development of tourism, causing also regional development and the ‘affirmation of local products and traditions’.1385 Tourism has been prevalent in Croatia since the 19th century.1386 From the 1960s onwards, tourism in Croatia has been focused on sun and sea.1387 Towards the end of the 20th century, during a biannual conference, tourism was acknowledged to be of economic importance to Croatia.1388 Tourism was to develop within the scope of the Croatian economy, but it needed to develop more ‘original values and advantages’.1389 And thus new forms of tourism were introduced such as rural tourism, health tourism, cultural tourism, maritime tourism, nautical tourism and wine tourism.1390 These forms of tourism shall be further discussed below. Overall, tourism needed to climb the state ladder of priority, as during the 1960s tourism has been unprofitable and this needed to change.1391 The bad image of the region as a

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Eurostat, 2010, table NACE Rev. 2 H-N STS. Interview 47; 54. 1385 Croatian Chamber of Economy Power Point presentation, 20th March 2014; Interview 12. 1386 Baldigara and Mamula, 2012, p. 54. 1387 Grzinic, 2007 (B). 1388 Serovic, 1999. 1389 Ibid., p. 155. 1390 Ibid., pp. 154-155. 1391 Kokanovic, 1999; Serovic, 1999, p. 154. 1384

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result of the 1990s Wars had caused Croatia to be less attractive to tourists.1392 This resulted in a decrease in tourism revenue between 1989 and 1998, whereas in other Mediterranean countries tourism had flourished and the tourism income had increased.1393 After the war and during the NATO intervention in Kosovo, the touristic regions of Croatia returned to approximately 61 percent of their pre-war proportions.1394 Half of the tourism employees had lost their job, and the other half worked for wages that were 17 percent lower than the state average.1395 Approximately a decade later, tourism is seen as the engine to economic development in Croatia.1396 Many economic sectors are influenced by the tourism sector, making tourism of vital importance to the general economy.1397 Sectors such as agriculture, trade and transport are all influenced by tourism, in both negative and positive ways.1398 Not only is tourism currently the driving force behind the Croatian economy, it is also the economic sector that has the best perspective because of its potential possibilities.1399 One can note the importance of tourism in Croatia through the number of tourists in each year, as shown in figure 9.2.

Figure 9.2: Number of tourist arrivals between 2000-2010 in Croatia. 1400

Croatia’s tourism industry accounts for a considerable share of Croatia’s GDP: The tourism sector accounts for 11.6 percent of Croatia’s GDP, while it supports 12.7 percent of the total employment.1401 An important reason for the success of Croatian tourism is Croatia’s geographical location. The counties with the highest amount of tourism are Istria, PrimorjeGorski Kotar, Split-Dalmatia, Zadar, Dubrovnik-Neretva and Šibenik-Knin. The map below 1392

Serovic, 1999; Kokanovic, 1999. Kokanovic, 1999, p. 23. 1394 Ibid. 1395 Ibid, p. 25. 1396 Grzinic, 2007 (B), p. 51; Interview 12. 1397 Interview 12. 1398 Baldigara and Mamula, 2012, p. 53. 1399 Baldigara and Mamula, 2012, p. 54; Interview 6; 25; 26; 47. 1400 Baldigara and Mamula, 2012, p. 54. 1401 Ibid., p. 54. 1393

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shows that all of these counties are adjacent to the Adriatic Sea. In 2012, 84.3 percent of the total tourist destinations consisted of locations on the Adriatic Coast. During these months the average temperature in these counties varies from 22 to 28 degrees Celsius, which can be considered as ideal conditions for beach vacations. Other types of tourism consisted of city trips to Zagreb (5.9 percent of total tourism in 2012) and vacations to the mountains (2.5 percent of total tourism in 2012). The mountains are mainly located in the counties of Primorje-Gorski Kotar, Lika Senj, Zadar and Karlovac. With a share of about 15 percent in the overall economy, tourism is an important industry for Croatia. According to the National Tourist Board of Croatia travel related revenues were 6 598.6 million in 2011 and 6 829 million in 2012.1402 In 2012 Croatia was visited by 11.8 million tourists of whom 10.4 million were foreigners. Most tourists come from Germany, Slovenia, Austria, Czech Republic, Italy, Poland, Slovakia and the Netherlands. The number of employees in the tourism sector was about 91 500 in 2012. The number of tourists grew significantly since the 1980s until the 1990s but this growth was followed by sharp decline in the early 1990s due to the war. After 1995 tourism gradually recovered from this decline.1403 The number of domestic tourists is difficult to measure, as many of these people stay in their own or their family's second homes along the coasts during their holidays.1404 As holidays in private accommodations are often not included in the statistics, the charts for domestic tourism are less reliable. Another problem with measuring tourism before the war is that the statistics display the results for Yugoslavia. Therefore, the charts display a higher number of tourists than the real number of tourists in Croatia before the war.1405 This makes it difficult to compare the pre-war and post-war numbers on tourist arrivals. It is important for Croatia to resort to new and alternative forms of tourism as the world tourism market is also shifting.1406 Typical Croatian products and activities are needed in order to cater for the increasing number of tourists that are arriving in Croatia.1407 Furthermore, as the Croatian tourist market is focused upon sea and sun, tourism in Croatia is seasonal. 1408 Typical summer holidays cannot be extended, so alternative fields of tourism are to be explored, since these fields can be extended over a period that lasts longer than the three months of summer.1409 These fields of tourism are called ‘selective tourism’.1410 The most mentioned forms 1402

National Tourist Board of Croatia, 2013. Ibid. 1404 Croatian Chamber of Economy Power Point presentation, 20th March 2014; Interview 26. 1405 Croatian Chamber of Economy Power Point presentation, 20th March 2014. 1406 Grzinic, 2007 (A); 2007 (B); Grzinic and Saftic, 2012; Baldigara and Mamula, 2012. 1407 Grzinic, 2007 (B). 1408 Interview 12; 26. 1409 Grzinic, 2007 (B); Interview 37. 1410 Baldigara and Mamula, 2012; Grzinic, 2007 (A); 2007 (B); Kokanovic, 1999. 1403

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of selective tourism that could be of value to Croatia are adventure tourism, health tourism, cultural tourism, maritime tourism, and rural tourism.1411 These, and other, forms of tourism will be further elaborated on below.

9.2.1.1 Adventure tourism As mentioned above, tourism is changing all over the world. The shift in tourism mainly lies in the fact that tourists no longer go to sunshine destinations just for sun and sea, but also to actively do something. For Croatia, this is where adventure tourism would come in. Croatia exists of a large environment that can be used for adventure tourism such as rafting and canoeing, mountain climbing and biking, hiking and spelunking.1412

9.2.1.2 Health-related tourism There are several natural remedies that are used in Croatia to increase the quality of life. Thermal and mineral waters, for example, were already used for this purpose in the Roman times. But healing has not only come from natural products and spas, but also from the location – the climate and the sea.1413 The Croats did not become aware of these natural remedies until halfway the 18th century, when they found that the cleanliness of their air and the prevalent sunshine are considered beneficial to people that are ill.1414 These aspects of Croatia are used within the sector of health tourism. Health tourism, as considered in Croatia, does not necessarily include medical tourism. In Croatia, medical tourism is not considered to be included in health tourism. Health tourism is more related to wellness tourism as it resorts to natural remedies, often extracted from plants. The wellness part of health tourism engages in the preparing of schedules, ensuring a healthy diet, enough rest and fresh air, while excluding smoking, alcohol and drugs.1415 Wellness is thus more related to the thermal spas and relaxation. Marine health resorts aim to relieve people from their stress and increase the overall quality of life. Balneotherapy, or spa therapy, makes use of mineral waters, muds and thermal spas. Many of such resorts currently exist in Croatia, such as medical facilities that are built on original thermal spas.1416 Currently, over 200 natural healing facilities can be found in Croatia, each of which resorts to typical Croatian natural resources for healing.1417 The natural

1411

Grzinic, 2007 (B); Serovic, 1999. Safarek, 2014, pp. 72-81; Croatian Chamber of Economy Power Point presentation, 20th March 2014. 1413 Ivanisevic, 2014, pp. 138-140. 1414 Ibid., p. 140. 1415 Ibid., p. 140. 1416 Ivanisevic, 2014, pp. 141-142. 1417 Ibid., p. 144. 1412

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environment of Croatia has role in this, as it is the home to many medicinal plant species.1418 Overall, health tourism in Croatia is mainly a preventive therapy rather than actual healthcare in hospitals and such. Hospital healthcare is part of medical tourism. Medical tourism in Croatia is considered competitive1419 because of the low costs, the waiting period and because it is considered safe. The Croatian doctors have received a good education and the top quality hospitals are often part of the private sector, resulting in good customer care.1420 9.2.1.3 Cultural tourism Cultural tourism in Croatia is flourishing. Many ancient towns alongside the coast of Croatia have remained untouched1421 and are therefore considered cultural heritage, and often interesting to foreign tourists. Other cultural heritage sites that are considered important in Croatia are the sites that UNESCO considers world heritage, these sites have been discussed in the chapter on the Croatian culture. The branding of such sites is important to Croatian cultural tourism, as it will attract more foreign tourists.1422 Besides tangible heritage, there are also a few intangible forms of heritage in Croatia such as lacemaking, wooden toys manufacturing, and the ‘following the cross’ procession on Hvar.1423 Among tourists, the Croatian tangible heritage sites are most popular to visit, whereas the intangible heritage is often good for souvenirs.1424

9.2.1.4 Maritime tourism Maritime tourism entails all forms of tourism that occur along the seacoast or further into the water.1425 The strength of maritime tourism lies in the fact that Croatia has an indented coastline, so that there are many bays and islands with warm water that are suitable for diving, sailing and bathing.1426 Along the 6 278 km coastline, there are 1 246 islands.1427 The transport to the islands is of vital importance for maritime tourism in Croatia. 1428 Tourists are able to access the 66 inhabited islands by means of a maritime liner that runs throughout the high season. All inhabited islands are equipped with a port, but not all of these islands have enough berths for the boats to dock.1429 This would need enhancement through a future governmental

1418

Rasic, 2014, p. 163. Tourism in Croatia, Belgium Embassy, retrieved from: http://www.awex.be/frBE/Infos%20march%C3%A9s%20et%20secteurs/Infossecteurs/Documents/PECO/TOURISM%20IN%20CROATIA%20052013. pdf, last accessed on 20.02.2014. 1420 http://www.medcroatia.com/why-croatia/croatian-medical-tourism/, last accessed on 20.05.2014. 1421 Viducic, 2008. 1422 Croatian National Tourist Board 2013, p. 6. 1423 Jelincic, 2014, p. 38. 1424 Croatian National Tourist Board, 2013. 1425 Viducic, 2007. 1426 Viducic, 2008. 1427 Kubicek and Bahnik, 2014, p. 276. 1428 Viducic, 2008, p. 322. 1429 Ibid., p. 324. 1419

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strategy. The Croatian coast is suitable for sailing because of the fair, but unpredictable, wind that blows at the Croatian Adriatic.1430 The proximity of the small Croatian islands and their variety provides sailors with plenty of things to see, from Istria to Dubrovnik.1431 In addition, Croatia attracts a large numbers of divers. Not only can reefs and corals be found in Croatian waters, also shipwrecks from the First and Second World War are found in the waters surrounding Pula.1432 Greek and Roman relics can also be found in Croatian waters, as the coastline of Croatia was an important waterway during Greek and Roman times.1433 Diving, but also maritime tourism in general, can also represent a threat to the environment. The underwater environment can be disturbed while diving or sailing. Furthermore, people spending time on the beach often leave litter, which also threatens the wellbeing of the environment. Therefore, the sustainability of maritime tourism is a highly debated topic in Croatia. No actual problems have been discovered yet, but the Croats are keen on maintaining their unspoilt environment. In order to prevent ecological problems from occurring on the coastal regions, preventative measures have been discussed, but no measures have actually been implemented1434. When looking at the economic value of maritime tourism, it has been found that boaters spend on average almost twice as much as an ordinary tourist.1435 Further expanding maritime tourism would thus be beneficial for the economy. Current issues with maritime tourism are concerned with its transport routes. It has been suggested that the transport to the coastal regions of Croatia is where the problem with maritime tourism lies. Whereas the roads have developed well, the rail infrastructure remains problematic.1436

9.2.1.5 Rural tourism Rural tourism is strongly related to maritime tourism as many of the islands are uninhabited or at least part of a rural area. Of the Croatian territory, 91.6 percent is considered rural. 1437 Accommodation in these areas is often problematic1438 and an overall challenge for rural tourism is that it should be developed individually, so there should not be a universal strategy for the entire coastal region, or for all islands combined. The strength of rural tourism lies in its 1430

Kubicek and Bahnik, 2014. Ibid., pp. 276-301. 1432 Ostoic, 2014, p. 314. 1433 Ibid., p. 314. 1434 Viducic, 2008. 1435 Gracan, 2002. 1436 Viducic, 2008, p. 323 1437 Demonja, 2014, p. 68 1438 Viducic, 2008. 1431

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uniqueness and in its relation to typical Croatian customs and traditions.1439 Rural tourism began its development during the beginning of the 1990s with the aim of bringing back farmers, who had left their farms, to resume their production of ‘original and artisan products.’1440 The main idea of rural tourism is to welcome tourists in the daily activities that are being offered in rural areas so that they become acquainted with the more traditional side of the country.1441 This often includes an overnight stay in the farm and taking part in agriculture and gastronomy.1442 Currently, there are approximately 380 registered rural tourism sites. The main benefit of this form of tourism is that farm owners can keep on engaging in their daily activities, while also engaging in sustainable tourism.1443 Wine roads and gastronomic tours are often considered part of rural tourism as the tourists travel through rural areas and are often spending their nights at farms.1444

9.2.1.6 The future of tourism in Croatia Most tourists arrive during the summer. In 2012 the highest number of arrivals was in the month of August (3 051 943), followed by July (2 882 654) and June (1 594 451). The main problem for tourism in Croatia is the low season,1445 when the touristic sector remains rather dormant. To increase the number of visitors for this period the Croatian touristic sector needs to figure out what the tourist demand is1446 and how they can improve the situation. In 2013, the Croatian government launched a new tourism strategy for Croatia until 2020. With this strategy the government aims to position Croatia within the 20 most competitive tourist destinations in the world.1447 Changes have been made in Croatia's marketing strategy for tourism, which will put more emphasis on online marketing, conceptualising PR and tourism branding.1448 The new strategy also tries to improve the quality of accommodations in Croatia. New hotels and resorts will be built and quality standards in accommodations will be monitored. Certification plays an important role in this process. In addition, Croatia will develop different products of tourism like rural tourism, cultural tourism, health tourism and nautical tourism. According to experts in the field of tourism, Croatia has not fully exploited it potential resources for tourism yet. By developing these tourism products the government aims to reduce the seasonality of tourism in Croatia. Furthermore, the government 1439

Demonja, 2014, p. 68; Viducic, 2008, pp. 325-327. Demonja, 2014, p. 68. 1441 Ibid. 1442 Ibid., p. 70. 1443 Ibid., pp. 70-71. 1444 Ibid., p. 71. 1445 Grzinic, 2007 (A), p. 64; Grzinic, 2007 (B), p. 54. 1446 Baldigara and Mamula, 2012, p. 61. 1447 Ministry of Tourism, 2013, ‘Tourism Development Strategy until 2020’, p.5. http://www.mint.hr/UserDocsImages/Strategy-tourism.present.pdf last accessed on 04.06.2014. 1448 Ibid. pp. 6-9. 1440

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will try to improve other aspects of tourism, like tourist centres, beaches and theme parks.1449 On a final note, the EU accession of Croatia has brought many Croats hope for the tourism sector. Many interviewees feel that being part of the EU has provided Croatia with a certain status of being ‘safe’.1450 Furthermore, the fact that EU citizens can travel more easily to Croatia is suggested to contribute to the number of tourists that will travel to Croatia.1451 Nevertheless, there are a number of issues that need to be resolved in order for the Croatian tourism sector to flourish. As mentioned before, the tourism sector is to expand to other forms of tourism than maritime tourism so that the sector can flourish throughout the year rather than only during the high season. Furthermore, tourism in general is not marketed good enough in foreign countries.1452 Also, many scholars have suggested that, the standards of accommodations need to be enhanced.1453 Finally, it is suggested that the human resources in the tourism sector are not well organised.1454 Croats need to become better educated in the tourism sector in general. But the current problem with working in the tourism sector is that people are often unemployed during the rest of the year.1455 The government tries to cope with these people through social packages for summer workers.1456

9.2.2 Transport services The transport sector is very important for Croatia. As transport is a necessity for trade, it is an important sector for the Croatian economy. In 2011 the transport and storage sector employed approximately 77 000 people and there were about 9 800 enterprises operating in the transport and storage sector.1457 In total, the amount of passengers carried by national transport carriers from January to December 2013 was approximately 93 million.1458 During the same period, 111.3 million tons of goods were transported.1459 This is an increase of 1.5 percent when compared to the same period in the previous year. The transport sector has developed in conjunction with the infrastructure in Croatia. As most investments have gone to Croatia’s road network, road transport has become the most common method for passenger transport and the transport of goods in Croatia. While trains were the most often used type of transport for passengers until 2011, the amount of passengers rapidly declined after 2010. In the fourth quarter of 2013 the number of passengers carried by 1449

Interview 26. Interview 6; 12. 1451 interview 47; 54. 1452 Interview 12. 1453 Viducic, 2008; Interview 12. 1454 Interview 12; 26. 1455 Interview 26. 1456 Interview 12. 1457 Agency for investment and Competiveness 2012. 1458 Central Bureau of Statistics, 2014 (A), p. 1. 1459 Ibid. 1450

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railway transport services portrayed a decrease of 15.9 percent.1460 An important explanation for this decline is the bad condition of the railway infrastructure due to the decrease in investments from the government.1461 The transport of goods on inland waterways has experienced an increase between January 2013 and January 2014.1462 This increase is caused by the large increase of international transport of goods on inland waterways to countries such as Austria, Serbia, Romania and Germany.1463 According to an expert this has been a result of the clearing of bottlenecks and the repair of inland waterway infrastructure.1464 However, the infrastructure is not the only factor that has an influence on the transport sector as the economic climate is also of great importance for the sector, especially for the transport of goods. As a result of the economic crisis the transport of goods has decreased in all types of transport. Between 2008 and 2012, the transport of goods by sea declined from 29 223 000 tonnes of goods to 18 972 000 tonnes.1465 During the same period, the transport of goods by roads decreased from 110 833 000 tonnes to 65 453 000 tonnes1466, goods transport by rail from 14 851 000 tonnes to 11 088 000 tonnes,1467 and goods transport by inland waterways from 6 416 000 to 5 934 000 tonnes.1468 Lastly, the air transport of goods has also declined during this period of time from 8578 tonnes to 6961 tonnes.1469 Some experts claim that transport, which already suffered from the economic crisis, was also experiencing negative effects from Croatia’s exit from the CEFTA in order to become an EU member state; trade with the CEFTA countries decreased while the benefits of EU membership were not directly noticeable.1470 However, experts foresee big opportunities for the transport sector, due to Croatia’s favourable geographic position between several transport corridors in Europe and the projected EU funding in order to improve its infrastructure.1471 Especially the development of the port of Rijeka port in combination with the EU funding for the railway network is seen as a chance for the transport sector, as goods can be shipped faster through the Suez Canal to the Port of Rijeka than to northern European ports like Rotterdam.1472 The development of the railway system will provide opportunities to transport these goods by train into the mainland. 1460

Central Bureau of Statistics 2014 (A), p. 1. Interview 20; 27. 1462 Central Bureau of Statistics 2014 (B), p.1. 1463 Ibid., p.2. 1464 Interview 27. 1465 Eurostat 2013, table: ttr00009. 1466 Eurostat 2013, table: ttr00005. 1467 Eurostat 2013, table: ttr00006. 1468 Eurostat 2013, table: ttr00007. 1469 Eurostat 2013, table ttr00011 . 1470 Interview 27; 53. 1471 Interview 9;27; 40. 1472 Kegalj and Cukrov, 2012, p. 22; Interview 9; 27. 1461

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The bright perspectives for the tourism industry are also positive for the passenger transport sector, as tourists need to use transport in order to reach their holiday destination. This is particularly favourable for airline carriers. The government’s strategy to improve tourism in other regions in Croatia besides the coastline could also bring opportunities for inland passenger transport.

9.2.3 Information and Communication Technology According to the AIK Invest, Croatia's Information and Communication Technology (ICT) sector employed approximately 30 000 Croats and had a 4.2 percent share in Croatia's GDP in 2012.1473 The telecommunication sector in Croatia has undergone significant changes during the last two decades. Until the 1990s the telecom sector was owned by the state. The Hrvatska pošta i telekomunikacije was the only network operator and service provider, while the state-owned company Nikola Tesla manufactured the majority of telecommunications equipment.1474 During the 1990s the sector underwent processes of deregulation, liberalisation and privatisation. New laws, regulations and international agreements supported these processes. In 1998 it was decided that the Croatian post and Croatian Telecommunications had to be separated first in order for the Croatian Telecommunications to be privatised. In 1999 the Croatian Telecom Privatisation Act allowed the sale of Croatian Telecommunications to a foreign investor. This resulted in the initial sale of 35 percent of Croatian Telecommunications to Deutsche Telekom.1475 Later, in 2002, a new Telecom Privatisation Act was passed by the Croatian government that allowed Deutsche Telekom to gain the majority of the company (51 percent). When Deutsche Telekom owned the majority of the company, it established HTmobilne komunikacije d.o.o. (later T-Mobile Croatia d.o.o.), as a separate legal entity with the purpose of providing mobile telephone network services.1476 In 2007 the government sold a large amount of its remaining shares of the Croatian Telecommunications through an initial public offering that took place on the London and Zagreb Stock exchange.1477 The government reserved 25 percent of the shares for Croatian citizens and 7.5 percent of the shares was sold to institutional investors. The government sold an additional number of shares in 2008 and in 2010; the last remaining shares were transferred to the state-owned pension fund.1478 During these years the amount of operators in telecommunications in Croatia increased. 1473

Agency for Investments and Competiveness, 2013, Invest in ICT Sector, p.2 http://www.aik-invest.hr/wpcontent/uploads/2013/09/AIK_letak_A5_ICT.pdf last accessed on 23.05.2014. 1474 Begusic, Dinko, Simunic and Dina, 2002, p. 3. 1475 Ibid., p. 3. 1476 T-Hvratski Telecom (B), 2012. 1477 Cuckovic, Jurlin and Vuckovic, 2011, p.8. 1478 Cuckovic, Jurlin and Vuckovic, 2011, p.8.

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Telephone system operators in Croatia are T-Hrvatski telekom (owned by Deutsche Telekom), Optima Telekom, H1 Telekom, Iskon Broadband Telekom, B.net, Amis, and Metronet. Mobile operators include T-Hrvatski Telecom (T-Mobile Croatia), Vipnet (a partner of Vodafone) and Tele2. Mobile virtual network operators are Tomato (that uses the Vipnet network) and BonBon (that uses the T-mobile network). When comparing the ICT sector in Croatia with other European countries, Croatia's performance is below average. In 2014 Croatia was ranked 46th out of 148 on information technology by the World Economic Forum (WEF). Other European countries like Finland, Sweden, Norway and the Netherlands obtained a top 10 position in this index. The index includes several aspects concerning the use and accessibility of ICT within an economy, like ICT infrastructure, access costs and the required skills for ICT usage. The index also includes different actors such as the government, business community and individuals and at the social and economic impact of the sector.1479 Croatia obtained its highest scores in affordability and skills, while the country obtained its lowest scores in its political and regulatory environment and business usage. The country has made improvements during the last year as Croatia ranked 51st on this index in 2013.

9.3 Industrial Sector Before the war in the 1990s the Croatian economy mainly focused on its manufacturing industry. After the war the focus shifted from industry to services. According to the World Bank, manufacturing accounted for approximately 16 percent of the country’s GDP between 2009 and 2013.1480 In addition, it accounts for almost 70 percent of the value of merchandise exports. The industrial sector in Croatia mainly involves the processing of food products, textiles, chemicals, electrical goods, vehicles and metal products. The charts below compare the industrial production of the EU27 and Croatia. The share of Croatia’s food, beverages and tobacco sector is twice as large as the share of this sector within the EU. This is also the case for the textiles, clothes and leather sector.

1479

World Economic Forum, 2014, p.132. http://www3.weforum.org/docs/WEF_GlobalInformationTechnology_Report_2014.pdf, last accessed on 02.05.2014. 1480 The World Bank, 2014, http://data.worldbank.org/indicator/NV.IND.MANF.ZS Last accessed on 22.05.2014.

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Figure 9.3: Croatia’s industrial sector compared to the EU27 in 2010. 1481

Croatia’s industrial sector has faced several problems that have made a negative impact on the sectorial development. There are several reasons for this decline. Croatia's transition from a state led to market economy is often mentioned as one of the root causes for this decline. According to many economic experts, the privatisation process in the industrial sectors failed.1482 They often mention that nepotism was very common during this period, which resulted in the purchasing and reselling of factories by influential persons with close ties to the government.1483 According to some economic experts, these actions would often have led to bankruptcy and unemployment.1484 Another factor that would have contributed to the economic decline of the industrial sector was the unfavourable exchange rate of the kuna in the 1990s.1485 This, combined with increased costs for doing business, has resulted in a major loss of assets for the industry.1486 Experts in the field state that competition from countries that have lower production costs has affected Croatia's industrial sector as well.1487 Lastly, the global economic crisis of 2008 led to a decrease in production volumes, employment, foreign trade and productivity.1488 As a result of the crisis the demand for goods has decreased, which has resulted in a decline in industrial production. For many companies this has resulted in a decrease in output. The graph below portrays the output in Croatia's manufacturing industry. It shows that output in many branches, especially motor vehicles and metal products, has declined since 2008. On the other hand, the industry has suffered worldwide from the crisis and the decline in

1481

Eurostat, table NACE Rev. 2 C. Interview 9; 44. 1483 Interview 9. 1484 Interview 44. 1485 Interview 44. 1486 Bezić, Cerović and Galović, 2011, p. 474. 1487 Interview 44; 53. 1488 Chamber of Economy 2012, p. 3. 1482

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industrial production occurred faster in the rest of the EU than in Croatia.1489

Figure 9.4: Croatia’s industrial sector performance since the economic crisis, 2008.

1490

9.3.1 Food Industry The food, beverage and tobacco industry has the largest share within the industrial sector, with a 26 percent share of the total Croatian manufacturing industry. This large share mainly consists out of food processing, which accounted for 20.4 percent of total output by value of the industrial sector in 2010.1491 According to AIK Invest food processing industry alone had an annual turnover of 5.3 billion euro and employed almost 65 000 Croats in 2011.1492 While 93 percent of the enterprises are small companies, 70 percent of the turnover in the industry is generated by large companies, which represent only 2.5 percent of the total enterprises in this industry.1493 The largest concentration of food and beverages companies is based in and around Zagreb and in the county Osijek-Baranja.1494 Food processing companies can additionally be found in the Varaždin County, Koprivnica-Križevci County, Virovitica-Podravina County, Istria County and Zadar County.1495 The food processing industry has been one of the few industries in Croatia that portrayed a growth in production volumes in 2012 in comparison to 2005.1496

1489

Jaegers, 2013. European Commission, 2013, p.1. http://ec.europa.eu/enterprise/policies/industrial-competitiveness/competitivenessanalysis/eu-industrial-structure/files/short_term_ind_outlook_july_2013_en.pdf , last accessed on 02.05.2014. 1491 Maxwell Stamp PLC, 2012, p. 5. 1492 Croatian Agency for Investments and Competiveness, 2013 (D), p.2. 1493 Maxwell Stamp PLC, 2012, p. 5. 1494 Jones Lang Lasalle, Agency for Investments and Competitiveness, Antal International, KPMG, 2013, p. 19. 1495 Croatian Agency for Investments and Competiveness, 2013 (D), p.2. 1496 Croatian Bureau of Statistics 2013 (B), p. 294. 1490

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The food industry has traditionally been important for the Croatian economy. The industry has undergone drastic changes in the last 15 years. The transformation from publicly owned companies to private enterprises initially caused a decrease in productivity and efficiency of the industry, which resulted in a decrease in productivity. During a period of economic recovery between 2000 and 2003 many small and medium enterprises were founded.1497 During this time purchasing power increased and the Croatian tourism industry continued to recover from the war. While these small enterprises emerged, the large organisations in the food industry invested in technological modernization and acquisitions that increased Croatia’s competiveness in the region.1498 The growth of the tourism industry, that became one of the main contributors to Croatia’s GDP, functioned as a catalyst in food-service sales as tourism during the summer season accounts for a substantial amount of the revenues of supermarkets and retail stores.1499 Since 2000 the amount of small grocery stores and specialist retailers decreased as they were replaced by larger supermarkets and large enterprises. This has resulted in an increase in import of unprocessed foods, because the majority of the agricultural sector mainly consists of small farms and most supermarkets prefer not to buy from a larger number of small producers.1500 There are a couple of large enterprises in the Croatian food, beverages and tobacco industry that have a large share in the market. The company Agrokor is one of these large companies. It was founded in 1967 and is active within several branches of the food and beverages industry. It is one of Croatia’s largest privately owned companies. In 2011 the total revenue was over 29 billion HRK and the number of employees was almost 40 000.1501 Agrokor produces mineral water, soft drinks, ice cream, frozen foods, oil, margarines, mayonnaise, dairy products, wines, salt, flour and meat.1502 In addition, the company has the largest agricultural and industrial capacity in Croatia and it owns various brands and retail companies like Konzum, which has more than 700 stores in Croatia.1503 Another major company in this industry is called Atlantic Grupa (the Atlantic Group). Atlantic Grupa is one of the leading food companies in Croatia and its neighbouring countries. The company has 4 250 employees and its main products are sports and functional food, coffee, beverages, snacks, baby foods, pharmaceutical products and products for personal care.1504 Atlantic Grupa has several brands and 12 operating companies in Croatia. The company employs approximately 1 500 people. In 2013, sales 1497

Maxwell Stamp PLC, 2012 p. 4. Ibid., p. 4. 1499 Ibid., p. 5. 1500 Ibid., p. 5. 1501 Agrokor, 2014. 1502 Ibid., pp. 4-5. 1503 Agrokor, 2012 p. 5. 1504 Atlantic Grupa, 2014 (A). 1498

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revenues were 5 051 million kuna and 24.8 percent of the company's total sales were made in Croatia. After signing the contract in 2013, Atlantic Grupa took over the distribution of goods for Unilever in Croatia and Slovenia in 2014. This agreement has, considering the annual value of the portfolio sales, an estimated value of 240 million kuna and will increase the company's status as one of the leading distributors in the region.1505

9.3.2 Pharmaceutical industry In 2011 the pharmaceutical industry had an annual turnover of 552.4 million euro, it employed approximately 4 400 Croats and it accounted for 4.4 percent of the country’s total exports.1506 The pharmaceutical industry is primarily located in the city of Zagreb, Zagreb County, PrimorjeGorski Kotar County, Koprivnica-Križevci County and Sisak-Moslavina County. The production volumes of the pharmaceutical industry experienced a sharp decline between 2008 and 2009. Although the production volume in 2012 had increased in comparison to 2009, it amounted to merely 75.8 percent of the production volume of 2005.1507 In 2012 there were 37 enterprises in the pharmaceutical industry.1508 These companies included Pliva, the largest drug manufacturer in the region, and Belupo and Jadran Galenski Laboratorij that closely cooperate with the European and US markets. Another large company is PharmaS that is also active in Serbia and Bosnia and Herzegovina. There are also international pharmaceutical companies operating in Croatia such as GlaxoSmithKline, Hospira, Galapagos Research Center, Teva, ACG Lukaps and Farmal.1509

9.3.3 Textile industry The textile industry employs approximately 20 000 people in Croatia and there are over 1 500 companies active in this industry.1510 The textile industry is particularly active in the north western part of the country, in regions like the city of Zagreb, Krapina-Zagorje County, Varaždin County, Međimurje County, Osijek-Baranja County, Karlovac County, Sisak-Moslavina County and Istria County. According to AIK Invest the foreign direct investments in this industry are over 200 million euro.1511 There have been several problems with the industry during the last decade. In the beginning of the last decade the total production of the textile industry declined due to a

1505

Atlantic Grupa, 2014 (B), p. 2. Croatian Agency for Investments and Competitiveness, 2013 (B), p.2. 1507 Croatian Bureau of Statistics, 2013 (B), p. 294. 1508 Croatian Agency for Investments and Competitiveness, 2012. 1509 Jones Lang Lasalle, Agency for Investments and Competitiveness, Antal International, KPMG, 2013, p. 20. 1510 Croatian Agency for Investments and Competitiveness, 2013 (C), p.2. 1511 Ibid., p.2. 1506

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decrease in demand of some textile products and a decrease in orders based on loans, which led to smaller revenues and layoffs in the industry.1512 In addition, there were internal problems in many textile companies as they failed to do market analysis and often lagged behind in the modernisation process. Furthermore, the industry suffered from the financial crisis, which caused a decrease in demand for textile products from Europe and the large number of Free Trade Acts, which resulted in more competition and an increased flow of cheap foreign products on the Croatian market.1513 In 2007, Croatia adopted the Strategy for the Croatian textile and garment industry for the period 2008–2015. This Strategy consisted of development goals like ‘re-positioning in the global market, technology transfers and innovation based on sharing knowledge and experience, production specialization in a higher quality and price range, improvement of network abilities of textile companies, improved adjustment to new markets, technological and organisational conditions of business running and development.’1514 However, the annual production volumes remained low from 2008.1515 This is illustrated by the fact that the production volume in 2012 was only 77.3 percent of the production volume of 2005.

9.3.4 Shipbuilding industry The shipbuilding industry has a long tradition in Croatia. Some feel that shipyards are part of Croatia’s history, tradition and culture.1516 Some towns in Croatia used to evolve around the shipbuilding industry, as many people worked for the shipbuilding industry or one of the supporting industries for shipbuilding. Most of the shipyards had their own schools as well, where they trained their future workers. Although the shipbuilding industry has flourished in the past, the sector is facing many problems nowadays. Many shipyards in Croatia have been operating inefficiently and have become financially troubled. One of the main reasons for these problems is the competition the sector is facing from Asian shipyards that are able to produce for lower production costs.1517 In addition, the sector has suffered from a decrease in demand as a result of the economic crisis.1518 As a result of the economic crisis; the prices for vessels have dropped resulting in a lower profit for sold vessels.1519 These circumstances resulted in the reliance of the industry on government funding.

1512

Chamber of Economy Industry and Technology Department, 2010, p 4-5. Ibid., p 5. 1514 World Trade Organization, 2010, p. 15 1515 Croatian Bureau of Statistics, 2013(B), p. 294. 1516 Interview 53. 1517 Sokolić, D., 2011, p. 181; Interview 44; 53. 1518 Bajo, A., Primorag, M., 2011, p. 2. 1519 Interview 44 1513

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The restructuring of the Croatian shipbuilding industry was one of the obligations listed in the EU Accession Agreement.1520 In 2013 some major privatization projects of shipyards took place. On 28 February 2013 the Croatian government signed a privatisation contract for Brodosplit Shipyard Inc. with the Management Board of DIV Shipbuilding ltd. and on 6 April 2013 an agreement was reached for the privatisation of the Brodotrogir Shipyard with Kermas Energija ltd.1521 After the withdrawal from Jadranska ulaganja d.o.o. in 2012, the 3 Maj. Shipyard from Rijeka was bought by the Uljanik Group on 6 June 2013 for the symbolic price of one Kuna.1522 Experts claim that the Croatian shipbuilding industry has to reinvent itself after the restructuring, as the shipyards do not provide enough work for their staff.1523 Therefore, the loss of many jobs seems inevitable. In order to compete with Asian shipyards and to survive the difficult economic climate, the Croatian shipyards will have to increase their competiveness. This can be achieved by differentiation, by producing high value vessels, by reducing their costs, and by optimizing processes. However, the time to achieve this is limited, as shipbuilding companies will receive no restructuring or rehabilitation aid in the period of ten years after the privatisation agreements.1524 If many of the shipbuilding companies will continue to make losses in the upcoming years, they will seize to exist. 9.3.5 The metal industry In 2011 the metal industry in Croatia had an annual turnover of 1 758 billion and provided employment for approximately 36 000 persons.1525 The metal industry accounts for about 10 percent of the total added value and sales of the manufacturing industry.1526 The industry has spread widely across the country, but is mostly developed in the counties of Medjimurje, Bjelovar-Bilogora, Brod Posavina and Krapina-Zagorje. About 3 000 companies operated in the metal industry in 2011. The largest companies in the industry are Alstom Hrvatska, Starco Beli Manastir, Metalind, Omial New and companies from the Končar Group and Đuro Đaković Holding.1527

9.4 Agricultural sector Agriculture and fishery accounted for 4.1 percent of Croatia’s GDP in 2011.1528 In 2010 agriculture, forestry and fisheries employed 229 200 persons aged over 15 in Croatia, which is 1520

Ministry of Finance, 2013, p. 82. Ibid., p. 36. 1522 Daily Portal Croatia, 2013. 1523 Interview 1. 1524 Bajo, A., Primorag, M., 2011, p. 7. 1525 Croatian Agency for Investments and Competitiveness, 2013 (E), p.2. 1526 Ibid. 1527 Croatian Agency for Investments and Competitiveness, 2012. 1528 Chamber of Economy, 2012, p. 2. 1521

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equivalent to 14.9 percent of the total workforce.1529 This was one of the highest rates in the EU. The total of 1.3 million hectares of agricultural land can be divided into plough-land and gardens (67 percent), land suitable for grazing by livestock (14 percent), meadows (12 percent), orchards (3 percent), vineyards (3 percent) and olive groves (1 percent).1530 Due to the variety in climate zones, a broad range of crops can be found in Croatia. The Pannonian and Sub-Pannonian areas, which are located in the northern part of Croatia, consist mainly of lowland and have a continental climate, while there is a Mediterranean climate in southern parts of the country. In between of these geographic zones there is a mountainous zone in the central part of Croatia.1531 These different climates result in a wide range of agricultural projects, like grains (mainly corn, wheat and barley), vegetable oils (soy, sunflower and oil rape), and fruit and vegetables (mainly cabbages, peppers, onions, tomatoes, olives, apples, pears, plums and tangerines).1532 There is a growing interest in Croatian wines and olive oils, which have become internationally recognised for their good quality.1533 Other Croatian products that are well known for their good quality are salt and cheese from the island of Pag, Slavonian kulen (minced pork sausages), Cetina cheese and smoked ham from Istria and Dalmatia. Despite the good conditions to grow a large variety of foods, the scale of production remains low. The country has many deficits in the agricultural and food sector. Croatia is a net importer of agricultural products and is only self-sufficient in a few agricultural products like potatoes, wheat, corn, sugar, eggs, poultry and wine.1534 One of the reasons for the low production scale is the farm structure in Croatia. The majority of the farms in Croatia are small farms (which have the average size of 2.4 hectares).1535 Compared to other European countries like Denmark, Czech Republic, France, Great Britain and Germany, Croatia uses a small amount of agricultural land per farm.1536 This is due to the fact that a large amount of these farms is run by families instead of large commercial agricultural companies. A relatively high number of people work these family farms. According to an EU labour force survey, 90.7 percent of the labour input for agriculture (measured in annual work units) was carried out by the farm owner or one of his or her relatives in 2010. This is a much higher percentage than the EU27 average of 76.4 percent. The family farm structure can be considered as a weakness for Croatia, as the production scales remain low while such a high percentage of the population is working in the agricultural sector and the 1529

Eurostat 2013, p 17. Ministry of Agriculture, Fisheries and Rural Development in the Republic of Croatia 2009, p.6. 1531 Ibid., p.4. 1532 Ibid., p.9 1533 Chamber of Economy, 2012, p. 2. 1534 European Commission, 2013 (D), p. 2. 1535 European Commission, 2013 (D), p. 2. 1536 Ministry of Agriculture, Fisheries and Rural Development in the Republic of Croatia, 2009, p.7. 1530

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climate conditions for agriculture are good. Small farms often use technically outdated machinery and people are often not adequately trained.1537 In addition to the small family farms, there are also privately owned agricultural companies. However, the number of family farms widely exceeds the number of privately owned companies in this sector. The private companies mostly have evolved out of large state owned companies from Croatia’s socialistic past. Croatia’s accession to the EU has had a big impact on Croatia’s agricultural sector, as it required many structural changes. As a member of the EU, Croatia was required to adapt to EU standards, which are described in Chapter 11 of the acquis. This included modernization of the farms, rural development, and an improved quality standard of agricultural products that is equal to other EU countries and a higher level of stability and planning.1538 Furthermore, Croatia was required to set up a number of management systems, like a paying agency and the Integrated Administration and Control System. In order to make these adjustments in the agricultural sector, Croatia has had access to several EU funds like pre-accession funds and funds for rural development. Although Croatia’s accession to the EU provides the agricultural sector with opportunities for receiving EU funds to improve standards in the field of agriculture, many farmers remain pessimistic about the accession as they consider it to be threatening for the existence of their farms.1539 They fear that their small family farms will not be competitive enough for the internal market. According to an expert in the field, it is often hard for family farms to receive subsidies due to their small size.1540 It is highly likely that over the years the amount of family farms will further decrease due to the high production costs.1541 In general, many of the Instrument for Pre-Accession Assistance in Rural Development (IPARD) projects were rejected or have long processing times.1542 This could also have contributed to the pessimistic view, as many farmers have to make adjustments in order to comply with the EU without seeing direct benefits, like subsidies. After Croatia’s accession to the EU farmers directly received their subsidies from the EU budget reserved for the Common Agricultural Policy (CAP). The amount of subsidies will be gradually increased within the years after the accession. Once it will be fully implemented in 2022, CAP budgetary support for Croatia will reach approximately 995 million dollar per year.1543 In 2013, about 25 percent of total EU budget transfers to Croatia in 2013 consisted out

1537

Franić, Njavro, Babic, and Kagin, 2006, p. 11; Interview 47. Chrenek, 2009, p. 16. 1539 Mollers, Zier, Frohberg, Buchenrieder and Bojnec, 2009, p. IV; interview 47. 1540 Interview 47. 1541 Chrenek, 2009, p. 16. 1542 Božić, 2013, p. 38. 1543 Boulanger, P., Ferrari, E., Michalek, J., Vinyes, C., 2012, p. 9. 1538

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of CAP budget.1544 According to experts in the field, the replacement of family farms by larger corporations will improve the efficiency of the agricultural sector, as large companies can produce for lower prices due to their scales of production.1545 In addition, it is easier for companies in the food industry to buy from larger farms than from several small family farms.1546 Furthermore, these larger commercial farms will be able to receive a subsidy, which gives them a better opportunity to invest in knowledge and technology to further improve their competiveness. Experts see potential in Croatia’s agricultural sector.1547 They think that increased production scales and investments in knowledge, marketing and technology will increase Croatia’s competiveness. 1548 Most potential is seen in niches in the market, like high quality wines and olive oils.1549 9.4.1 Wine Wine production in Croatia accounts for approximately four percent of GDP in the agricultural sector.1550 32 454 hectare of Croatian land is used as vineyard, which produces 197 979 tons of grapes, resulting in 1 365 372 hectoliter of wine.1551 The strength of the Croatian wine industry is that the wine is of good quality. The general economic position of vine growing is, however, considered to be weak and resources are scarce.1552 The best way to promote Croatian wine is considered to be through tourism, so that foreigners can also become acquainted with Croatian wines.1553 The main challenge for the wine industry is, as often described, the marketing of wine on the international market.1554 As the Central Bureau of Statistics1555 has shown, it is even the case that the Croatian wine export decreased between 2004 and 2007 and that wine import increased within that same time span. Among the problems is the presentation of the wine bottles, which is often not done attractively enough.1556 In Croatia the majority of wine producers is registered in the Register of Wine Producers, which consists of approximately 14 000 wine producers. A questionnaire with 1 400 wine producers (10 percent of the total amount) has shown that the Croatian wine producers are predominantly occupied with the production process of the wine rather than with the

1544

Boulanger, P., Ferrari, E., Michalek, J., Vinyes, C., 2012, p.9. Interview 9; 47. 1546 Interview 9; 47. 1547 Interview 47. 1548 Interview 47. 1549 Ibid. 1550 Cacic et. al, 2010, p. 263; Sellschopp, Par and Haynes, 2000. 1551 Croatian Central Bureau of Statistics, 2009. 1552 Cacic et. al, 2010, p. 269. 1553 Ibid, p. 274. 1554 Ibid, p. 264. 1555 Croatian Central Bureau of Statistics, 2008. 1556 Time Out, 2013/2014 edition, p. 42. 1545

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marketing of the wine.1557 Other studies showed that the branding is increasingly important within the wine industry, as that will often result in global success upon the wine markets.1558 9.4.2 Olive oil The growing of olives, as well as the production of its oil, has been a long-standing tradition in Croatia, especially in Istria.1559 There are a number of olive oil cultivars in Croatia1560 of which the majority are private family farms. These families produce olive oil for their own consumption and sell the surplus of their production on the market.1561 Olive oil has always been treated in a similar manner, as olive oil was rarely sold and more often used to maintain relations with family and friends.1562 Around 2000, there was an increase in the consumption of olive oil, resulting in an increase in education on olive oil as well as an increase in the quality of olive oil.1563 It was during this time that also many new olive trees were planted, resulting in an overall increase in olive oil production.1564 Multiple studies1565 have shown that the olive oil produced in Croatia is up to date with the EU regulations concerning the production of olive oil.1566 Olive oil from Istria is considered to be of the highest quality and is not only of culinary value, but also of economic value through export and tourism.1567 Other important regions for olive oil production are Dalmatia and Croatian Littoral.1568 9.4.3 Fisheries In addition to tourism and agriculture, fishery activities are one of the main sources of income in Croatia’s coastal regions and island communities. Croatia’s long coastline and islands provide favourable natural conditions for fishery activities. Although fisheries have been an important economic activity in the region Croatia's part is, compared to the other parts of the Mediterranean, poor in fisheries resources. In 2008, nearly 49 000 tonnes of fish were caught.1569 About 96 percent of the total catch volumes consist of fish. The remaining four percent consists of cephalopods, like octopus or squid, and shellfish. The total catch mainly

1557

Cacic et. al, 2010. Schamel, 2006, quoted in Cacic et. al, 2010. 1559 Koprivnjak, 2014, p. 92 1560 Major Croatian cultivars: Buga, Bianchera, Lastovka, Drobnica, Rosulja, Zutica, Uljarica, Slivnjaca, Puljka, Plominka, Ostrika, Oblica, Levantica, Kosmaca, Grozdaca, Duzica and Crnica (source: Giacometto and Milin, 2001). 1561 Giacometti and Milin, 2001 1562 Koprivnjak, 2014, p. 95 1563 Giacometti and Milin, 2001, p.398 1564 Koprivniak, 2014, p. 94 1565 Herceg Romanic, Matek Saric and Klincic, 2011; Giacometti and Milin, 2001 1566 European Parliament, Regulation 1308/2013, 17 December 2013; European Commission, 2013 (E). 1567 Koprivnjak, 2014, p. 96 1568 Ozimec, 2014, p. 98-101 1569 European Commission, 2011 (B), p.4. 1558

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consists of small pelagic species like sardines and anchovies.1570 The main landing places for these types of fish are Kali, Zadar, Biograd na Moru and Pula.1571 The majority of Croatia's vessels can be characterised as small-scale and multipurpose fishing boats. Like other branches in Croatia’s agricultural sector, fisheries have remained very traditional and there is little industrial fishing.1572 Besides sea fishing, mariculture (the cultivation of marine organisms) is important for these areas. In 2011 64 fish farms were registered.1573 Cultivated species include sea bass and sea bream, oily fish like tuna, and shellfish like mussels and oysters.1574 In addition to the cultivation of marine organisms, there is also freshwater aquaculture that particularly cultivates trout and carp. Carp farms are most often situated in the continental part of Croatia, while trout farms are generally located in the mountain areas of Croatia that have the largest concentration of uncontaminated, cold running water.1575 In 2008 12 000 tonnes of fish were produced through aquaculture.1576 Croatia’s exports of fish and fish products are dominated in value and volumes by thecountry’s tuna export to Japan. In 2011 tuna accounted for more than 60 percent of total fresh and frozen fish export in Croatia. The export of tuna also affects Croatia’s import of fish, as the import mainly consists out of inexpensive species like herring that are used as food for the tunas in the aquaculture industry. However, production of the Atlantic bluefin tuna has decreased due to strong restrictions on tuna fishing by ICCAT (International Commission for the Conservation of Atlantic Tunas). Other exports within the fishery sector in Croatia comprise farmed seabass and seabream and canned fish. The production of seabass and seabream has increased over the last couple of years, while shellfish production is stagnating, mainly as a result of export barriers. The most important exporting markets for Croatia are Japan for tuna, Italy for fresh fish and Spain for salted products.1577 The most important markets for canned fish are Serbia, Bosnia and Herzegovina, Montenegro, Slovenia and Macedonia.1578

1570

Eurofish, 2012, p. 23. Ministry of Agriculture Directorate of Fisheries, 2011. 1572 European Commission, 2006, p.2. 1573 Ministry of Agriculture, 2013, p.5. 1574 Ministry of Agriculture, Fisheries and Rural Development of the Republic of Croatia, 2009, p. 19. 1575 Food and Agriculture Organization of the United Nations, 2010. 1576 European Commission, 2011 (B), p.5. 1577 Food and Agriculture Organization of the United Nations, 2010. 1578 Ministry of Agriculture, 2013, p.17. 1571

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Table 9.1: Fishery production in all Croatian fishing regions (2001-2012).1579

The chart above shows the fishery production of Croatia. It consists of the total amount of catches and aquaculture (fish-farming), excluding hatcheries and nurseries and it is recorded in the live weight equivalent of the production. The production of fish declined during the war in the first half of the 1990s due to the devastations and Croatia's economic isolation. In the 2000s the production gradually increased. The Croatian government has adapted several programmes to improve the sector. In 2003, a national programme was launched to increase the production and consumption of fish. Goals included ‘modernisation of the fishing fleet; the creation of fishing ports with proper logistical support and surrounding infrastructure; improvement of marketing strategies and the trade system; development of aquaculture; better education on fisheries and the strengthening of fishermen's cooperatives.’1580 As the consumption of fish is relatively low in Croatia when compared to other countries in the EU, the government launched campaigns to stimulate the Croats to eat more fish. The average Croat consumes nine kilogrammes of fish a year, while in the EU the average consumption is 23.3 kilograms.1581 The Croatian government also has made an increased effort to complete the legal framework to stimulate further development of aquaculture. Measures to simplify the procedures for licensing have been adopted, zones with

1579

Eurostat, table tag00117. European Commission, 2006, p.3. 1581 Eurofish, 2012, p. 24. 1580

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potential for fisheries have been included in the planning and Integrated Coastal Zone Management (ICZM) has been applied to areas where marine aquaculture is dominating. ICZM consists of a set of plans and strategies to efficiently manage the countries natural resources. 1582 In 2006, new measures were taken to support the fishing and aquaculture sector. These measures included a 12 million euro investment in maintenance and modernisation of equipment for the agriculture and fisheries sector, a programme for buying off trawler licences, an investment of 6.4 million euro to modernise the fleet, investments in monitoring fish populations and investments in the construction of new markets.1583 In total, in 2006 the sector accounted for one percent of Croatia's GDP and it employed about 20 000 people.1584 During Croatia’s pre-accession phase the Croatian fisheries sector received state aid and support through pre-accession mechanisms like the Special Accession Programme for Agriculture and Rural Development (SAPARD) and the IPARD for the period 2007 – 2013. When Croatia entered the EU in 2013, these pre-accession funds were replaced by structural funds like the European Fisheries Fund (EFF). Since 2010 Croatia is undergoing structural reforms in its fisheries sector in order to comply with the acquis. These are listed within five main points that all include several measures, which are: ‘adjustment of the fleet; development of aquaculture, inland fisheries, processing and marketing of fisheries products; projects of common interest; sustainable development of fisheries dependent areas and technical assistance’.1585 All of these goals aim to modernise Croatia’s fisheries to EU standards and to improve the sector’s competitiveness. In order to use these funds, which for example cover compensation losses, the construction of new processing factories and the equipping of ports and landing places, Croatia needed to adopt a National Strategic Plan and the Operational Programme for the EFF. Like many farmers, fishermen are negative about the consequences of Croatia’s accession to the EU for their business. The new legislation brings difficulties for fishermen, as they are required to comply with EU standards for their fishing tools and have to fish further from the shore.1586 They fear that they will run out of business before they will have had the chance to notice any positive effects from becoming an EU Member State. Agriculture and fisheries in Croatia show a number of similarities. The geographic position and climate of Croatia enable the production of a wide variety of products and livestock. However, the scales of production remain low due the large amount of small family farms and fisheries that often use traditional production methods. In addition, many farmers and fishermen have been pessimistic about Croatia’s accession into the EU as they feel that this negatively interferes with their business. Most of them had to make adjustments in order to 1582

et. al, Katavić, Herstad, Kryvi, White, Franičević and Skakelja, 2005, p. 10. European Commission, 2006, p.5. 1584 Ibid., p.2. 1585 Ministry of Agriculture Directorate of Fisheries, 2011. 1586 Euractiv, 2013 (B). 1583

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comply with the new rules, without receiving compensation like EU subsidies. Many family farms and traditional fishermen will cease to exist due to the restructuring process as they will be most likely be replaced by larger organisations that have more chance to receive subsidies and have the money to invest in technology, marketing and education.1587 Although Croatia’s accession to the EU often has negative effects for small-scaled businesses, it improves the standards and competiveness of the overall sector.

9.5 Conclusion When analysing at Croatia's economic sectors strengths and weaknesses can be seen. The service sector in Croatia can be considered as a strength due strong industries like tourism and transport. Both of these industries are currently important for Croatia and have potential for further growth. The current strategy from the government for the tourism industry aims to improve the quality of tourism in Croatia and to promote different types of tourism throughout the country. The transport sector will benefit from the investments to improve the infrastructure and from Croatia's plans to become one of Europe's larger gateways. The IT sector in Croatia also continues to develop. The industrial sector in Croatia is facing challenges, as most industries are not competitive enough and are in need of modernisation and to innovation. This can be seen as a weakness for the country's economic competiveness. In addition, the sector has suffered a lot from Croatia's economic transition, as privatisation turned out to be problematic for many industries. Furthermore, the sector was hit in 2008 by the global economic crisis and competition from countries where production costs are lower. As a result, traditional Croatian industries, like the shipbuilding industry, are struggling to survive. The agricultural sector and Croatia's fisheries are currently characterised by small scaled farms and small family-owned fishing businesses. It is expected that the structure of the agricultural sector and the fisheries will gradually change due to replacement of small farms and traditional fishermen by companies that operate on a larger scale. Croatia's accession to the EU can be seen as an opportunity for the sector, as EU funding will stimulate this process. However, for small farms and fishing businesses it can be defined as a threat.

1587

Interview 47.

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10. The labour market In this chapter the Croatian labour market will be discussed. Attention will be given to the rate of unemployment, labour market participation, the power of trade unions, and the average income level and poverty rate.

10.1 Unemployment rate In 2013 Croatia had to deal with a relatively high unemployment rate. This had to do with the recession that the country has been facing for five years now.1588 During the first half of 2013 unemployment hovered around 17 percent of the labour force. From June until November one can observe an increase in unemployment, starting at 17.2 percent in June and reaching 18.6 percent in November.1589 The average rate for the EU-27 was up until the accession of Croatia to the EU at a steady 10.9 percent of the labour force. After accession in July the average unemployment rate for the EU-28 remained stable at 10.9 percent. Whereas the unemployment rate for the EU-27/EU-28 was constant throughout 2013, the unemployment rate in Croatia increased. The unemployment rate among Croatian men was higher than among Croatian women. At the beginning of the year 17.5 percent of the male labour force was unemployed, against 17.1 percent of the female labour force. By November these numbers had diverged significantly, with a male unemployment rate of 19.4 percent and a female unemployment rate of 17.7 percent. This trend is not reflected in the average male and female unemployment rates for the entire EU-28. Until May the female rate of unemployment was only 0.1 percentage point higher than the male rate of unemployment. From May until November the male and female rates converged to a steady 10.9 percent.1590 Croatia is characterised by a relatively high youth unemployment rate. The youth unemployment rate of the EU-28 amounted to 23.6 percent in the last quarter of the year; whilst in Croatia a much larger share of young people (49.7 percent) was unemployed. At the end of 2013 it was one of the three member states with the highest youth unemployment rate in the EU. Only Greece and Spain had a higher rate of youth unemployment.1591 From an interview with a group of students it became clear that they have a very pessimistic view of their future. They are worried that they will not find a job after they graduate and will have to go abroad to find employment.1592

1588

The World Bank, 2013 (C), “Country Program Snapshot”, http://www.worldbank.org/content/dam/Worldbank/document/eca/Croatia-Snapshot.pdf, last accessed on 09.01.2014. 1589 Eurostat, Table: teilm020. 1590 Ibid. 1591 Eurostat 2014. 1592 Interview 36.

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10.2 Labour force According to a labour force survey carried out by the central bureau for statistics of Croatia, the Croatian working-age population in the second quarter of 2013 consisted of approximately 3.8 million people.1593 In this survey the concept of working-age population is defined as all persons aged 15 years and over. Not all people belonging to the working-age population are active. In the above-mentioned period 44.6 percent of the working-age population was participating in the labour market, against 55.6 percent that was not. Experts in the field have mentioned three factors contributing to this situation. First, they point to the fact that after the war in the 1990s, many people (war veterans and disabled people due to the war) were sent into early retirement.1594 The second explanation they provide is that the social security system in some cases has encouraged people not to work, but to receive benefits instead, since this was more lucrative.1595 Finally, the experts refer to the fact that young people in Croatia stay in school relatively long and in this way postpone their entrance into the labour market.1596 The labour force consists of the active part of the working-age population and contained roughly 1.7 million people in 2013, of which 1.4 million were in employment and close to 300.000 people were unemployed. For 2013 no data are available for the division between male and female members of the labour force. A report on gender equality published by the Commission1597, however, shows that the general participation rate of women in the Croatian labour market was significantly below EU-average in 2011. Whereas the average EUparticipation rate of women was 58.5 percent, only 47 percent of Croatian women participated in the labour market. Furthermore, the report points to the fact that an unusually low percentage of women worked part-time. The EU-average of women working part-time was 31.6 percent, whilst in Croatia only 9.6 percent of women worked part-time. This indicates that Croatian women generally choose to work full-time or not to work at all. The number of Croatian men working part-time also lay below EU-average in 2011. Whereas the EU average comprised 8.1 percent, only 5.9 percent of Croatian men chose to work part-time. The explanation provided by experts in the field for the fact that part-time work is not very common in Croatia, is that it is not part of Croatian culture. People are not used to working part-time and it is hard to introduce something that people are not familiar with.1598 It is also stated that people cannot afford to work part-time.1599 The Commission report on gender equality was set up to encourage companies to gain 1593

Croatian Bureau for Statistics 2014 (B). Interview 10, 17. 1595 Interview 2, 24. 1596 Interview 2, 18. 1597 European Commission 2012 (A), p. 5. 1598 Interview 2. 1599 interview 10. 1594

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better access to, as they prefer to call it, the female talent pool. Female participation in the labour market could be of great significance in the future, as, due to ageing, the gap between labour demand and labour supply will widen. To ensure a higher female participation, it is of great importance to improve childcare facilities. The number of children in childcare in Croatia is significantly lower than in other EU countries. The EU-average of children between the ages of 0-3 that are in childcare for 30 or more hours a week was 14 percent in 2010. The EU-average for children who are between three years old and have not yet reached a school age at, that are in childcare for 30 or more hours a week, was 45 percent. The respective percentages for Croatian children in the same year were 7 percent and 29 percent. A part of the explanation for these low numbers lies in the fact that the care for children in Croatia is traditionally the responsibility of their mothers or grandparents. Another important explanation is the fact that childcare facilities are often far too expensive for the average Croatian family. To improve the situation and encourage women to (re)-enter the labour market, the Commission suggests financial assistance for childcare or the setting up of childcare facilities at the workplace. The Commission also points to the possibility of providing women with better options to combine motherhood with working. A survey on the quality of life in Croatia1600 held by the European Foundation for the Improvement of Living and Working Conditions confirms that almost half of the Croatian women is inactive and is thus not a part of the labour force. Furthermore, the survey shows that in 2013 73 percent of inactive women were actually willing to work if they could reconcile their personal lives with their professional lives. Here lies a great opportunity for Croatia to enlarge the labour force by offering women working conditions that are reconcilable with their home lives. The World Bank considers the relatively low labour force participation in conjunction with the high unemployment rate as the cause of an unsatisfactory labour market situation, in which labour is underutilised. The poor labour market outcomes point to a structural weakness of the Croatian labour market.1601 The World Bank states that there are several factors contributing to these problems, e.g.: the design of the social security system, labour market institutions, the skills gap and most importantly labour market rigidity.1602 Labour market rigidity can partly be explained by the strict employment protection legislation (EPL). The OECD ELP index categorises EPL in different countries on an index from 1 till 6. On this index Croatia received a higher score (2.76) than the EU-15 (2.01), which means EPL is overall stricter in Croatia than in the EU-15.1603 The strictness of the EPL is especially 1600

Eurofound 2013, p.6. The World Bank 2011 (A), p. 15. 1602 The World Bank 2011 (A), p. 16. 1603 Ibid., p. 17. 1601

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prominent in three areas: collective dismissals, individual dismissals and working hours. The costs of collective dismissals are considerably higher in Croatia than in other EU countries, and it is also administratively more difficult to lay-off a group of workers in Croatia than in other countries. These factors inhibit companies from restructuring, which in turn has a negative impact on productivity growth. As dismissing a group of people is costly in Croatia, so is laying-off just one employee. This results in a reluctant attitude among employers to hire new people, since it involves potential future costs in case (for instance when a demand shock occurs) it is necessary to reduce employment. Besides the potential future costs of firing new employees, the immediate costs of hiring new employees are also relatively high in Croatia. The high costs of hiring and firing constrain employers to adequately respond to fluctuations in demand and therefore provide an important explanation for the high structural unemployment rate the country has been dealing with. A third area in which EPL is quite strict is working hours. Like in many other European countries, Croatian employers are limited in adjusting working hours to changes in demand. Employers cannot deviate more than 12 hours from the standard 40 hour work week, which leaves them little room to increase work hours in times of high demand and decrease work hours in times of low demand.1604 Several experts in the field have confirmed that most of the factors that the World Bank has put forward do indeed contribute to a structural weakness of the Croatian labour market and that these factors provide an explanation for the high unemployment rate. Some experts state that the dysfunctional social security system contributes to the high structural unemployment.1605 Secondly, they point to the gap between skills that young people are taught in the educational system and the skills that are needed in the labour market to explain youth unemployment.1606 Other experts acknowledge the relatively strict EPL as an important cause of structural unemployment.1607 Some also brought to the fore some factors contributing to unemployment that were not present in the World Bank report on the matter. According to one expert the transformation process of the 1990s provides an explanation for structural unemployment. It is argued that the privatisation process devastated the industrial sector, which formerly was relatively well developed. It was argued that: to restore ‘economic growth requires the rebirth of the Croatian Industry.’1608 Another explanation points to administrative barriers, which discourage foreign

1604

The World Bank 2011 (A), p. 21. Interview 2, 24. 1606 Interview 2, 24. 1607 Interview 17, 18, 24. 1608 Interview 10. 1605

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investors from investing in Croatia.1609

10.3 Trade unions Another important factor contributing to labour market rigidity in Croatia is the position of trade unions. Croatian trade unions are in a relatively strong position compared to European standards. A prominent study on trade union power in Croatia conducted in 2010 reported a trade union density in the country of 35 percent.1610 This means that 35 percent of all Croatian employees was member of a trade union. The average EU trade union density that year amounted to 23 percent, which shows that Croatian trade union density was well above average. An expert has confirmed the relatively high trade union power. However, it was added that during the socialist era trade union membership used to be much higher.1611 The highest trade union participation rates in Europe in 2010 were to be found in the Scandinavian countries, with the highest participation rate of 74 percent in Finland. The lowest rates were to be found in the Baltic States and France, with the rates differing from 8 percent in France to 13 percent in Latvia.1612 There are approximately 550 registered trade unions in Croatia. The five biggest ones account for about 90 percent of all trade union membership. The study shows that the number of trade union members was remarkably higher in the public sector (70 percent) than in the private sector (17 percent).1613 An expert has also confirmed this fact. The explanation provided for this fact is that the transition did not affect the public sector not as much as it did the private sector.1614 The World Bank considers the relatively high trade union density and large number of trade unions as positive for the protection of employees’ right. However, the strong protection for the employed has a negative effect on the opportunities for the unemployed. The unions make sure the government and employers’ organisations do not succeed in making the labour market more adaptable to demand, and thus discourage employers to hire new people.1615 Eurostat had no data available concerning the number of strikes and missed workdays annually in Croatia. Eurofound points to the possibility of investigating collective actions by using data on mediation in collective disputes. According to Croatian labour law mediation between employees and employers is mandatory before declaring a strike. There is one major office in Croatia, the Office for Social Partnership, which concerns itself with mediation in labour 1609

Interview 10, 17, 18, 24. Bagić 2010. 1611 Interview 10. 1612 Trade unions, http://www.worker-participation.eu/National-Industrial-Relations/Across-Europe/Trade-Unions2, last accessed on 20.01.2014 . 1613 Eurofound 2012, p. 3. 1614 Interview 10. 1615 The World Bank 2011 (A), p .22. 1610

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disputes. The office sees a clear increase in the number of mediation cases due to the recent economic crisis. Whereas in 2008 the office had to mediate in 52 cases, this number more than doubled in 2010 when the office had to mediate in 122 disputes. Most cases concerned payrelated issues or layoffs.1616 The initiative to strike often comes from trade unions. As was the case in November 2013 when Zagreb airport employees went on a strike and the entire airport was out of order for a day.1617

10.4 Income and wages The minimum wage, which is the minimum monthly compensation for labour before deduction of income tax and social security contributions, is quite low in Croatia when compared to other older EU member states. In 2013 the minimum monthly wage amounted to 372.35 euro. The minimum wage in the Netherlands, by comparison, was set at 1 469.40 euro per month. Croatia did not have the absolute lowest minimum wage level. In Romania for example minimum monthly wage in 2013 was 157.50 euro.1618 It is not possible to compare the Croatian minimum wage to an EU average, since there is no data available for nine member states. Eurostat provides no information regarding the average gross earnings in Croatia. The CBS states that the average gross earnings per person in paid employment in October 2013 were 7 919 kuna1619, which comes down to a gross monthly income of approximately 1 040 euro.1620 After the deduction of income taxes and social security contributions the average Croatian had a disposable income of circa 723 euro.1621 In 2003 the 20 percent of the population with the highest income (top quintile) earned 4.63 times as much as the 20 percent of the population with the lowest income (lowest quintile). From 2003 up until 2009 the ratio hovered around 4.5. In 2010 a change occurred in the standards for defining and measuring this variable. The ratio went up from 4.5 to 5.5 and remained 5.4 in 2011 and 2012. Due to the fact there was a change in methodology, it is rather difficult to say whether there has been a significant change in the income gap between the rich and the poor in Croatia, since the data from 2009 and 2010 are incomparable. What can be concluded is that the gap between rich and poor is quite steady in Croatia. In both examined periods, 2003-2009 and 2010-2012, the ratio showed no major changes. Compared to the EU-28 average, Croatia’s income gap is slightly above average. In 2011 the top quintile earned 5.1 times as much as the lowest quintile in the EU-28, whilst as mentioned above in Croatia the top 1616

Eurofound 2012, p. 6. Euronews, Croatia: strike at Zagreb Airport, http://www.euronews.com/nocomment/2013/11/22/croatia-strike-atzagreb-airport-/, last accessed on 21.01.2014. 1618 Eurostat, Table: tps00155. 1619 Croatian Bureau of Statistics, 2013 (A). 1620 Converted according to the exchange rate on 1 October 2013, 1Euro=7.6158Kuna. Source: European Central Bank, http://www.ecb.europa.eu/stats/exchange/eurofxref/html/eurofxref-graph-hrk.en.html, last accessed on 20.01.2014. 1621 Croatian Bureau of Statistics, 2013 (A). 1617

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quintile earned 5.4 times as much. The highest income gap that year was found in Spain, where the top quintile earned 7.1 times as much as the lowest quintile.1622 Besides an income gap between “the rich” and “the poor”, one can also locate a wage gap between men and women. According to Eurostat the (unadjusted) gender pay gap amounted to 18 percent in 2012, which means women’s average salaries were at 82 percent of men’s average salaries.1623 In comparison, the gender wage gap for that same year was 16.9 percent in the Netherlands, which means Croatia did not differ much from the Dutch situation. It has been argued that there is a large difference between the public and private sector. The gap is stated to be larger in the private sector than in the public sector. Furthermore, the gender wage gap tends to be smaller for women with a high-level education.1624 10.4.1 Poverty and social exclusion According to Eurostat 32.3 percent of the Croatian population were at risk of poverty or social exclusion in 2011. People are considered at risk of poverty when their disposable income is lower than 60 percent of the national median disposable income. In 2011 this threshold was set at 5 593 euro.1625 Furthermore, they have to be deprived of certain material items. For the EU 28 it was estimated that 24.3 percent of all inhabitants were at risk in the mentioned year.1626 The percentage in Croatia is thus relatively high, especially when compared to a country in Western Europe like the Netherlands, where only 15.7 percent of people were at risk.1627

10.5 Conclusion Croatia has suffered from a high structural unemployment rate for years. This provides a major strain on its economic development. Different sources have provided different explanations for this phenomenon. The high EPL and trade union power seem to inhibit employers from hiring new employees, since the cost of firing them is too high. Secondly, there seems to be a skills gap between what students learn in school and what is requested in the labour market. Furthermore, the social security system in some cases induces people not to work, since the benefits they can obtain from the system are higher than their wage would be when they worked. A final important factor seems to be the Croatian administrative system. There are many administrative barriers, which discourage foreigners from investing in the country. Many potential jobs are lost due to this fact.

1622

Eurostat, Table: tsdsc260. Eurostat, Table: tsdsc340. 1624 European Commission 2011 (C), p. 3. 1625 Eurostat, Table: ilc_di03. 1626 Eurostat, Table: t2020_50. 1627 Ibid. 1623

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The poor situation in the labour market has been exacerbated by the recent financial and economic crisis and by the fact that a relatively low number of people participates in the labour market. The low participation rate can also be partly explained by the design of the social security system. Other factors contributing to this are the 1990s Wars, after which many people were sent to an early retirement, and the fact that young people stay relatively long in school and postpone their entrance into the labour market.

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11. Tax system In this chapter the Croatian tax system, the tax burden, and tax evasion will be discussed. The Croatian tax system consists of six different types of taxes. In the following table an overview of these different types of taxes is provided. 1. National taxes

- Value added tax - Corporate income tax - Special taxes and excise duties

2. County taxes

- Inheritance and gifts tax - Tax on road and motor vehicles - Tax on vessels - Tax on coin operated machines for games for amusement

3. City or municipal taxes

- Surtax on income tax1628 - Consumption tax - Tax on holiday houses - Trade name tax - Tax on the use of public land

4. Joint taxes

- Income tax - Real estate transfer tax

5. Taxes on winnings from games - Fee for organising/ tax on of chance and fee for organising winnings from Lottery games games of chance

- Tax for operating Casino games - Fee for organising/tax on winnings from betting games - Fees for organising slot machine games - Fee for organising occasional one-time games of chance.

6. Fee for organising award - Fee for organising award games games

Table 11.1: Different tax measures in Croatia.

1628

This implies an additional tax on income that can be prescribed by a commune or municipality. The rate differs among local authorities.

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11.1 PIT, VAT and CIT Personal Income taxes (PIT) were introduced in Croatia in 1994. After its introduction numerous amendments and changes were adopted. Croatian income taxes are progressive, which means a larger percentage is taken from people with a high income than from people with a lower income. Progressive tax systems are intended to reduce income inequality in a country. Income taxes are raised over earnings from (self) employment, income from property and property rights, income from insurance, income from capital and other sources of income. Croatian income taxes are currently divided into three brackets (there used to be four brackets). People earning up to 26 400 kuna (3 442 euro1629) per year are required to pay 12 percent income taxes. People with an annual income between 26 400 kuna and 105 600 kuna (13 771 euro1630) pay 25 percent income taxes. In the third bracket 40 percent income taxes are raised for people earning over 105.500 kuna per year.1631 The PIT also includes a surtax that is levied by local authorities. The VAT, Value Added Tax, was first introduced in Croatia in 1998. Until the introduction of VAT there was a system of taxing products and services that did not function properly. The regulations were difficult to implement and tax collection was problematic. With the introduction of VAT in 1998 the rate was set at 22 percent. The installation of VAT was expected to have an inflationary effect on the economy, but it turned out to cause only a single moderate increase in prices of 2.4 percent. Over the years the VAT law was amended to provide tax exemptions for instance for bread, milk and medicines. In 2006 the law was amended to introduce a lower tax rate of 10 percent for services providing accommodation. In 2010 the VAT law changed substantially in order to comply with a European Council Directive. Up until now the VAT rate has been raised two times, first in 2009 to 23 percent and later in 2012 to 25 percent. By doing this the Croatian government aimed to increase tax revenues in the face of the economic and financial crisis.1632 Currently Croatia has three different VAT rates: the standard rate of 25 percent, a reduced rate of 13 percent and a reduced rate of 5 percent.1633 Together with Sweden and Denmark Croatia has the highest VAT rate in the EU after Hungary with a VAT rate of 27 percent. Revenues from VAT are combined with revenues from social security contributions the most important source of income for the state budget. In 2010 VAT revenues accounted for 60 percent of the state budget, while PIT only

1629

Converted according to the exchange on 19 February 2014 rate provided by the European Central Bank http://www.ecb.europa.eu/stats/exchange/eurofxref/html/eurofxref-graph-hrk.en.html, accessed on 20.02.2014 1630 Ibid. 1631 Ministry of Finance, ‘Income tax’, http://www.porezna-uprava.hr/en/EN_porezni_sustav/Stranice/income_tax.aspx, last accessed on 20.02.2014. 1632 Sopek 2012, p.271-272. 1633 Ministry of Finance, ‘Value Added Tax’, http://www.poreznauprava.hr/en/EN_porezni_sustav/Stranice/value_added_tax.aspx, last accessed on 20.02.2014.

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accounted for 1.9 percent.1634 Croatian corporations have to pay taxes over their income, the so-called corporate income tax (CIT). The current CIT rate is set at 20 percent.1635 In 2010 revenues from CIT accounted for 10.2 percent of the state budget.1636 Since 2000 Croatia has favoured certain underdeveloped areas with special tax treatment (UASTT). In these areas CIT has been reduced and special state aid is given. UASTT include areas that were occupied in the war of independence, economically underdeveloped areas, hill and mountain areas and the city of Vukovar.1637 It is, however, questionable whether these tax reductions and state aid have served their purpose, since the areas are still lacking behind the rest of Croatia.1638 Experts in the field have confirmed that these tax reduction measures are not effective.1639

11.2 The tax burden and its effect on the labour market In 2012 a study was conducted on the tax burden of Croatian employees compared to that of the average European worker. The study focused on whether the tax burden has any effects on the labour market. One of the concepts that was used to investigate the tax burden is the tax wedge, the sum of PIT and social security contributions (paid both by employers and employees) plus any payroll tax as a percentage of the total labour costs.1640 Croatia came out of the study as a country with a high tax wedge, which means that the difference between labour costs and net earnings is relatively high. Among the experts in the field there was disagreement concerning the tax wedge in Croatia. While some confirmed that the tax wedge is relatively high and is hurting Croatia’s competitiveness1641, others do not agree and point to the fact that wages are still below EU average.1642 Different studies concluded that the allegedly high tax wedge is mainly due to high social security contributions. These social security contributions consist of six different contributions: pension insurance, health insurance, occupational injuries, employment, child allowances and water management.1643 On average, social security contribution payments amount to 33.74 percent of total labour costs, whilst the PIT amounts to 9.41 percent. The tax wedge consists for more than two-thirds of social security contributions, whereas just over 20 percent consists of

1634

Bratic 2012, p. 380 Ministry of Finance, ‘The Croatian Tax system’, http://www.porezna-uprava.hr/en/EN_porezni_sustav/Stranice/THECROATIAN-TAX-SYSTEM.aspx, accessed on 20.02.2014, last accessed on 20.02.2014. 1636 Bratic 2012, p. 380 . 1637 Ibid., p. 379. 1638 Ibid., p. 380. 1639 Interview 2, 40. 1640 Grdovic and Tomic 2010, p.111. 1641 Interview 2. 1642 Interview 10, 24. 1643 Grdovic and Tomic 2010, p.119. 1635

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income taxes.1644 In 2009 the situation slightly changed when a crisis tax was introduced to deal with the economic crisis. The share of PIT of the tax wedge increased by two percentage points, but social security contributions remained dominant. The crisis tax was abandoned in November 2010.1645 In the EU-15 the tax wedge is dominated by social security contributions paid by employers. In Croatia the situation is remotely different. Although the tax wedge is, just like in the rest of the EU-15, dominated by social security contributions, the employees have to pay the largest share of these contributions instead of the employers. At lower wage levels the Croatian worker bears a higher tax burden than the European worker and at higher wage levels the opposite is true.1646 The average tax burden in Croatia amounts to 30.49 percent of net earnings. According to some VAT should be included when calculating the average tax burden. Including VAT, the average tax burden would amount to 48.35 percent.1647 Since the publication of this study several changes have been made in PIT and VAT law. There is, however, at the moment of writing this report no data available concerning these changes. The abovementioned data is thus based on the situation as it was in 2009. The tax burden is an important factor influencing the international position and competitiveness of a country.1648 It is of major influence on the labour market. As mentioned before in this report, Croatia’s labour market is underused and characterised by a high inactivity rate, high unemployment and strong EPL that creates inflexibility. Croatia conforms in this matter to the usual pattern: countries with a higher tax wedge have higher unemployment rates and lower employment rates.1649

11.3 Tax evasion Most countries in transition are facing major issues concerning tax evasion.1650 Croatia is no exception to this rule. A study done in 2002 concluded that a large chunk of income in Croatia is not reported and thus not taxed. It was estimated that the amount of evasion of income tax and surtax increased from 1.5 percent of GDP in 1994 to 2.7 percent in 2000. The evasion of contributions grew from 4.3 percent to 5.9 percent of GDP in the same period.1651 There seems to have been some improvement over the last decade, but tax evasion still plays a role in Croatian society.1652 There are several explanations for the relatively high level of tax evasion in the country.

1644

Grdovic and Tomic 2010, p. 123. Ibid. 1646 Ibid., p. 124. 1647 Ibid., p. 132. 1648 Cok et. al, 2013, p. 260. 1649 Grdovic and Tomic 2010, p. 133. 1650 Bejakovic 2009, p. 787. 1651 Ibid., p. 788. 1652 Interview 2. 1645

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First, paternalism is deeply rooted in Croatia. People believe the government should take care of its citizens and pay for public goods and services. They, however, forget where the government receives its income from, namely the taxpayers. There is little understanding among the people what public goods cost.1653 Second, due to its past the country lacks experience in the payment of taxes. Before Croatia became an independent state people were only used to paying indirect taxes on consumption goods. They had never had to pay direct taxes, like income tax. The tax burden was hidden and people were not bothered with paying taxes. Croats, in general, are not properly educated about the different aspects of public finance. Therefore there is a serious lack of public debate on the matter.1654 Furthermore, there is a widespread belief that the Croatian welfare system does not succeed in stimulating equality and redistributes government income in favour of the relatively well off.1655 A fourth explanation offered is that legislation related to taxes lacks stability and is often subject to change. The constant amending of tax legislation makes an efficient approach against tax evasion more difficult to achieve. Finally, the Croatian people are in general not satisfied with the public administration. It is widely regarded as corrupt, inadequate and an impediment to Croatia’s development.1656 This image of lacking efficiency is based on the fact that employees in the public administration have lower wages in comparison to employees in the private sector and on a perceived lack of anti-corruption control. The overall trust of people in the government and its institutions is relatively low. According to a survey held in 2004 82.7 percent of Croatian citizens do not trust their government.1657 This seems to be a widespread phenomenon that has been confirmed by several interviews.1658 The lack of trust in government results in low tax morale among people. Lastly, Croatia’s tax administration is reported to be inadequate in collecting taxes and preventing tax fraud.1659

11.4 Conclusion Due to mainly high social contributions, the tax burden is considered to be relatively high in Croatia. This contributes to the high unemployment rate, which has been discussed in the previous chapter. Furthermore, the country has one of the highest VAT rates in the EU, which in conjunction with the high tax wedge result in a negative influence on the country’s competitiveness. Tax evasion seems to be a major problem in Croatia. The most important explanation for the low tax morale is the distrust of people in each other and in the government. 1653

Bejakovic 2009, pp. 788-789. Ibid., p. 790. 1655 Ibid., p. 789. 1656 Bejakovic, 2009, p. 791. 1657 Ibid., p. 797. 1658 Interview 2, 10, 28, 38, 45. 1659 Bejakovic 2009. 1654

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Part V The Welfare State and Society

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12. Corruption Since Croatia’s independence in 1991 corruption has been regarded as a major issue.1660 It has been argued that both politicians and private entrepreneurs used corrupt practices for their own benefits during the transition process. However, it has been difficult to outline the extent of corruption and its influence on Croatia’s economy, political system and society. Corruption is not measurable like macroeconomic indicators, since persons and organisations involved in corruption try to keep it under the radar. According to the Commission, the clearest definition of corruption states, ‘the abuse of power for private gain’.1661 Corruption remains an important subject, since it seriously hampers economic growth and the political stability of a country. Corruption harms the economy and the wealth of average citizens. Scholars have outlined that corruption reduces economic growth and diminishes the attractiveness to invest in a given country. High corruption rates have a negative effect on FDIs, because corruption undermines the effectiveness of economic policies and encourages unlawful behaviour in various economic sectors.1662 Corruption has some major implications for a country’s stability. The short-term individual benefits of corrupt practices are outweighed by the negative long-term consequences, such as spill over effects and an insecure business climate. Moreover, the overall governance of a country is undermined by corruption. According to an interviewee, the lack of transparency in the Croatian government and its policy-making and the absence of a balance mechanism results in Croatian citizens being excluded from politics.1663 The effects of corruption are severe; besides a country’s economy and political system it also damages social justice, the rule of law and it undermines the democracy.1664 Corruption has undermined the trust of Croatian citizens in democratic processes and institutions.1665 To prevent corruption and its negative consequences, a country needs to develop a strong institutional framework of supervision. However, corruption is a complex phenomenon with an economic, a political, a social and a cultural dimension. Therefore, the anti-corruption programmes of the post-Tuđman governments only achieved visible results after approximately five years.1666 When Croatia declared its independence, it inherited a legal and institutional framework to tackle corruption from the former socialist Yugoslav state. This system was outdated and 1660

Interview 13. Hardy, 2010, p. 65. 1662 Ibid., p. 65. 1663 Interview 13. 1664 European Commission, 2014, COM(2014) 38 Final, p. 2. 1665 European Commission, 2014, COM(2014) 38 Final, p. 2; Interview 13. 1666 Interview 13. 1661

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inadequate to deal with the economic and political transition process of Croatia. The privatisation of socially owned companies has given opportunity to groups of people to enrich themselves, because of their former high position in the former Yugoslav republic. In a socialist country private property is limited. The weak institutional structure enabled some influential people to become rich and further enlarged the gap between rich and poor in Croatia.1667 These people were not persecuted due to slow reform in the state administration. This situation also resulted in inadequate training of civil servants working at state institutions. These employees were not capable to track down and persecute sophisticated forms of corrupt activities.1668 Furthermore, the low incomes of these employees made it more reasonable to accept financial offers from wealthy and influential politicians and entrepreneurs. Croatia’s weak legislative framework provided the conditions for corruption to become a widespread and inherent phenomenon in Croatian society. Croatian citizens lacked the motivation to fight against corruption as a result of long court proceedings. Some court proceedings lasted for more than 10 or 15 years before a decision was taken. The bad legislative framework of Croatia did not discourage illegal practices during the transformation and privatisation of social enterprises: the chance to be persecuted was negligible.1669 Due to this weak institutional and legal framework, and dominant position of influential elite groups, corruption brought the country in a vicious cycle. When the elite class becomes more influential, raises its property and dominates all the important sectors, the chance to interrupt this cycle becomes more difficult. For example, when the media are owned by corrupt entrepreneurs there will be no chance for a journalist to reveal corrupt practices within the country.1670 In short, there were no possibilities to denounce corruption in Croatia since there was no legal path to follow; companies were in hands of entrepreneurs who used corrupt practices themselves and there was no freedom of press. When the

Tuđman era ended in 1999, Croatia made its first steps towards EU

integration. After the new government signed SAA in 2001, Croatia did not only show its interest to catch up with the EU in political and economic terms, but also became part of the EU’s direct sphere of influence. To start an eventual negotiation process on EU membership for Croatia, the country first had to made huge improvements; this included improvements in the field of corruption. During the 1990s the overall institutional framework had not been able to provide an adequate response to the spread of corruption in Croatia.1671 However, under the SAA Croatia committed itself to participate in anti-corruption projects and to suppose a better

1667

Piplica and Čovo, 2011, p. 88. Ibid., p. 88. 1669 Ibid., p. 89. 1670 Ibid. 1671 Ibid. 1668

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national legal framework and institutions to fight corruption.1672 Therefore, the National Programme for Combating Corruption and the Action Plan for Combating Corruption were implemented. These programmes resulted in the establishment of the Offices for the Prevention of Corruption and Organised Crime (USKOK). These offices were based in Zagreb, Split, Rijeka and Osijek.1673 These offices faced a difficult start due to a lack of well-trained employees, adequate offices, modern techniques and adequate operational support to execute planned actions.1674 To improve the offices’ efficiency the Croatian government decided to establish the Police National Office for Combating Corruption and Organised Crime (PNUSKOK).As soon as the PNUSKOK was well equipped and consisted of educated police officers it started investigations of great corruption scandals. Next to the improved strategic approach to combat corruption, Croatia also reformed its legislative framework. To show the country’s willingness to target corruption according to EU requirements, Croatia ratified the Council of Europe Criminal Law Convention in 2000, the Civil Law Convention on Corruption in 2003, and the United Nations Convention against Corruption in 2005.1675 Furthermore, Croatia amended its criminal code law in 2001 and 2003 to improve the legislative structure in order to combat corruption. The understanding of corrupt crimes, such as receiving or offering a bribe and the abuse of an official position or authority, that had already existed in the criminal law during the 1990s were preserved. However, the new criminal code added new criminal acts in the legislation such as money laundering, bankruptcy abuse, and the abuse of office of state government.1676 During the first years of the 2000s the abuse of power and the self-enrichment of influential entrepreneurs in both political and economic sectors were gradually tackled through an improved institutional and legislative framework. However, according to research in Croatia, these were only small steps in tackling corruption.1677 More improvements were required to solve the problem, also to meet the EU criteria concerning corruption. In Croatia’s progress to target corruption, the period 2006-2007 has to be seen as a major turning point. Anti-corruption reforms were already implemented earlier, but it took several years before results became visible.1678 Furthermore, the Commission argued that corruption started to become an important topic in the political arena at the end of the Tuđman era, but that in 2006 the fight against corruption has been highlighted increasingly by senior 1672

Hardy, 2010, p. 80. Piplica and Čovo, 2011, p. 89. 1674 Ibid., pp. 89-90. 1675 GAN Integrity Solutions, 2013, http://www.business-anti-corruption.com/country-profiles/europe-centralasia/croatia/initiatives/public-anti-corruption-initiatives.aspx, last accessed on 06.02.2014. 1676 Piplica and Čovo, 2011, p. 90. 1677 Interview 13. 1678 Ibid. 1673

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politicians.1679 This turning point was embodied by the Croatian government’s National AntiCorruption Programme 2006-2008. Furthermore, since 2007 the government started four high profile and anti-corruption projects, named Dijagnoza 1 and 2, Meastro, and Gruntovčan.1680 These operations were directed towards the corruption in Croatia’s healthcare sector, the HFP, the Zagreb Land Registry and the Zagreb University. In the end, these four projects led to several arrests of officials. The turning point in Croatia’s attitude towards corruption can also be seen in the statements and policies of politicians. Between 2003 and 2009 Dragan Primorac achieved in curbing corruption in the Croatian education system acting as Minister of Education. Moreover, the Minister of Justice (2008-2010) Ivan Simonovic declared that Croatia needed to carry out anti-corruption programmes with very clear principles whereby nobody would stand above the law.1681 Notwithstanding, the governmental high profile projects and the above outlined statements of politicians, there have only been some mid-level actors convicted for corruption during the final years of the 2000s. The Croatian government showed its willingness to tackle corruption, but its projects and statements had not resulted in investigations or prosecutions of top-level actors.1682 For example, the reason for the resignation of former Prime Minister Ivo Sanader in July 2009 remained unclear for a long time. Even Croatian anti-corruption committees were affected by corruption. The chairman of the Committee for the Prevention of Conflict of Interest had to resign from the board due to corruption allegations.1683 In line with these remarkable cases the Nations in Transit (NIT), a study group reporting on former communist’s states transition to democracy, stated in 2008 that the persistence of corruption lies within the ‘double loyalty’ system of values in Croatia.1684 This system is based on hidden political agendas as the primary sources of corruption and not only on illegal cash payments. This image has been confirmed by interviewees in Croatia.1685 Despite the lack of results, the Commission and NIT conclude that 2006-2007 still has to be seen as a turning point in Croatia’s fight against corruption, since politicians openly declared the country had to curb down corruption in its main sectors. Croatia’s willingness to tackle corruption has been translated in numerous public and private anti-corruption initiatives, ranging from public procurement and whistleblowing

1679

Hardy, 2010, pp. 82-83. Ibid., p. 83. 1681 Ibid., p. 83. 1682 Ibid., p. 83. 1683 Ibid., p. 83. 1684 Ibid., p. 83. 1685 Interview 13; 21. 1680

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assistance projects to conflict of interest commissions and governmental strategies to curb down corruption. These different programmes, strategies and commissions are all headed by the USKOK. In combination with the ongoing reforms of the legislative and institutional framework, in line with the EU criteria for membership, Croatia has continued its anticorruption programme in the new decade. When Croatia’s EU membership became more likely during recent years, Croatia made an important and symbolic step in its fight against corruption. When Ivo Sanader resigned as prime minister in 2009, the reason behind this decision remain unclear for a while. However, in 2010 a prosecution against Sanader was started by the Croatian government, because he was convicted of corrupt crimes. In 2012 and 2014 Sanader was found guilty of corruption during his term as prime minister when he received payments of a Hungarian oil company and an Austrian bank. This case finally proved the efficiency of the country’s anti-corruption strategies and disproved critical recommendations that were stated in monitoring reports of the Commission on Croatia’s accession to the EU. A recent report of the Commission on corruption in the EU refers with a positive remark to Sanader’s conviction and considers it as a signal that there is a strong will in Croatia to prosecute high-level corruption.1686 However, there has to be mentioned that Sanader’s conviction is only a single case. In combination with other investigations to former ministers, Sanader’s case proofs the conviction of existing illegal links between politicians and businesses in Croatia. According to the Commission, the strategic approach, legislative structure and institutional framework of Croatia is adequate and appropriate to prosecute the protagonists in these supposed existing corrupt relations.1687 Notwithstanding, this good structured anti-corruption framework, there still exists a clear imbalance between repression and prevention of corruption. According to the Commission, prevention is better than cure, and therefore more emphasis should be laid at tackling corruption in its first stages, instead of the prosecution of several main actors when corrupt activities already occurred. Furthermore, the corruption-related crimes are regularly punished with low sanctions.1688 Again, this picture of Croatia’s approach to curb down corruption was confirmed by field research. An interviewee stated that Sanader’s conviction can be compared to an iceberg: ‘Sanader was the top of the iceberg, now visible above the sea. However, the iceberg is much bigger below sea level, a part still not visible for anti-corruption agencies and average citizens’.1689 Recent perception surveys under the Croatian population show that there still have to 1686

European Commission, 2014, COM(2014) 38 Final, Annex 11, pp. 2-3. Ibid., p. 2. 1688 Ibid., p. 2. 1689 Interview 13. 1687

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be made improvements in combating corruption. The 2013 Eurobarometer Survey on Corruption indicated that 94 percent of the Croatian population believed that corruption is still widespread in their country.1690 The average EU rate is 24 percent on this issue. Moreover, 89 percent of the respondents declared that bribery and the use of connections is often the way to obtain certain public services in Croatia. Of the population, 55 percent even acknowledged that corruption affects their daily lives.1691 Finally, a United Nations study on crime and drugs proved that Croats consider corruption as the country’s third most important problem.1692 The Commission argues that Croatia has to improve the supervision on conflict of interest cases, the transparency of gifts and the finances of political parties, the big role of the shadow economy, the integrity of public administration, the integrity of elected and appointed officials, the protection of whistleblowers and the public procurement procedures. Next to the above outlined recommendations, the Croatian government particularly has to confront corruption in the healthcare sector. The 2011 UN study on drugs and crime already indicated that healthcare is one of the most vulnerable Croatian sectors to corruption.1693 Of the Croatian population, 20 percent felt obliged to give an extra informal payment or a valuable gift to doctors before they received a medical service. Furthermore, favouritism and conflict of interest are considered as risks to an equal provision of services for all Croat citizens. However, the Croatian government tries to tackle corruption in this sector. In November 2012, as a result of an anti-corruption project, more than 350 doctors were accused of bribery. Therefore, the Commission recommends Croatia to update the Croatian Healthcare Act. The control mechanism of the sector has to be updated too. In short, the Commission stated that Croatia has made considerable efforts to improve the anti-corruption framework.1694 The strategic, legislative and institutional structures are up to date and considered appropriate to curb corruption. The conviction of former Prime Minister Sanader proves Croatia’s progress in its anti-corruption strategy. In addition, the investigations to 350 doctors’ inclination to accept bribes shows Croatia’s willingness to tackle corruption. The NIT annual report on Croatia and corruption shows that the country’s corruption rate diminished slightly since the 2006 turning point.1695 Despite the improvement in Croatia’s attitude and operations towards corruption, the country has to take steps to catch up with the average EU level on corruption. The Commission emphasises the lack of concrete results of

1690

European Commission, 2014, COM(2014) 38 Final, Annex 11, p. 3. Ibid., p. 3. 1692 Ibid., p. 3. 1693 Ibid., p. 12. 1694 Ibid., p. 13. 1695 Dorić, 2013, p.177. The corruption rate is based on the scale 1 to 7. A corruption rate 1 represents the highest degree of democratic process and 7 the lowest. Since 2006, the Croatian corruption rate has gradually decreased from 4,75 to 4,00 in 2013. 1691

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investigations and prosecutions of officials, businessmen or politicians.1696

12.1 Conclusion Corruption can be regarded as one of Croatia’s main contemporary problems, because the phenomenon is inherited form the socialist past and since then it has been incorporated throughout the whole Croatian society; the political arena, the economic sectors, the country’s administrative procedures and Croatia’s healthcare sector. Especially during the 1990s corruption was a widely spread phenomenon in Croatia. Under the leadership of President Tuđman, the political, cultural and economic elite used corrupt practices to benefit themselves. This lead to a destabilised country where the citizens lost their faith in the political system and judicial functioning. Since the 2000s, the new President Mesić announced a profound reform programme aimed to curb down corruption. During the first years there were no major achievements made in this area, because corruption was widely incorporated throughout the society. More important was the resistance of the elite groups leading the country’s main public and private organisations. They would not like to give up their influential position in society. Therefore, it took until the mid-2000s before significant improvements were made. As a result of an improved legislative and institutional framework, with in specific the establishment of the independent anti-corruption agency USKOK, and the start of several governmental strategies against corruption some protagonists resigned from their influential position or were arrested. The most important achievement has been the arrest and double conviction of former Prime Minister Ivo Sanader, who led the Croatian government between 2003 and 2009, and several of his associates. According to an expert, the Sanader case can be regarded ‘as the top of the iceberg’ that has finally been convicted. This also means that there seem to be still a huge amount of high ranking officials that use corrupt practices, belonging to the ‘part of the iceberg under the water level’, who not have been convicted yet. However, the Commission has also recognised that the Sanade case can be regarded as a major breakthrough in Croatia’s attempt to curb down corruption. In line with this statement, some Croatian experts emphasised that this case hopefully raises the awareness among all societal layers in Croatia that corrupt activities need to be condemned publicly.

In this sense, Croatia’s purpose to eradicate

corruption from its society still has to be regarded as one of the top priorities in order to foster the country’s political, judicial, societal and economic development.

1696

European Commission, 2014, COM(2014), 38 Final, Annex 11, p. 13.

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13. Demographics Over the last decade the population of Croatia has gradually decreased. In 2003 the population numbered 4 305 494 people and up until 2010 the population hovered around 4.3 million people. Since 2011 the number of people living in Croatia has dropped to under 4.3 million and has been annually decreasing ever since to 4 262 140 people in 2013.1697 This is caused by the relatively low birth rate that results in a negative population growth rate. In 2012 41 771 babies were born, whilst 51 710 people died. The country’s natural population growth was thus negative and comprised -9 939.1698 In 2013 the population shrunk by -0.11 percent.1699 As in the whole of the EU, Croatia has slightly more female inhabitants than male. The average male/female ratio for the EU27 in 2012 was 104.8 women per 100 men. In Croatia there were 107.1 women per 100 men.1700 According to the CBS, the Croatian population is ageing. In 2013 the median age was 41.8 years. Compared to Ireland (35.4) and Slovakia (38.4), countries with a similar number of inhabitants, the median age of Croatia is relatively high.1701 As becomes apparent from the three following tables the process of ageing has been going on for quite some time and is expected to persist in the next fifty years. Whereas in 1961 far more people were between the ages of 0-4 than between the ages of 80-84, it is estimated that in 2061 there will be more people in the latter age category than in the former. This is a clear indication of an ageing population.

Table 13.1: Demographic pillars 1961 (left) and 2011 (right).

1697

Eurostat, Table: tps00001. Croatian Bureau of Statistics, 2013 (A). 1699 Ibid. 1700 Eurostat, Table: tps00011. 1701 Index Mundi, 2013. 1698

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Table 13.2: Future demographic situation Croatia 2061.

There are a few factors contributing to this process of ageing, one of which has already been mentioned above, namely the low birth rate. This is reflected in the fertility rate of Croatian women, which is below EU-average. In 2010 Croatian women had 1.55 children on average, which was below the 1.61 children European women had on average.1702 The mean age a Croatian woman gets her first child is around 29 years old, which corresponds with the European average.1703 A third factor contributing to the ageing problem is one that seems to be prominent in all of Europe. The life expectancy at birth for both men and women has gradually increased over the last decade. The EU-28 average male life expectancy at birth in 2002 was 74.5 and had increased to 77.4 by 2011. The average life expectancy of Croatian men had increased between 2002 and 2011, from 71 to 73.8. For women the EU-28 average was 80.9 in 2002 and went up to 83.2 in 2011. Croatian women had a life expectancy of 78.3 in 2002 and of 80.4 in 2011.1704 What becomes apparent from these statistics is that even though the life expectancy of Croats is below EU average, the European trend of increasing life expectancies is definitely present in Croatia as well. Furthermore, as is the case in other EU countries, women are generally getting older than men. A solution to the ageing problem may be the immigration of young people from abroad. However, in contrast to other Mediterranean EU countries, Croatia has a low number of immigrants entering the country. At the moment of writing this report, Eurostat had statistics available on immigration to the EU up until 2011. In this year more than 1.7 million long-term immigrants entered the EU. The 8 534 immigrants that entered Croatia in 2011 are not included in this number, since Croatia was not a Member State yet.1705 According to the CBS, the number of immigrants in 2012 was 8 959. The migration ratio was negative, since more people (12 877) emigrated out of Croatia than immigrated into Croatia.1706 The net migration used to be positive. 1702

Eurostat, Table: tpsdde220. Eurostat, Table: tps00017. 1704 Eurostat, Table: tps00025. 1705 Eurostat, Table: tps 00176. 1706 Croatian Bureau of Statistics, 2013 (C). 1703

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In 2003, for instance, the net migration was 11 921. Up until 2008 Croatia had a positive net migration. The number of people entering the country declined over the years, while the number of people leaving the country increased gradually. In 2008 the two numbers met at a certain point and from then on the gap between the number of immigrants and emigrants widened which has resulted in negative net migration numbers ever since. Out of the total number of immigrants 47 percent had Croatian citizenship. The remaining 53 percent of the total number of immigrants was of foreign descent. The foreign nationals that immigrated to Croatia were mostly of European descent. As becomes apparent from the chart below, only 11.4 percent of the immigrants were from non-European descent and by far the largest share of immigrants came from the neighbouring country Bosnia and Herzegovina. More than half of all immigrants fell in the age category between 20 and 34.

Foreign nationals immigrated to Croatia in 2012. 31,2% Bosnia-Herzegovina 28,7% Other European countries 11,4% Other non-European countries 10,8% Serbia 6,5% Slovenia 5,8% Germany 5,6% Macedonia Source: CBS Croatia, 2013

Figure 13.1: Foreign nationals immigrated to Croatia in 2012.

In conjunction with the fact that most immigrants came from Bosnia and Herzegovina, the country was also an important destination for Croatian emigrants. The Croatian Bureau for Statistics has reported that in 2012 more than half of the Croatian people who chose to emigrate departed to Serbia (31 percent) and Bosnia and Herzegovina (25 percent). People leaving Croatia fell into a larger age category, than people entering the country. As stated above most immigrants were between 20 and 34 years old, while most emigrants in contrast were between 20 and 64 years of age.

13.1 Conclusion Croatia faces some major challenges in the field of its demographics. The population has been decreasing for several years. On top of that, the population is aging. When no solution is found to these problems, the situation in the labour market could deteriorate since even less people will be available to work. Furthermore, government expenses will rise, since more people will 245

require pension and health expenditures are expected to be higher among an aging population.

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14. The social security system The Croatian social security system consists on the one hand of social insurance (pension insurance, health insurance and unemployment insurance) and on the other hand of family benefits and social assistance schemes. People do not directly contribute to family benefits and social assistance schemes as they do to social insurance through their payroll contributions. Family benefits are mainly financed by the State budget. An overview of the Croatian social security system is provided below.

Figure 14.1: The Croatian social security system.

14.1 Pension system The ageing of the population of Croatia creates a major challenge to the Croatian pension system. This system has to provide an increasing number of people with an adequate income at their retirement. The Croatian pension system is a so-called Pay-as-You-Go (PAYG) system, which means that contributors to this public pension system receive promises from government that future tax revenues will provide them with goods and services after their retirement. 1707 This type of system could result in a pension crisis when future tax revenues do not suffice to meet the pension promises the government has made. An ageing population could cause such a crisis, since fewer people are working and paying taxes and an increasing number of people is in need of a pension. While some say the country is working on improving the system and guaranteeing sufficient old age pensions1708, others have expressed their worries about their own pension and believe people should take into account that they will not receive a sufficient pension at their retirement.1709 In 1999 the Croatian pension system was reformed to deal with the challenges the PAYG

1707

Wilmore 2004, p. 1. Interview 24. 1709 Interview 18. 1708

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system was facing. A three-pillar system1710 was created, with the PAYG system comprising the first pillar. All workers are obliged to contribute 15 percent of their monthly income to the PAYG system. The newly created second pillar is a private pension fund to which workers are obliged to contribute five percent of their monthly income. This pillar is intended to support increasing pension expenditures in the future due to ageing.1711 The third pillar was created in 2002 and comprises a voluntary private pension fund. Every citizen of Croatia has the opportunity to be insured in the third pillar as well, but this is on a voluntary basis. A Croatian citizen has to contribute for at least fifteen years to become eligible for old age pension, at age 65 in case of men or age 61 in case of women. The Croatian government intends to close the gap between the male and female retirement age by lifting the female retirement age annually by three months. It is the intention to have reached an equal retirement age for men and women by 2030.1712 People who are retired have to pay a relatively low amount of income taxes over their pension. This, combined with the fact that the Croatian population is ageing, could have a negative impact on pension benefits from the first pillar. 14.1.1 Pension insurance The Croatian Pension Insurance Institute (HMZO) is responsible for the first pillar of the pension system. The first pillar provides besides protection at old age: -

Invalidity benefits. A Croatian citizen can be eligible for invalidity benefits when the capacity to work is reduced or completely lost. The level of benefits provided depends on previous earnings, the level of invalidity, the period of employment, and on the person’s annual wage in relation to the national annual average wage.1713

-

Survivor’s benefits. These benefits are accessible to family members of a diseased person who already enjoyed a pension of some kind. The percentage of the concerning pension the survivor(s) will receive depends on the number of survivors. It can range from 70 percent for one survivor to 100 percent when there are four or more survivors.1714

-

Benefits in case of accidents at work or occupational diseases. The HMZO covers these benefits in case of physical impairment or invalidity due to work-related accidents or diseases.1715

The second pillar is controlled by private companies and is primarily occupied with providing old age pension.

1710

Euraxess, Pension System, http://www.euraxess.hr/sitegenius/article.php?aid=587, accessed on 9.01.2014 The World Bank 2011 (B), p. 4. 1712 European Commission 2013 (F), p. 16. 1713 Ibid., p. 14-15. 1714 Ibid., p. 18-19. 1715 Ibid., p. 21. 1711

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14.2 Healthcare 14.2.1 Healthcare during the socialist era After an initial period after the Second World War in which Yugoslavia abolished private ownership, the new country developed a new type of ownership in the 1950s. The state was to be organised in accordance with the principle of social ownership. Formally this meant that all ownership was transferred to society and there was no distinction between employers and employees. This principle was also to be implemented to the healthcare systems of the different republics of the Yugoslav federation. It is however argued that in practice this was never fully realised and the state still had a major influence on the healthcare system.1716 The government influenced the allocation of capital, the wages and employment in the health sector. Health was decentralised and mostly organised at community level. Health insurance was provided by ‘self-managing communities of interest’ (SIZ). Each SIZ was responsible for its own community, which normally comprised a population of 50 000. It was governed by two councils: a council of healthcare workers and a council of consumers. Apart from a few exceptions, all working members of the community were obliged to contribute to the SIZ. In return they received universal and comprehensive coverage for healthcare.1717 Up until the end of the 1980s the system achieved many things. The number of hospital beds almost tripled; the number of medical schools rose, which resulted in more medical specialists; 82 percent of the population was covered by health insurance; and diseases such as diphtheria, malaria and typhus were eradicated.1718 An expert in the field has confirmed the effectiveness and success of the healthcare system during the socialist era.1719 The period of progress was, however, halted by the economic crisis that erupted in the 1980s. The system started to suffer from deficits and shortages of pharmaceuticals.1720 Due to the economic crisis, the government felt the necessity to impose financial barriers on the system. Most people took free healthcare for granted and were severely opposed to these barriers.1721

Eventually,

co-payments

were

introduced

on

some

procedures

and

pharmaceuticals. These payments, however, accounted for only a small portion of total healthcare expenditure.1722 After Croatia gained its independence in 1991 the government put through several reforms to centralise the healthcare system and to gain control over the costs.1723 1716

Saric and Rodwin 1993, p. 223. Ibid., p. 225. 1718 Ibid., p. 229. 1719 Interview 37. 1720 Saric and Rodwin 1993, p. 229-230. 1721 Ibid., p. 230. 1722 Ibid., p. 231. 1723 Dzakula 2007, p. 145. 1717

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14.2.2 Healthcare costs and health insurance There is one major health insurance fund that dominates the Croatian healthcare system, namely the Croatian Institute for Health Insurance (HZZO). This is a public institute that receives its funds from the government. Every Croat is obliged to pay 15 percent of their gross income to health insurance contributions for a mandatory health insurance package (MHI). When a person is unemployed or not working for any reason, the government provides MHI for them. This package does not cover all medical expenses, only those prescribed by law. A Croat is insured for primary and specialist healthcare, partly for dental care, specific pharmaceuticals and partly for other aids. One is covered to visit public medical institutions or private institutions that are contracted by the HZZO.1724 Apart from medical expenses the MHI also covers: -

Sickness cash benefits. The employer is usually obliged to pay the first 42 days of an employee’s sick leave. After this period the sickness cash benefit is paid by the HZZO. The amount of money the employee receives from the HZZO depends on his average income of the preceding six months. In most cases it amounts to 70 percent of this average income calculation. In exceptional cases, for instance when sickness results from the War or complications during pregnancy, the employee receives a full (100 percent) compensation. After 18 months of uninterrupted sick leave the benefit is cut to 50 percent of its original amount.1725

-

Maternity and paternity benefits. (Self-)employed pregnant women are entitled to maternity benefits from 28 days before the due date up until six months after the baby has been born. The first 70 days of postnatal leave after childbirth have to be used by the mother. The rest of the postnatal leave can be fully or partially transferred to the father. The mother has to resume employment in this case. The maternity benefit amounts to 100 percent of the monthly income.1726

-

Benefits in case of accidents at work or occupational diseases. The HZZO covers these benefits in case an employee is temporarily incapable to work due to an accident at work or an occupational disease. An employee enjoys full compensation in this case.1727

The funding of MHI depends mostly on payroll contributions and for a minor part on revenues from general taxation. The system is characterised by co-payments, which means that part of the medical expenses are covered by the MHI and part is to be paid by the patient. People can insure themselves against paying these co-payments by choosing for a voluntary health 1724

European Commission 2013(F), p. 8. Ibid., p. 10. 1726 Ibid., p. 13. 1727 Ibid., p. 21. 1725

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insurance package (VHI).1728 VHI is divided into supplementary and complementary health insurance. Complementary health insurances packages are provided by the HZZO and by private companies. Supplementary health packages are only provided by private insurers. It is argued that contributions for VHI are regressive, which means that people with a lower income spend a relatively bigger part of their income on healthcare than people with higher incomes.1729 The 2008 reform, which is discussed below, changed this situation remotely by aligning the contributions to people’s income. The system is however still regressive in nature. 14.2.3 2008 reform The last major reform to the Croatian healthcare system took place in 2008. Several studies conducted in this period pointed to a few weaknesses that characterised the public healthcare system: organisation, financing and spending. The system was plagued by constant deficits, which were caused by insufficient revenues and a lack of control over expenditures.1730 Most revenues had to come from contributions from the employed. The number of people contributing to the system was, however, not in balance with the number of people benefiting from the system (employed plus inactive population). The fact the Croatian population is ageing, which puts further pressure on the labour market, also puts a strain on the system.1731 These financial troubles were reflected in a high number of payment arrears. The 2008 reform was particularly intended to deal with these financial problems and was aimed to create financial stability. To achieve this goal several measures were introduced. One prominent measure was to create additional sources of funding for the system. Besides contributions from the employed, revenues were now retrieved from general taxes (such as excise taxes on tobacco) and car insurance payments. A second measure was to broaden the size of the population that is obliged to contribute to the system. Pensioners, for instance, who before did not have to contribute, were now also obliged to pay at least part of the costs. Thirdly, co-payments were in some cases increased, which encouraged many people to get a supplementary insurance package. Finally, the hospital payment system was reformed, which induced higher efficiency in hospitals. Before the reform was implemented hospitals were paid according to a system that encouraged them to extend the length of patients’ stay at the hospital. Experts in the field consider the reform as positive, but state further reform is necessary to make the current system more efficient.1732 It has been argued that an important objective is to make general practitioners gatekeepers of the healthcare system and to aim for preventive

1728

Voncina et. Al. 2012, p. 67. Svaljek 2014, p. 41. 1730 Ibid., p.. 37. 1731 Ibid., p.. 68. 1732 Interview 18, 52. 1729

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medical care.1733 The measures initiated in 2008 provided the needed additional sources to fund Croatian healthcare. Some however claim these additional funds were excessive, especially considering the economic crisis, which struck the country in the same period and put a strain on people’s purchasing power.1734 It is argued that even though overall financial stability had been restored, not much attention was given to the expenditure side.1735 Revenues were increased and arrears decreased, but there were still abundant expenditures that needed to be dealt with. There was no incentive to cut the expenditures, since funding was abundantly available. Expenditures were, however, reallocated so that more resources were used for health purposes instead of other compensations, such as transfers for sick-leaves.1736 14.2.4 Quality of healthcare Since 2005 the EU has measured the quality of European healthcare systems annually using the so-called Euro Health Consumer Index (EHCI). Public healthcare institutions are rated on 48 different indicators, which are divided into six categories: patient rights and information (12 indicators), waiting time for treatment (6 indicators), outcomes (7 indicators), range and reach of services provided (8 indicators), prevention (8 indicators) and pharmaceuticals (7 indicators). On each indicator the country can have a good score, which is awarded with three points, a moderate score, which is awarded with two points, or a poor score, which is awarded with one point. In 2013 Croatia was ranked 19th out of 34 countries, with a total score of 656 points.1737 When compared to 2012 Croatia has dropped two spots in the ranking, from 17 th place to 19th place.1738 It is however a major improvement when compared to 2008 when Croatia was ranked 29th out of the 31 indexed countries.1739 The Netherlands has had the highest ranking for years now and had a total score of 870 points in 2013. The worst performing country was Serbia with a total score of 451 points.1740 In 2013 Croatia managed to receive a good score on merely two out of six indicators: same day access to a family doctor and a waiting time of under 21 days for cancer therapy. The country received a moderate score for the waiting time in case of an accident or emergency. 1733

Interview 52. Svaljek 2014, p. 37-38. 1735 Ibid., p. 39-40. 1736 Ibid., p. 39-40. 1737 Euro Health Consumer Index 2013, http://www.healthpowerhouse.com/files/ehci-2013/ehci-2013-index-matrixa3.pdf, accessed on 01.03.2014. 1738 Euro Health Consumer Index 2012, http://www.healthpowerhouse.com/files/ehci-2013/ehci-2013-index-matrixa3.pdf, accessed on 01.03.2014. 1739 Euro Health Consumer Index 2008, http://www.healthpowerhouse.com/files/ehci-2013/ehci-2013-index-matrixa3.pdf, accessed on 01.03.2014. 1740 Euro Health Consumer Index 2013, http://www.healthpowerhouse.com/files/ehci-2013/ehci-2013-index-matrixa3.pdf, accessed on 01.03.2014. 1734

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Croatia scored poorly on the three other indicators: direct access to a specialist, a waiting time of less than 90 days for major elective surgery, and a waiting time of under seven days for a CT scan. It scored especially poorly on the waiting times for treatment. Experts in the field have acknowledged that waiting lists are a major issue in the country.1741 It has been mentioned that it is not unusual to bribe medical staff to cut the waiting lists.1742 Many studies, focusing on patients’ satisfaction with the Croatian healthcare system, have identified the same issues the Croatian healthcare system is supposed to be facing as the EHCI. In accordance with the results from the EHCI, patients regarded waiting lists as one of the major issues within Croatian healthcare. To investigate this, a survey was conducted among 386 patients in February and March 2013 on their satisfaction with the system. Most patients (35 percent) considered long waiting lists to be the biggest problem; 30 percent of the participants found insufficient funding as a major issue; and 16 percent stated the biggest problem lies with the doctors working in both public hospitals and private practices. Doctors were thought to have poor communication skills, a lack of interest and motivation, and are perceived as corrupt. Little over 60 percent of the respondents claimed to also have used private healthcare services, mainly to avoid long waiting lists in public healthcare. They stated to be prepared to save a certain amount of money annually for medical services in the private sector.1743 A large part of the respondents (73 percent) believed that the quality of private healthcare is higher than of public healthcare. A way to improve this situation, according to 69 percent, is to allow more competition by abolishing the monopoly position of HZZO.1744 Some have argued that creating more competition is essential to the development of the Croatian healthcare system, especially with Croatia’s accession to the EU in mind.1745 Experts in the field, however, did not agree to this argument.1746 Some argued that in a small country it is not possible to create a competitive market with private health insurers.1747 The overall conclusion was that the system is good, but costly.1748 Several interviews with experts in the field have brought to the fore some concerns about the leaving of medical professionals to find employment abroad. Some are not really concerned, since they expect that this is just a temporary trend. They expect doctors that have left the country to return within five years. They do, however, worry about the shortage of nurses in the country due to emigration.1749 Others are equally concerned about the brain drain 1741

Interview 37, 52. Interview 2. 1743 Kovac 2013, p. 613. 1744 Ibid., p. 614-615. 1745 Ibid., p. 617. 1746 Interview 18, 37, 52. 1747 Interview 52. 1748 Interview 18, 52. 1749 Interview 52. 1742

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of doctors as they are about the brain drain of nurses. They consider this as a big problem for the Croatian healthcare system.1750

14.3 Unemployment insurance Employees who have lost their job may be entitled to unemployment benefits. They have to be registered as unemployed at the Croatian Employment Service (HZZ), the organisation that pays the benefits and assists the unemployed in finding new jobs. The duration of their rights to unemployment benefits depends on the duration of the last employed period. They have to have been employed for at least nine months in the last 24 months to earn the right to unemployment benefits for the duration of 90 days. The right to unemployment benefits can range from a minimum of 90 days to a maximum of 450 days for people who were employed for at least 25 years. The monthly payments are based on an average of the last three salaries received before losing employment. The first 90 days of unemployment the benefit amounts to 70 percent and for the rest of the unemployed period it amounts to 35 percent. There are several conditions attached to receiving unemployment benefits: ‘1) the state of unemployment should not be one’s own fault or voluntary; 2) one should have the capacity to work; 3) one should be actively searching for a job; 4) one should be available for employment; 5) one should accept suitable employment.’1751

14.4 Family benefits -

Children allowance scheme. A person may be entitled to a child benefit when the family income is below a certain level. The amount of the benefit depends on the monthly income of each family member, the status of the parents (single parents receive a 15 percent increase), and the child’s health condition (parents receive an 25 percent increase in case the child is disabled.) In principle, the benefits are paid for children up to fifteen years of age. When a child is still studying after he turned fifteen, the child benefit can be extended up until the child has reached the age of nineteen. The period can be extended to 21 years when the child has a serious illness or to 27 years when the child is disabled.

-

Parental allowances. In case an employee is responsible for the care of a severely disabled child, he or she may be entitled to parental leave or part-time work.

-

New-born child assistance. A flat-rate amount of money is transferred to new parents who have just had a child.1752

1750

Interview 37. European Commission 2013(F), p. 26. 1752 Ibid., pp. 23-24. 1751

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14.5 Social assistance schemes There are many different types of social assistance schemes available in Croatia. Social assistance schemes are funded primarily by the state and can be applied for at the Social Welfare Centre. People can be eligible to receive social assistance when they lack sufficient resources and are not able to independently secure sufficient resources by working or any other form of income. The amount of the social assistance differs per case, depending on the number of family members and the total family income. Social assistance can consist of e.g.: ‘subsistence allowance, housing allowance, one-time assistance, educational assistance, personal disability allowance, assistance and care allowance, and an inclusion supplement.’1753

14.6 Conclusion The Croatian social security system is extensive, but somewhat inefficient. As mentioned before, the system sometimes induces people not to work, since receiving benefits is more lucrative. The system seems to be a left over from the socialist past, in which the state had a paternalistic role towards its citizens. Especially the healthcare system seems still to be influenced by a socialist mentality. The coverage is extensive and at a relatively low cost. It is said that people also still expect the government to take care of them and to provide free and unlimited healthcare. The problem is, however, that this is too costly for the country. The government is initiating reforms to make the system more efficient and compatible with a market economy. These reforms are, however, slow since people dot not easily accept changes in this area.

1753

European Commission, 2013(F), p. 28.

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15. Education and science High-quality education is necessary in a post-industrialised country for a competitive workforce, because the skills required in the knowledge economy are developed through education. Croatia, therefore, needs to deliver high-quality education to compete on the European labour market.1754 In the EU, education remains primarily the competence of the Member State. Yet, it is necessary for a Member State to ‘have the legal, administrative and financial framework and necessary implementing capacity in place to ensure sound financial management of the education, training and youth Community programmes’.1755 This chapter will provide an overview of the Croatian education system and the different types of education in Croatia. Furthermore, it will discuss the access, efficiency, equity and quality of the Croatian education system. Lastly, this chapter includes a section on science and research in Croatia.

15.1 The Croatian education system As part of Yugoslavia, Croatia took part in the federal education system. After its independence and as part of their EU accession, Croatia had to adjust its education system.1756 While Croatia was the regional leader regarding access, quality and equity of education it had to overcome some obstacles to match the EU education standards.1757 In order to meet these standards, many reforms have been made. Some of these reforms were made in the context of EU programmes, such as the Bologna Declaration (1999), the Lisbon Strategy (2000), the Copenhagen Declaration (2002), and Europe 2020 (2010). Other reforms were made on Croatia’s own initiative. The reforms include, inter alia, the establishment of new kindergartens, the improvement of foreign language acquisition programmes, the introduction of compulsory secondary education, and the creation of a National Education Council.1758 The Bologna Declaration has initiated the Bologna Process. The Bologna Process aims to improve mobility and education quality in European higher education and to create a European Higher Education Area (EHEA). It has introduced an European system that arranges academic degrees in two cycles, the bachelor’s and the master’s degree, making degrees easily comparable.

In order to improve student, teacher and researcher mobility, obstacles to

1754

Lowther, 2004, pp. 15-18; Interview 19. European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 15.04.2014. 1756 Nuffic, 2012, p. 4. 1757 Unicef, www.unicef.org/ceecis/Croatia.pdf, last accessed on 18 March 2014; European Commission, 2012, COM (2012) 338 Final, p. 42. 1758 Unicef, www.unicef.org/ceecis/Croatia.pdf, last accessed on 18.03.2014; European Commission, 2012, COM (2012) 338 Final, p. 42. 1755

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freedom of movement are removed and credits are made transferable through the European Credit Transfer and Accumulation System (ECTS). Lastly, a European dimension is added to higher education by increasing the number of study areas with a European dimension.1759 Croatia has implemented the two cycles structure in nearly all study programmes. Furthermore, it has adopted legislation to implement the ECTS; and most higher education institutions now apply the ECTS.1760 The Lisbon Strategy aimed for the EU to become the ‘most dynamic and competitive knowledge-based economy’ by 2010. To achieve this, objectives were set to make the European education and training systems a ‘world quality reference’.1761 These objectives are in line with the Bologna declaration and include: to increase per capita investment in human resources, to half the number of 18 to 24 year olds with only lower-secondary education, to make schools and training centres accessible to all, to improve student, teacher and researcher mobility, and to develop a European format for a curriculum vitae.1762 The Copenhagen Declaration initiated the Copenhagen Process. The Copenhagen Process aims to elaborate on the Bologna Declaration and the Lisbon Strategy by involving both candidate countries and European Free Trade Association (EFTA) countries in EU cooperation in vocational education and training. The main priorities of the Copenhagen Process are to add a European dimension in vocational education and training; to provide transparency, information and guidance on mobility; to support the recognition and transferability of competences and qualifications; and to ensure quality of vocational education and training.1763 The Europe 2020 strategy aims at smart, sustainable and inclusive growth. It has set objectives for education and training regarding early school leavers and tertiary education attainment. The aims for 2020 are to have a dropout rate of ten percent at most; and at least forty percent of the 30 to 34 years old should have a tertiary education degree. 1764 The Croatian target regarding early school leavers was four percent of the population between 18 and 24 years old. In 2012 this percentage was 4.3 percent.1765 The Croatian target regarding tertiary education attainment is 35 percent. In 2012 this was 23.7 percent.1766

15.1.1 Governing bodies and legislation The Ministry of Science, Education and Sport is responsible for developing education strategies

1759

European Higher Education Area, 1999, pp. 3-4. Nuffic, 2012, p. 12. 1761 European Commission, COM (2007) 61 Final, p. 2. 1762 European Council, 2000. 1763 European Commission, 2002, pp. 1-3. 1764 European Commission, COM (2010) 2020 Final, p. 11. 1765 Eurostat, Table: t2020_40. 1766 Eurostat, Table: t2020_41. 1760

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and policies. Furthermore, it determines the national curriculum and is responsible for the financial policy regarding education.1767 The ministry cooperates with independent institutions as well as with other ministries.1768 There are two governing bodies that monitor the quality of education and make recommendations for improvement. For pre-primary, primary and secondary education this is done by the National Education Council, which was created in 2012.1769 Since 2009 and 2010 gimnazija students are obliged to take a state exam, the državne mature. To administer these state examinations, the National Centre for External Evaluation of Education was established.1770 The responsibilities for primary education, and secondary education are divided. Municipalities and town have competence in primary education, while counties have competences in secondary education.1771 The Croatian higher education is governed by the Act on Scientific Activity and Higher Education, which entered into force in 2003. This act introduced the binary education system, which makes a distinction between professional education programmes, and academic programmes. This change is in line with the Bologna Process. Further in line with the Bologna process is the Act on Academic and Professional Titles and Academic Degree, which came into force in 2007. This Act introduced the three-cycle system of higher education, with a bachelor’s, master’s and PhD degree.1772

15.1.2 Financing and student support The public expenditure on education as percentage of GDP in 2010 was 4.27 percent. This percentage was below the EU28 average of 5.44 in the same year.1773 Private expenditure on education in 2010 was 0.26 percent of the GDP. Private expenditure includes school fees, material costs, transport to school and school meals (if they are provided by the school), boarding fees and expenditure by employers on initial vocational training.1774 Part of the budget is allocated for higher education institutions. These higher education institutions receive funds through ‘founders’ funds, […] local authorities funding, National Science Foundation projectbased funding, […] and donors’, but the biggest part of their budget comes from the state budget.1775 Private higher education institutions do not receive funding by the government, and private institution students do not receive student welfare. They are, however, offered 1767

Nuffic, 2012, p. 4. EACEA, 2010, p. 3. 1769 European Commission, COM (2012) 338 Final, Brussels, p. 42. 1770 Nuffic, 2012, p. 5. 1771 Bache and Tomšić, 2010, p. 72; Association of the Local Democracy Agencies, 2002; Ministry of Science, Education and Sports, http://public.mzos.hr/Default.aspx?sec=2499, last accessed on 29.04.2014; Interview 6. 1772 Nuffic, 2012, pp. 4, 8-9. 1773 Eurostat. Table: tsdsc510. 1774 Eurostat. Table: tps00068. 1775 EACEA, 2010, p. 4. 1768

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subsidised meals, tax exemption and health insurance.1776 The other part of the budget is used for student support. The government helps students by paying part of their tuition fees. The annual tuition fees of 700 to 1400 euro for master students and 1400 to 3000 euro for postgraduate students are only about a third of the actual costs. For bachelor students education is free of charge since 2010/2011. For private education, students pay 1500 to

15 000 euro per year. Students also receive a food subsidy, health

insurance, tax exemption, subsidy for private accommodation and a tax relief for their parents. Part-time students and postgraduate students do not receive any benefits through the student welfare system, because it is expected that these students work full-time. Lastly, annual state grants are given to exceptional students, students of lower economic or social status and students with disabilities.1777 It has been argued by the interviewees that it is a structural problem that these student support measures create incentives to stay a fulltime student, because the costs of living are lower for students. This means that students take longer to complete their study.1778

15.1.3 International cooperation International cooperation on education and training includes several kinds of cooperation, namely interuniversity cooperation, intergovernmental cooperation and mobility programmes cooperation. Croatia actively participates in EU mobility programmes for students, teachers and researchers, such as Marie Curie, and the Central European Exchange Program for University Studies (CEEPUS). Through the European Lifelong Learning Programme (LLP), Croatian students can now participate in Erasmus, Leonardo da Vinci, Comenius, and Gruntvig programmes.1779 In order to attract more international students, Croatia needs to strengthen the number of courses available in foreign languages and encourage the acceptance of international students in professional education programmes.1780

15.2 Types of education Education is compulsory between the ages of six and fifteen years old.1781 The Croatian school expectancy in 2012 was 16 years, meaning that the average Croatian will spend 16 years in school. This number has increased steadily since 2004, when school expectancy was 14.5 years.

1776

EACEA, 2010, p. 5. Ibid., p. 5; Interview 19. 1778 Interview 2; 18; 19; 24. 1779 EAEA, 2011, p. 7. 1780 EACEA, 2010, p. 9. 1781 Nuffic, 2012, p. 4. 1777

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However, Croatia lags behind as the EU28 average in 2011 was 17.5 years.1782 Below, the different types of education will be discussed.

15.2.1 Pre-primary education Pre-primary education is not compulsory in Croatia. In 2012 102 857 children attended preprimary education and preschool, this translates into 71.1 percent of the four to six years olds. This is lower than the EU28 average in 2011 of 93.2 percent.1783 Although it is not compulsory, there is a national curriculum for pre-primary education. The national curriculum for preprimary education is focused on the development and growth of the child and his or her personality and abilities. The basic structure of the curriculum consists of three themes: 

‘I’: focused on the development of a self-image;



‘I and others’: focused on family, kindergarten, and the local community; and



‘The world around me’: focused on the social environment, cultural heritage and sustainable development. 1784

15.1.3 Primary education and lower secondary education Children start primary education when they are six years old. Primary and lower secondary education is free of charge for all children who are Croatian residents. There are three types of primary and lower secondary education: a general education is given at regular schools (grammar schools); art education is given at regular and specialised music and dance schools; and students with special needs can attend special education institutions. After eight years of primary and lower secondary education, upper secondary education starts.1785 All students, except those with special needs, follow the national core curriculum. Besides the general subjects, children need to choose subjects from a differentiated curriculum. The differentiated curriculum offers, for instance, an alternative subject about ethical and moral competences, and religion, instead of the catechism course. Lastly, schools offers an extracurricular programme consisting of non-compulsory subjects, supplementary classes, school projects, and excursions.1786 The educational areas in which the subjects are divided are: language and communication, mathematics, science, technology and informatics, social sciences and humanities, art, and physical and health.1787 These areas are connected with compulsory interdisciplinary themes, which schools have to implement. These themes help students to 1782

Eurostat. Table: tps00052. Eurostat. Table: tps00179. 1784 Ministry of Science, Education and Sports, 2010, p. 28. 1785 Nuffic, 2012, p. 5. 1786 Ministry of Science, Education and Sports, 2010, pp. 20-22. 1787 Ibid., p. 30. 1783

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adopt different points of view. The themes are: ‘personal and social development; health, safety, and environmental protection; learning to learn; entrepreneurship; use of information and communication technology; and civil education’.1788

15.1.4 Special needs education Students with special educational needs can be divided into two groups: students with a (learning) disability, and gifted and talented students. Therefore, it covers a diverse group of students for whom the curriculum must be adjusted to their specific needs and competences. They might also need more support than other students. To achieve this, the teachers participate in development programmes, and cooperate with other actors on different levels.1789 The national curriculum aims to ‘achieve a maximum level of knowledge, competences and skills’1790 for students with disabilities. There are four forms of education for students with disabilities. The first is inclusive education, in which students follow education within regular schools. To realise this, their curriculum is individualised and they receive extra support. The second form is for students to follow a special curriculum in special education groups within regular schools. A third form is to follow a special curriculum in an institution for special education. Lastly, for some students it is, due to their condition, necessary to organise classes at home or in the hospital. In that case, they will only need to follow the core curriculum.1791 In higher education, students with disabilities have a bigger chance of getting a scholarship. They also get support in the form of easy accessible dormitory places and compensation for transport costs.1792 Gifted and talented children might have disabilities which interfere with their talents and development: they might appear to be average or below-the-average students. Therefore, the curriculum aims to create conditions in which students can develop their talents. The responsibility for this lies with the education institutions. To meet their needs, talented children can have an individualised curriculum with supplementary classes and other forms of extra work.1793

15.1.5 Upper secondary education There are three forms of upper secondary education, namely general secondary education at gimnazija; art education at umjetnička škola; and secondary vocational education at strukovna 1788

Ministry of Science, Education and Sports, 2010, p. 23. Ibid., p. 199. 1790 Ibid., p. 199. 1791 Ibid., pp. 199-200. 1792 Interview 19. 1793 Ministry of Science, Education and Sports, 2010, pp. 201-2. 1789

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škola. General secondary education lasts four years and is designed to prepare students for the state exam and university. The curriculum consists of ‘general education subjects, linguistic subjects, classic subjects, academic subjects, mathematics’.1794 It is optional to expand the curriculum by choosing other subjects and modules.1795 At the end of the gimnazija, students have to pass the state exam, the državna matura. The state exam consists of three obligatory subjects: Croatian, mathematics and a foreign language. The students themselves can decide which other subjects they want to take on the exam to earn extra credits. Passing the state exam leads to the svjedodžba o državnoj maturi diploma which grants access to higher education.1796 Both art education and vocational education schools only provide a minimum of general education. This minimum of general education is necessary to acquire key competences in general subjects, such as the Croatian language, mathematics, biology, history and geography. In the case of vocational education they teach sixty percent of what is taught in general secondary education in the first year, and forty percent in the second year.1797 Art education also lasts four years, in which students are expected to gain core and art competences. After art education, the student will receive the svjedodžba o zavrsnom ispitu diploma. After art education, students can choose to take the admission exam for higher education.1798 Vocational education lasts two to four years, in which students will gain general and vocational competences. Students are educated in management, education, care, technology, economics, socio-legal professions, administration, or arts. In the two and three year programmes, students are provided with a basic vocational qualification and will receive a certificate or diploma.1799 Students can take supplementary classes to prepare for the state exam if they plan to continue their education.1800 In a four year programme, students get a vocational qualification and are prepared for the state exam.1801 They will be rewarded with the svjedodžba o zavrsnom ispitu diploma. With this diploma students can either continue their education or enter the labour market.1802

15.1.6 Higher education Since 2010/2011, admission to higher education is regulated by the Central Application Office 1794

Nuffic, 2012, p. 5. Ministry of Science, Education and Sports, 2010, p. 19. 1796 Nuffic, 2012, p. 5. 1797 Ministry of Science, Education and Sports, 2010, p. 197. 1798 Ibid., p. 18. 1799 Nuffic 2012, p. 6. 1800 Ministry of Science, Education and Sports, 2010, p. 21. 1801 Ibid. 2010, p. 21; 197. 1802 Nuffic, 2012, p. 6. 1795

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of the Agency for Science and Higher Education (ASHE). All higher education studies require an admission exam, yet some technical studies may offer direct admission to outstanding applicants. Whether or not a student is admitted to a study programme can depend on their secondary school grades, their results on the state exam, their results on the admission exam, and the maximum capacity of the study.1803 Students that have not completed relevant secondary education do have the right to enrol in undergraduate studies. In that case, the higher education institution itself decides the registration conditions.1804 Higher education in Croatia can be divided into two categories: the first category consists of universities (sveučilište), and the second category consists of polytechnics (veleučilište) and institutions for higher professional education (visoka škola). The main differences between these two categories are that universities are connected to research and are allowed to establish independent entities such as faculties and academies. Both types of institutions are allowed to offer bachelor’s and master’s degrees, but only universities have the right to offer PhD programmes.1805 Both types of higher education institutions can be public and private. Public institutions have, in general, more responsibilities than private institutions regarding research and quality assurance. In 2010 there were a total of 119 higher education institutions, of which 10 are universities, 15 are polytechnics and 27 are professional higher education schools. Of these, two universities, two polytechnics and 24 schools of professional higher education were private.1806 The University of Zagreb is the largest university, and the newest public universities were established in Dubrovnik, Zadar and Pula.1807 Universities offer programmes at three levels. Bachelor university programmes usually take three to four years to complete. After completion students receive the title of Bachelor (sveučilišni prvostupnik). Students can then access master programmes or enter the labour market. The master programmes usually take one to two years and aim at in-depth knowledge through academic research. The master programme results in the title of Master (magistrar). There are also integrated programmes, which take five to six years. Integrated programmes grant the master’s degree, without a separate bachelor programme. Postgraduate programmes usually take one to two years and give the title of Doctor of Science (doctor znanosti) or Doctor of Arts (doctor umjetnosti).1808 Polytechnics and institutions for higher professional education offer programmes at two levels. The professional short-cycle degree (stručni pristupnik) takes 2 to 2,5 years. This programme gives students access to the first cycle professional baccalaureus programme 1803

Nuffic, 2012, pp. 5-7. EACEA, 2010, p. 6. 1805 Ibid., p. 2; Nuffic, 2012, p. 8. 1806 EACEA, 2010, pp. 2-3. 1807 Ibid., p. 2. 1808 EACEA, 2010, p. 7; Nuffic, 2012, p. 9. 1804

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(stručni prvostupnik) and the labour market. The professional baccalaureus programme takes three to four years and provides access to the professional specialist programmes and the labour market. The professional specialist programme (stručni specijalist) takes two years.1809

15.1.7 Adult education and lifelong learning Lifelong learning is increasingly becoming important in the EU. Lifelong learning refers to persons between the age of 25 and 64, who have followed some form of education or training in the past four weeks. In 2012, 2.4 percent of the persons aged 25 to 64 years said to have followed some form of education.1810 The EU28 average in 2012 was 9.0 percent.1811 Of the persons aged 20 to 24 years, 94.8 percent in Croatia has completed at least upper secondary education.1812 For the persons between the age of 25 and 64 this number is 79.3 percent. Following the guidelines for lifelong learning this means that 20.7 percent of the people in Croatia have not finished upper secondary education.1813 Adults can continue their education at people’s and worker’s universities, specialised primary schools, secondary evening schools and evening higher education institutions.1814 There are also private institutions which they can attend, or they can follow training and education at companies.1815 This increases their chances of employability and participation in society.1816 The people’s open universities are the pučka otvorena učilišta, which are usually public or private local community universities. 1817 Lifelong learning programmes are open to people of all ages, to ‘enable the continuous education and personal development of every individual’.1818 The Croatian Qualifications Framework (CROQF), in line with LLP, is currently being developed. CROQF is based on the European Qualifications Framework (EQF) and EU guidelines.1819 To establish a competitive European labour market, mobility is required. To improve mobility, competences and skills should be recognised across Europe. The CROQF links learning outcomes, sets quality criteria, and measures learning outcomes.1820 It should lead to more transparency and lifelong access to the education system.1821

1809

EACEA, 2010, p. 7; Nuffic, 2012, p. 10. Eurostat. Table: tsdsc440. 1811 Ibid. 1812 Eurostat. Table: tps00065; tps00186; tsdsc430. 1813 Ibid. 1814 EAEA, 2011, p. 4. 1815 Ibid., p. 7. 1816 Ibid., p. 5; Interview 19. 1817 EAEA, 2011, p. 9. 1818 Ibid., p. 11. 1819 Interview 19. 1820 Beljo Lučić et. al, 2011, p. 11. 1821 Ibid., p. 13; p. 34. 1810

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15.3 Access, efficiency, and equity 2012 Total students 804.880  Pre-primary education 102.857  Primary education 159.945  Lower secondary education 197.473  Upper secondary education 187.316  Tertiary education 157.289 Table 15.3: Number of students per education type in 2012.1822

Percentage females 48% 48,6% 49,4% 49,7% 55,8%

Access, equity and efficiency in the education system can determine the quality of the education system. Croatia is a regional leader on these three points, but will still need to make some improvements to match EU standards.1823 ‘Access’ involves the enrolment of children in education and the amount of children out of school. In 2010/2011 there were 7 000 children who did not attend primary education; while 167 000 children did attend primary education. This means that four percent of the children does not have access to primary education.1824 Regarding secondary education (both upper and lower secondary education), there were 2 000 children out of school, while 389 000 children did attend secondary education. This means that 0.5 percent of the children could not or did not attend secondary education.1825 Efficiency is linked to access and is measured by participation rates, the number of children that leave school before completion and the number of children that had to repeat a year.1826 In 2010/2011 there were 400 children that have left primary school before completing it, which is 0.22 percent of the children. In the same year there were 500 children in primary school that had to repeat a year, which is 0.29 percent of the children.1827 There is largely equity of access in Croatia regarding gender. From pre-primary education to upper secondary education, females are slightly underrepresented. In tertiary education males are slightly underrepresented, as is shown in table 15.3.1828 However, there is no equity of access between ethnic groups. The inequity of access is mostly directed to Roma children. Because a majority of the Roma children do not attend preprimary education, they are barely fluent in the Croatian language. Furthermore, they face racism and discrimination and the dropout rates of Roma students are higher. More information 1822

Eurostat. Table: educ_renrlrg1. UNESCO, 2014, pp. 364-5. 1824 Ibid., pp. 364-5. 1825 Ibid., pp. 380-1. 1826 Unicef, www.unicef.org/ceecis/Croatia.pdf, last accessed on 18.03.2014. 1827 UNESCO, 2014, pp. 364-5; pp. 372-3. 1828 Eurostat. Table: educ_renrlrg1. 1823

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on Roma in the Croatian education system can be found in box 15.3. Serbian children also do not receive the same level of access and quality as Croatian children.1829

Box 15.3: Roma in the Croatian education system

A majority of the Roma children do not attend pre-primary education. Pre-primary education could bridge the gap between Roma students and other students in primary education, and could lead to better integration. The overall enrolment of Roma children in education is relatively low, but is increasing. In the beginning of 2012/2013, there were a total of 5 173 Roma students enrolled in primary education, which accounts for 3.2 percent of the primary education students. Yet the number of Roma students that finish primary education is low and quite some students have to repeat a year. The number of Roma students in secondary education is also rising. In 2012/2013 the number of Roma students in secondary education was 480. Furthermore, the number of classes with only Roma students is decreasing. In 2012/2013 there were a total of 2 028 classes with Roma students, of which 50 were classes with only Roma students.1830 The Croatian government and the Ministry of Science, Education and Sports aim to improve Roma inclusion in education. They aim to improve the access to education to prevent dropping out of school, to remove segregation and discrimination and to ensure a smooth transition from school to employment. Furthermore, they want to abolish all classes with only Roma students by 2020.1831 The Ministry of Science, Education and Sports also provides scholarships to all Roma students in secondary education and scholarships to all Roma students who request them in tertiary education. Furthermore, the Ministry spends its budget on adult literacy programmes for Roma. 1832 It was expressed by an interviewee that there is still discrimination against Roma, for example with Roma girls not being able to get an internship.1833

15.4 Quality of the higher education system Quality is guaranteed and monitored by the Act on Quality Assurance in Higher Education and Science (2009). Higher education institutions often also monitor their internal quality. An external institution that also monitors quality in higher education is the ASHE.1834 This section

1829

Unicef, 2010. Decade of Roma Inclusion, 2012, p. 6-8. 1831 Government of the Republic of Croatia, 2013, pp. 6-7. 1832 Decade of Roma Inclusion, 2012, p. 7-8. 1833 Interview 3. 1834 EACEA, 2010, p. 6; Interview 19. 1830

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will discuss the quality of the Croatian higher education system, based on the interviews. One issue is that universities are fragmented, meaning that they are legally independent and have their own budget and leadership. Therefore, the quality within a university can differ.1835 There is also no competition among public universities, as they are all part of the ministry.1836 Furthermore, it has been argued that students do not learn to think critically, as there are not many debates in class.1837 Education at private higher education institutions is claimed to be of better quality than education at state universities, partly because there is more communication between students and teachers at private institutions.1838 Another issue is the gap between the educational system and the needs on the labour market. The education system does not provide students with the right skills and knowledge needed on the labour market. It was argued that this gap is one of the causes of youth unemployment.1839 One solution to closing this gap is the one-year internship programme, as work experience is necessary to get a job.1840 Another way to close the gap is through CROQF. CROQF will provide the necessary skills and knowledge needed in the labour market.1841 Reforms in the higher education sector are thus necessary, but not appreciated by most higher education institutions.1842

15.5 Science and research Regarding the acquis chapter on science and research, there is no European legislation to be implemented in the national legal order. It is only necessary for member states to have the capacity to participate in European Framework Programmes.1843 In 2012 only 0.6 percent of the Croatian labour force worked in R&D, the total amount of researchers was 11 454.1844 Furthermore, domestic expenditure on R&D in 2012 was 0.75 percent, while the Croatian target for Europe 2020 is at 1.4 percent.1845 Croatia’s independence has led to the loss of many industrial research centres due to their transition and the 1990s Wars.1846 Furthermore, Croatia experiences, like other European 1835

Interview 19. Interview 39. 1837 Interview 9. 1838 Interview 7. 1839 Human resource development, p. 49; Interview 2; 24; 25. 1840 Human resource development, p. 50; Interview 45; 54. 1841 Interview 24. 1842 Interview 19; Interview 48. 1843 European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 15.04.2014. 1844 Eurostat. Table: tsc00002; tsc00003. 1845 Eurostat. Table: t2020_20. 1846 Šlaus, Šlaus-Kokotović and Morović, 2004, pp. 492-3. 1836

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countries, a brain drain.1847 In the interviews, the concerns about Croatia’s brain drain were expressed. Students and young adults increasingly immigrate in search for a job and better working conditions.1848 To counter this brain drain, Croatia will need to establish research institutes and universities to create brain gain and to attract foreign firms.1849 The establishment of universities and related research institutes is important because most of Croatia’s research activities happen within higher education. Around 44 percent of the R&D institutions are located within higher education. Together these institutions employ about fifty to sixty percent of all Croatian researchers. Furthermore, about 70 percent of all state-funded research projects are implemented by universities.1850 Croatian scientists and researchers have always been engaged in international cooperation and collaboration. They participate in, inter alia, the European Science Foundation, Academia Europaea, EURAXESS and All European Academies.1851 Croatia also participates actively in the Seventh EU Research Framework Programme (FP7). Croatia has aims to further integrate within the European Research Area and has undertaken steps towards more researcher mobility.1852

15.6 Conclusion Education is a crucial element in developing a competitive and skilled workforce. While Croatia is a regional leader, it had to overcome some obstacles to match the European education standards. In order to do so, the government has reformed the Croatian education system in the context of the Bologna Declaration, the Lisbon Strategy, the Copenhagen Declaration and Europe 2020. Croatia now has good access to primary and secondary education and there is equity in access regarding gender. However, there are some issues regarding Roma and Serbian children. In general, interviewees were not enthusiastic about the quality of the Croatian education system, because the gap between the educational system and needs on the labour market is big. It was also mentioned that this gap is an important contributor to youth unemployment. Another issue connected to the high youth unemployment is misuse of the student support system, which leads to a lot of delays. Thus, it can be argued that reforms in the higher education system are necessary in order to realise brain gain, and to tackle issues like youth unemployment, student support misuse and brain drain. 1847

Šlaus, Šlaus-Kokotović and Morović, 2004, pp. 492-3. Interview 6; 19; 27; 38; 50 1849 Šlaus, Šlaus-Kokotović and Morović, 2004, pp. 492-3. 1850 EACEA, 2010, p. 8. 1851 Šlaus, Šlaus-Kokotović and Morović, 2004, p. 492. 1852 European Commission, COM (2012) 338 Final, Brussels,, pp. 41-2. 1848

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16. Media During the 1990s, the character of media legislation was influenced by the government and politics. It has been argued that the development of a democratic media system during this period was slow.1853 After 1996, it was the Croatian civil society that started to call for more democratisation and pluralism.1854 They expressed themselves by organising debates and protests against the suppression of the right to information and the freedom of press.1855 Together with the decriminalisation of libel and the role of digital media, these issues were put on the public agenda. In 2000, the new SDP-led government put these issues on the political agenda, and made the independence of the media and the freedom of expression into common values.1856 Some authors argue that changes in the media legislation have been made due to pressure by the EU during the accession period.1857 Between 2000 and 2004, even before Croatia started the negotiation talks with the EU, it changed the media legislation to harmonise it with European standards.1858 During the accession period, Croatia had to further align their media legislation with the acquis, meaning that they had to adapt specific rules and regulations on electronic communications, information society services, and audio-visual services.1859 Among the main issues concerning media were the attempts by the Croatian government to influence Croatian Radiotelevision (HRT) and the private media.1860 Croatia has adopted new strategies in line with European legislation and their media system has adequately developed itself in relation to European standards. The Commission concluded in 2012 that Croatia meets the requirements and commitments of the acquis chapter on media and the information society.1861 This chapter will give an overview of the traditional media: print media, radio, and television. Furthermore, it will discuss the Croatian Media Policy including public service content, and the rights and freedoms of journalists. It will furthermore elaborate on issues such as defamation, libel, hate speech, censorship, and media concentration. Lastly, this chapter will provide an analysis of media independence and media professionalism in Croatia.

1853

Peruško, 2011, p. 1. Ibid., p. 5. 1855 Malović, 1997, p. 61. 1856 Peruško, 2011, p. 5. 1857 Malović, 1997, p. 61; Peruško, 2011, p. 1. 1858 Peruško, 2011, p. 1. 1859 European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 17.03. 2014. 1860 Peruško, 2011, p. 1; Interview 15. 1861 European Commission, COM (2012) 338 Final, Brussels, pp. 21-22. 1854

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16.1 The media landscape This section will discuss the three traditional media: print media, radio and television.

16.1.1 Print media In 2010 there were a total of 168 regularly published newspapers, and 2 432 regularly published magazines.1862 There are fifteen daily newspapers, of which five are national daily newspapers. The biggest national daily newspaper in terms of circulation is 24 Sata, which accounted for 31 percent of the market in 2009. The other national daily newspapers are Jutarnji list (13.6 percent), Večernji list (13.4 percent), Slobodna Dalmacija (6.8 percent) and Novi list (4 percent).1863 It has been argued that Večernji list and Jutarnji list are the most influential daily newspapers, and Novi list is considered to be the most independent daily newspaper.1864 Four of these daily newspapers are published by the two main print media companies: Europapress Holding (EPH) and Styria Media Group. EPH publishes the daily newspapers Jutarnji list and Slobodna Dalmacija, a weekly newspaper and several magazines. Styria Media Group publishes Večernji list and 24 Sata.1865 The Catholic church also owns a publishing house and a weekly newspaper, Glas Koncila. It decided to start publishing due to disappointment about the media coverage of the Catholic church.1866 Until 2008, the yearly growth in print media was around ten percent.1867 However, print media now face financial problems due to the global economic crisis and the increase in competition. The print media face increased competition due to the availability of a wide range of newspapers, and the new digital media as internet portals are becoming increasingly important for qualitative journalism.1868

16.1.2 Radio There are 152 radio broadcasters in Croatia, of which six are national broadcasters. There are three public national broadcasters, HR1, HR2 and HR3, which are part of HRT, and three commercial national broadcasters.1869 The three commercial national broadcasters are Narodni radio, Otvoreni radio, and the Catholic broadcaster Hrvatski katolički radio.1870 The remaining 1862

Croatian Bureau of Statistics, 2011. Peruško, 2011, p. 12. 1864 Malović, 1997, p. 69; Dorić, 2013, p. 185; Interview 4. 1865 Peruško, 2011, p. 12. 1866 Malović, 1997, pp. 66-67. 1867 Peruško, 2011, p. 12. 1868 Dorić, 2013, pp. 185-6; Malović, 1997, pp. 64-65; Interview 4. 1869 Peruško and Popovic, 2008 (A), p. 6; Peruško and Popovic, 2008 (B), p. 179. 1870 Peruško, 2011, p. 12. 1863

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146 radio broadcasters are either regional or local broadcasters. In each county there are two or more big radio broadcasters.1871 HRT also has eight regional radio broadcasters and one international programme, Glas Hrvatske (Voice of Croatia).1872 It has been argued that Croats listen more to local and regional broadcasters, than to national broadcasters.1873

16.1.3 Television Television is a widely used medium in Croatia. Of all Croatian households, 97.1 percent had a television in 2009.1874 Most of the households use cable reception (58.3 percent) or Internet Protocol Television (IPTV, 24.5 percent), while digital terrestrial reception (9.9 percent) and satellite reception (7.3 percent) are more uncommon.1875 There are three national broadcasters: the state-owned HRT (with HTV1 and HTV2), and two commercial broadcasters, RTL TV and Nova TV.1876 Partly due to public service content, HTV1 and HTV2 broadcast more news programmes, children’s programmes, political interviews, debates and documentaries. RTL TV and Nova TV show light entertainment, such as soap operas and reality shows.1877 It is argued that HRT is the most influential television broadcaster, partly because it attracts more than half of the Croatian population.1878 Croatia introduced a dual broadcasting system in 1999, when Nova TV received the first national level commercial television concession. HRT remained the dominant television broadcaster until Nova TV gained popularity through the reality show ‘Story Super Nova’ and ‘Croatian Idol’.1879 Soon after, RTL TV started broadcasting. Both Nova TV and RTL TV were in 2004 majority-owned by foreign companies, respectively by Central European Media Enterprises (CME) and the RTL Group, which led to serious competition for HRT. Competition for HRT has further increased due to new methods of reception, such as IPTV, cable and satellite. The situation is more difficult for local and regional television broadcasters, as advertisements generate the biggest part of their budget. However, due to increased competition they receive less advertising revenues.1880 HRT was the first television broadcaster to take on digital broadcasting, with their channel HTV Plus, and has developed a digital newsroom.1881

1871

Peruško and Popovic, 2008 (A), p. 6; Peruško and Popovic, 2008 (B), p. 179. Peruško, 2011, p. 18. 1873 Ibid., p. 12. 1874 International Telecommunications Union, 2013a. 1875 HAKOM, 2013a. 1876 Peruško and Popovic, 2008 (B), p. 179. 1877 Peruško and Popovic, 2008 (A), pp. 17-19; Peruško and Popovic, 2008 (B), p. 180. 1878 Peruško and Popovic, 2008 (A), p. 5; Dorić, 2013, pp. 184-186; Malović, 1997, pp. 65-66. 1879 Peruško, 2011, pp. 10-11. 1880 Ibid., p. 11. 1881 Peruško, 2011, p. 13. 1872

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16.2 Media policy Since 2000, broadcasting and print media are under the control of the Ministry of Culture, and telecommunications is part of the Ministry of the Sea, Transport and Infrastructure. Other bodies that play a role in Media Policy are the Croatian Agency for Post and Electronic Communications (HAKOM), the Agency for Electronic Media (AEM), and the Council for Electronic Media (VEM). The HAKOM is in charge of telecommunication services, while the AEM manages the ‘linear and non-linear audio-visual media services’.1882 The VEM regulates television and radio broadcasting, and is in charge of ‘protecting diversity of ownership in electronic media’,1883 together with the Council and Agency for the Protection of Market Competition.1884 16.2.1 Croatian Radiotelevision (HRT) HRT is a state-owned broadcaster and is governed by the Law on Croatian Radiotelevision. This law guarantees HRT’s editorial and institutional independence.1885 HRT collects money by licence fees and advertisements. As public service broadcaster, specific rules apply regarding advertising: nine minutes of advertisements are allowed per hour, but advertisements cannot interrupt films, religious programs and documentaries, and children’s and information programmes shorter than 30 minutes. Due to these advertisement restrictions HRT is the main broadcaster of informational, educational and cultural programmes. HRT is required by law to also broadcast programmes specified to the interests of the different regions, and of interest to Croats abroad and national minorities.1886 In 2001 it was decided that the 25 HRT Programme Council members would be directly appointed by civil society associations and organisations.1887 This led to inefficiencies in the functioning of the council, and in 2003 the management structure of HRT was changed. The HRT Programme Council now has eleven members, which are appointed by the Croatian Parliament from a list of proposed members, which is put together by civil society organisations.1888 It has been argued that the new management structure leads to less institutional independence, as the council that needs to protect the public interest is now appointed by the government.1889 Though HRT’s legal framework is comparable to those of other European public service broadcasters, it has been argued that Croatia will not be able to professionally manage HRT. 1890

1882

Peruško, 2011, p. 6. Ibid., p. 7. 1884 Ibid., p. 7. 1885 Ibid., 2011, p. 1; p. 4. 1886 Ibid., 2011, p. 18. 1887 Ibid., 2011, pp. 18-19. 1888 Ibid., 2011, pp. 18-19; Interview 4. 1889 Peruško, 2011, pp. 18-19; Interview 4; 37. 1890 Peruško, 2011, pp. 18-19; Interview 4; 37. 1883

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There are also fears about the existence and development capacity of HRT, and the financial and programming controls that have been introduced by a new law. Furthermore, HRT is not supported by the government and the VEM in the creation of their digital broadcasting channel.1891

16.2.2 Public Service Content Broadcasting is considered to be serving the public interest, therefore both public and commercial broadcasters are obliged to follow the public service content.1892 The public service content entails that broadcasters need to broadcast ‘news and information, including those covering and of interest to national minorities’.1893 Furthermore, their content should be ‘supportive of human rights, political rights, rule of law and the development of civil society’,1894 and should contribute to the protection of the Croatian national and cultural identity. 1895 Another aspect of public service content is diversity, which can be achieved by covering a broad range of ideas representing a range of actors from different races, ethnicities, gender, sexual orientation, and educational background. The aim of this objective is to promote tolerance and respect among citizens.1896 Pluralism and diversity are promoted by the Fund for the Promotion of Diversity and Pluralism, which was created by the VEM in 2003. The fund can be used to produce programmes on local and regional levels.1897 In line with the European Audiovisual Media Service Directive, the VEM gives out broadcasting licences (concessions) to private broadcasters based on programme proposals. 1898 A programme proposal must specify the share of public service content, advertisement and the viability of the programme. The actual content may not differ more than ten percent. It has been argued that the public is not aware of these guidelines. Furthermore, commercial broadcasters do not always comply with the public service content, and there is no consistent monitoring on this. However, the VEM states that it now has the capacity to consistently monitor broadcasters.1899

16.2.3 National minorities All citizens, including national minorities, should have access to information. There are 1891

Peruško, 2011, p. 13; p. 18. Peruško and Popovic, 2008 (A), pp. 15-17; Peruško, 2011, p. 14. 1893 Ibid., p. 15. 1894 Ibid., p. 15. 1895 Peruško and Popovic, 2008 (A), p. 15. 1896 Peruško and Popovic, 2008 (A), pp. 15-17; Peruško and Popovic, 2008 (B), pp. 180-181. 1897 Peruško, 2011, p. 13; Council of Europe/ERICarts, 2013, p. 18. 1898 Peruško, 2011, p. 6; p. 14. 1899 Peruško, 2011, p. 6; p. 14; Council of Europe/ERICarts, 2013, p. 19. 1892

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newspapers, radio broadcasts and television programmes dedicated to these minorities.1900 In 2009, 47 newspapers were published in minority languages such as Slovak, Hungarian and Serbian. To encourage the establishment of newspapers for national minorities, they are financed by the Council for National Minorities and the Croatian government. There are daily and weekly radio programmes on public radio stations and regional radio stations. These programmes are sometimes broadcast in a minority language, for example ‘Italian on Radio Rijeka and Radio Pula, and Slovak and Hungarian on Radio Osijek’.1901 There are also programmes for religious minorities, such as a programme on Radio Dubrovnik for the Bosniak minority and a programme for orthodox Christians on Radio Knin.1902 The public television programme Prizma is ‘dedicated to national minorities’.1903 The Croatian Parliament and its Committee for National Minorities annually evaluate HRT’s programmes, and they have in the past criticised the amount of programmes in the language of the minorities.1904

16.2.4 Rights and freedoms of journalists After Croatia’s independence, the protection of journalistic sources was one of the first rights to be guaranteed. This right was expanded in 1996 to also protect unpublished information, and broadened to protect editors, publishers and authors of books. If necessary, journalists must name their sources in closed court following the Law on Criminal Procedure.1905 The freedom of expression is guaranteed in inter alia the Law on Media, the constitution, the criminal code. Freedom of expression, being a human right, is also protected by the ECHR and the UDHR.1906 There are some limits to the freedom of expression, namely if they concern ‘national security, territorial integrity, public order, prevention of crime, protection of health and morals, protection of reputation and rights of others, prevention of divulging of confidential information, [and] protecting the authority and impartiality of the courts.’1907 There are concerns about the freedom of expression, as charges of copyright infringement on the internet are handled in criminal court, which means that it is treated as severely as child pornography or terrorism.1908 Other concerns regarding the freedom of expression will be discussed in the section on defamation, libel, hate speech and censorship. The right to information is also guaranteed in the constitution, the Law on Media, and in the Law on the Right of Access to Information. When a journalist is denied information, the 1900

Peruško, 2011, p. 17; Interview 58. Peruško, 2011, p. 17. 1902 Ibid., p. 17. 1903 Ibid., p. 17. 1904 Ibid., p. 17. 1905 Peruško, 2011, p. 5. 1906 Ibid., p. 3. 1907 Ibid., pp. 7-8. 1908 Ibid., p. 8. 1901

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offender can be fined. It is not stated in the Law on Media what the reasonable time for providing information should be. However, the Law on the Right of Access to Information specifies the reasonable time for public authorities: public authorities have 15 days to provide the requested information.1909 Though it was a common practice in the 1990s, there have been no known cases of discrimination against journalists or media concerning access to information in the past 10 to 15 years.1910 Other rights and freedoms that are guaranteed by media legislation are the freedom to form media companies, the freedom of journalists to refuse to take orders that are against their professional ethics, the right of journalists to be consulted over the appointment of editors and the right of editors to compensation when ownership or editorial policy is changed. In practice, however, these rights are often not included in media statutes.1911 Another right is the right to reply: the right to criticise and correct wrong information in the same slot the information was published. It is argued that in many cases this right is ignored by the media, or not handled correctly.1912

16.2.5. Defamation, libel, hate speech and censorship While defamation was decriminalised, libel and hate speech are still criminal offences. In 2007 defamation was decriminalised when an amendment to the criminal code removed the jail sentence for it.1913 While no journalist has recently been incarcerated, the possibility of a jail sentence is considered to have a negative influence on the freedom of expression. As libel and hate speech are still criminal offenses, they can lead to imprisonment. A journalist is not guilty of libel if he had no malicious intent, since there is freedom of expression. Yet, as mentioned above, there are several restrictions to the freedom of expression. Hate speech is forbidden, as is encouraging or promoting inequality ‘inciting hatred or animosity, violence or war’.1914 In the past, the Croatian government has prosecuted journalists for libel and defamation.1915 It has been argued that at present, the government rarely prosecutes journalists for libel or defamation. Instead, people with power, like businessmen, are the ones who prosecute journalists for these charges, as a way to silence them. The criminalisation of libel is said to lead to self-censorship: if press rooms refuse to pay for court expenses, journalists will think twice about what they write. It is therefore argued that libel should also be

1909

Peruško, 2011., p. 4. Ibid., p. 13. 1911 Ibid., p. 4. 1912 Ibid., p. 7. 1913 European Commission, COM (2012) 338 Final, Brussels, p. 21. 1914 Peruško, 2011, p. 8. 1915 Malović, 1997, pp. 62-63. 1910

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decriminalised.1916 Censorship is prohibited by relevant legislation and the constitution. The state does not attempt to censor the media or internet. Yet, when state secrets are made public, the offender is prosecuted for espionage.1917 It has been argued that there is censorship through editorial practices. For example, it may be decided to refrain from broadcasting a story or change a written article at the last moment because the editor does not like it or does not want to publish or broadcast it for political reasons. While this is technically not censorship, it does question the professionalism and independence of the media.1918 Another way of censorship is the pressure on investigative journalists when they are working on topics like corruption and organised crime. These journalists may face harassment, charges, and might be threatened with violence.1919 One example of this is the beating of an investigative journalist, Dušan Miljuš, who wrote about corruption and crime. Another example is the murder of Ivo Pukanić, founder and journalists of the former Croatian weekly newspaper Nacional, and Niko Franić, marketing director for Nacional. They were killed in 2008 by a car bomb. It has been suggested that the murder had to do with Nacional’s investigative journalism on corruption and organised crime.1920

16.2.6 Media ownership and media concentration To achieve pluralism and diversity in media, media concentration should be prevented and media ownership data should be transparent.1921 The VEM is in control over the register of electronic media, and the register of newspapers is in hands of the Croatian Chamber of Commerce. All media companies must provide and publish information on their income and the sources of their income, audience figures, and information on all legal and natural persons who directly or indirectly possess a share in their enterprise. These measures were taken in 2003 to improve the transparency of media ownership.1922 It has been argued that there is only low transparency of media ownership, because the information is not easily accessible to the public.1923 Others argue that even though media owners and companies are registered, it is not always clearly indicated who owns the registered company, as there could be secret agreements

1916

Interview 4. Peruško, 2011, p. 8. 1918 Ibid., p. 8; Interview 4. 1919 Malović, 1997, pp. 62-63; Peruško, 2011, p. 8. 1920 Peruško, 2011, p. 21; BBC, http://news.bbc.co.uk/2/hi/europe/7687532.stm, last accessed on 18.03.2014; BBC, http://news.bbc.co.uk/2/hi/europe/8077594.stm, last accessed on 18.03.2014. 1921 Peruško, 2011, p. 9; Interview 4. 1922 Peruško, 2011, p. 10. 1923 Freedomhouse, http://www.freedomhouse.org/report/freedom-press/2013/croatia#.UwyX04W689Q, last accessed on 18.04.2014. 1917

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and contracts to cover up the media concentration.1924 The Law on Electronic Media and the Law on Media control the concentration in respectively electronic media, including the internet, and print media.1925 Under these laws, the VEM, and the Council and Agency for the Protection of Market Competition are in control of protecting the diversity of ownership.1926 The council and the agency are both involved in change in ownership, and breach of ownership restrictions.1927 Both the VEM and the agency must be notified when there is a change in the ownership structure. If this leads to a breach of ownerships restrictions, the broadcaster has time to restructure ownership within legal limits. If they do not comply, their concession will be revoked.1928 In spite of the anti-concentration measures, the media market is said to be highly concentrated.1929 The first foreign investments in the media market were made after Croatia’s privatisation in the 1990s.1930 Private and foreign investors invested again in Croatian media when in 2003 the restriction of a maximum of 25 percent ownership was removed.1931 Nova TV was sold in 2004 to the foreign company CME. RTL TV is owned for 74 percent by RTL group, and is for 26 percent owned by the Croatian companies Agrokor (13 percent) and Atlantic Grupa (13 percent).1932 There are no issues with media concentration in television, but there are problems in print media. In print media the market is considered highly concentrated when a publisher’s share in all sold copies of daily or weekly papers in the country exceeds 40 percent. However, there is a loophole here. While it implies that one must look at the share in either daily or weekly papers, as they are not substitutes, the Agency for the Protection of Market Competition has allowed a merger between EPH and Slobodna Dalmacija. In this case the agency looked at EPH’s share in the combined daily and weekly paper market.1933 It has also been argued that the media ownership restrictions only apply when new media is bought, it is therefore possible to successfully develop your company and thereby exceed 40 percent.1934 The two main print companies, as discussed above, are EPH and Styria Media Group. EPH is owned for fifty percent by the German Funke Mediengruppe (formerly WAZMediagroup), and by the Croat Ninoslav Pavić. Styria Media Group is an Austrian company. In 2008, Styria Media Group had a 46 percent share in the daily press market and EPH a 44 1924

Freedomhouse, http://www.freedomhouse.org/report/freedom-press/2013/croatia#.UwyX04W689Q, last accessed on 18.04.2014; Interview 4. 1925 Ibid., p. 9. 1926 Ibid., p. 7. 1927 Ibid. 1928 Ibid., p. 10. 1929 Ibid., p. 10; Interview 4. 1930 Peruško and Popovic, 2008 (B), p. 179. 1931 Peruško, 2011, p. 6. 1932 Ibid., p. 11. 1933 Peruško, 2011, p. 10; Interview 4. 1934 Interview 4.

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percent share, which means that in practice there is a duopoly in the press sector.1935

16.3 Media independence and professionalism Media independence in Croatia has improved over the past 20 years.1936 It is argued that even though the media are rather independent, they are not free from political and business pressures. The public media are mostly affected by political pressures, while the private media are affected by business pressures.1937 Political pressures on the media are limited by law. It is, for instance, not allowed for political actors to own media companies, or to be stockholders in any of these companies. 1938 Furthermore, there are specific rules and legislation regarding media coverage of electoral candidates to guarantee fair elections.1939 However, the government and politics influence the media in a different way. It has been argued that some broadcasters that received concessions during the 1990s ‘enjoyed the special favour of the government’, and therefore have a less critical attitude towards the government.1940 As discussed above, the independence of HRT is also questionable. In general, the local and small media companies are more prone to political influences, especially because local authorities have to invest in local media and thereby are able to influence them.1941 Private media are less influenced by the government: they are owned by (foreign) companies.1942 Private media do experience business pressures. Private media can never be fully independent, because they rely on advertisements and it has been argued that advertisers can therefore exercise some influence on the media. An example of business pressure on media is the case of FIMI MEDIA. In 2009 the company FIMI MEDIA was investigated, because they pressured the media into reducing advertisement prices.1943 It has, furthermore, been argued that media sometimes promote their own political or business interest, as they might have links with businessmen and political groups.1944 However, not just businesses pose a threat for media independence, media owners can also influence the quality of reporting and the independence, when they choose for sensationalism, which will be discussed below.1945

1935

Peruško, 2011, p. 12; Interview 4. Peruško, 2011, p. 5. 1937 Ibid., p. 4; Interview 4. 1938 Peruško, 2011, p. 4; Interview 48. 1939 Peruško, 2011, p. 20; interview 4. 1940 Peruško, 2011, p. 4. 1941 Ibid., p. 4; p. 15; Interview 4. 1942 Peruško, 2011, p. 4. 1943 Ibid., p. 15. 1944 Dorić, 2013, p. 179; pp. 184-186; Interview 4. 1945 Peruško, 2011, p. 4. 1936

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16.3.1 Professionalism On the basis of field research it can be argued that the professionalism of Croatian media is sometimes questionable. The professionalism of media depends on whether they are private or public, and what type of media it is.1946 The law states that journalism should be ‘fair and impartial’.1947 However, it is argued that in practice this does not always happen. The public media are sometimes accused of unprofessionalism, yet private media are often even less professional. The difference between the professionalism of public and private media has a financial reason. Since HRT is the most popular broadcaster, they receive most of the advertising revenues. This leaves commercial broadcasters in a difficult financial position, making it difficult to produce more expensive, quality programmes.1948 Furthermore, public radio and television are more professional as they are a role model and have to comply with the public service content.1949 It has been argued that print media are the least professional, as they tend to favour sensationalism over investigative journalism. This has several reasons. First of all, it is relatively easy to start a newspaper which leads to more competition. As a result, newspapers might rely on sensationalism in order to stand out and attract new readers. Secondly, the economic crisis has left many print media companies in financial difficulties: they simply lack money for investigative journalism.1950 The introduction of new digital media and the internet also pose a problem for television and radio broadcasters: the increased competition leads to reduced advertising revenues, which in turn leads to a smaller budget for qualitative journalism. 1951 Professionalism of media is thus connected to their financial means.1952 It has been expressed by interviewees that they are not satisfied with EU coverage and public debate space in the media.1953 They argued that there is a lack of information about the EU and EU topics. Furthermore, it is not explained to the public how the EU functions, which might fuel Euroscepticism. In general, the media is said to pay too little attention to the EU.1954

16.3.2 The Croatian Journalists’ Association and the Union of Croatian Journalists The Croatian Journalists’ Association (HND) was founded in 1910. Around 3 000 journalists are united in the HND. They negotiate with media owners, protest against suppression of freedoms, and release publications on the media situation in Croatia. Their goals are to promote the right 1946

Peruško, 2011, p. 20; Interview 4. Peruško, 2011, p. 20. 1948 Peruško and Popovic, 2008a, p. 5. 1949 Interview 4. 1950 Dorić, 2013, pp. 179; p. 184-186; Malović, 1997, pp. 64-67; Interview 4. 1951 Peruško, 2011, p. 28. 1952 Peruško and Popovic, 2008 (A), p. 5; Interview 4. 1953 Tomić-Koludrović and Petrić, 2007, p. 16; Interview 4. 1954 Interview 48; 50. 1947

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of the public to be informed, to promote the right of freedom of expression, to protect journalists, and to protect the rights and freedoms of journalists. They have also formed an ethics code and an ethic council which reflects on complaints about lack of professionalism.1955 The HND has also established the Trade Union for Croatian Journalists, which also represents the majority of the journalists.1956

16.4 Conclusion Compared to the 1990s, the Croatian media are currently rather independent. This is partly due to Croatia’s accession to the EU, and partly due to pressures from the Croatian society. There are still some governmental and business pressures on the public and private media. This is especially the case for smaller and local media companies. Media concentration is increasingly becoming a threat to the media independence. Media concentration is rather high, especially in print media. While media legislation should prevent media concentration, there are some loopholes in the law, and media ownership is not always transparent. While censorship is not a pressing issue in Croatia, there are some issues with self-censorship. Media legislation and the constitution provide for the rights and freedoms of journalists, such as the freedom of expression. The freedom of expression is argued to be threatened by the possibility of criminal charges for libel, and the court expenses. It has been argued by authors and interviewees that there is too little professionalism in Croatian media, partly due to economic problems, but also because sensationalism attracts more readers than expensive investigative journalism. While Croatian media are rather independent today, issues with media concentration, self-censorship and professionalism will need to be addressed to further improve the quality and independence of the media in Croatia.

1955 1956

Peruško, 2011, p. 4; p. 19; HND, http://www.hnd.hr/hr/info/, last accessed on 02.05.2014. Peruško, 2011, p. 24.

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17. Energy and environment This chapter will discuss the Croatian Energy Policy and environment. First, the Croatian Energy Policy and its main objectives will be discussed. Then, this chapter will provide information on Croatia’s energy consumption and production, and will list the challenges and potential for Croatia regarding energy. Lastly, this chapter will discuss the Croatian environmental policy, as well as two environmental issues: soil contamination by landmines and the emission of greenhouse gases.

17.1 Energy As part of their accession to the EU, Croatia had to align its national energy legislation with the acquis and the EU’s Third Energy Package, which consists of common goals, methodologies and mechanisms.1957 The EU energy policy goals include the ‘improvement of competitiveness, security of energy supplies and the protection of the environment’.1958 Croatia furthermore had to prepare its energy market for the entrance in the European energy market, to guarantee nuclear safety, and to stimulate energy efficiency and the use of renewable energy sources as part of the Europe 2020 agenda.1959 On 1 July 2006, the Energy Community Treaty of nine South Eastern European countries, including Croatia, came into force. This treaty aimed to create the required infrastructure and cooperation for a regional energy market, and to eventually entry into the European energy market.1960 The 2012 European Commission monitoring report on Croatia’s accession states that Croatia has generally completed alignment with the acquis.1961 The 2009 Energy Strategy, which will be discussed below, helped Croatia to reach European standards.1962 In order to meet the Europe 2020 targets for energy efficiency and renewable energy, Croatia will need to make efforts,

which

will

be

discussed

below.1963

Furthermore,

more

transparency

and

competitiveness are needed for the Croatian electricity and gas markets to be able to join the European energy market. Especially regarding nuclear energy, more efforts need to be made, such as the adoption of the directive on shipment of radioactive waste and substances.1964 A current issue is that Croatia needs to develop a programme on radioactive waste disposal or

1957

Karasalihović Sedlar, Hrnčević, and Dekanić, 2011, pp. 4191-4192. European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 28.04.2014. 1959 Ibid.; Ministry of Economy, Labour and Entrepreneurship, 2009, p. 2; p. 13. 1960 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 2. 1961 European Commission, COM (2012) 338 Final, Brussels, p. 27. 1962 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 12. 1963 European Commission, COM (2012) 338 Final, Brussels, p. 27. 1964 Ibid., p. 26. 1958

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storage concerning the shared nuclear power plant in Krško, Slovenia.1965 This has been dealt with in more detail in the section regarding the political relations between Croatia and Slovenia.

17.1.1 Energy policy The latest energy strategy was adopted in 2009, with the goal of harmonising the national legislation with EU legislation and objectives. Both the EU and Croatian strategy are now developed for the same timeframe, until 2020.1966 The strategy’s goal is: ‘to build a sustainable energy system that makes a balanced contribution to security of energy supply, competitiveness and environmental protection and provides for security and availability of energy supply to the Croatian citizens and business sector.’1967 This goal can be divided into three main objectives: to secure the energy supply, to create a competitive energy system, and to develop a sustainable energy sector.1968 These three objectives will be further discussed below. The focus in the strategy lies with Croatia’s potential: its favourable geographic position and the space to build new power generation plants, reserves and storages. Croatia’s location provides the opportunity to become an important energy hub for the region, as Croatia transports oil, natural gas, and electricity via pipelines, transmission networks and its ports. Croatia also has the potential to build new power generation plants, gas and carbon dioxide storages, and oil reserves. There is great potential for renewable energy power plants, such as hydropower plants and wind parks.1969 In order to fully utilise this potential, the development of the energy sector should be aligned with geographical planning.1970

17.1.1.1 Security of energy supply It is the responsibility of the government to ensure a secure energy supply, even in uncertain situations, in rural areas and on the islands.1971 In order to secure the energy supply the import dependency must decrease, supply must should be diverse, reserves and stock should be built and there should be diverse energy sources. Croatia relies heavily on energy imports to fulfil its

1965

European Commission, COM (2012) 338 Final, Brussels, p.27; Interview 45. Ministry of Economy, Labour and Entrepreneurship, 2009, p. 1. 1967 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 2. 1968 Ibid., p. 3. 1969 Ibid., p. 5; p. 10; Interview 33. 1970 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 11. 1971 Ibid., pp. 4-6. 1966

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energy demands. In 2012 its energy dependence was 53.6 percent.1972 The dependence on imports can be decreased in several ways: by developing their own energy sources, by energy efficiency and through the use of renewable energy sources.1973 To create diversity of supply, Croatia must take advantage of its geographical location. Projects like the Pan-European Oil Pipeline and the Družba-Adria Pipeline Integration Project create more diversity of supply.1974 A third way to improve the security of energy supply is by obligating the building of oil and natural gas stocks and reserves. In case of an emergency, Croatia should have a 90 days oil stock to secure national energy supply.1975 Lastly, diversification of energy sources can improve the security of supply. Investing in renewable energy sources brings positively affects the security of the energy supply and sustainable development.1976

17.1.1.2 Competitive energy system The Croatian energy market should be open and competitive and should be regulated by an independent agency in order to be able to join the European energy market.1977 The Croatian energy system is quite open, because it is connected to the South Eastern European and the EU system, which allows for more competitiveness.1978 The Croatian system is also argued to be quite competitive due to its ‘diverse energy structure of electricity generation and relatively high share of local natural gas generation’.1979 More investments could further improve the competitiveness of the energy market. Measures to attract more investors are taken through risk sharing, and through promoting the development of local power generation plants.1980 Croatia’s geographical position and potential as energy hub should also attract both local and foreign investors.1981

17.1.1.3 Sustainable energy sector development A sustainable development of the energy sector is necessary in the light of climate change, the Kyoto Protocol, and the Europe 2020 targets. Most of the greenhouse gas emissions, around 75 percent, are the result of energy production. To meet the set targets, Croatia must be more energy efficient, invest in renewable energy sources, and use technologies that emit less 1972

Eurostat, table:tsdcc310. Ministry of Economy, Labour and Entrepreneurship, 2009, p. 8 1974 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 11. 1975 Karasalihović Sedlar, Hrnčević, and Dekanić, 2011, p. 4196; Ministry of Economy, Labour and Entrepreneurship, 2009, p. 61. 1976 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 5. 1977 Ibid., p. 16. 1978 Ibid., p. 4. 1979 Ibid., p. 3. 1980 Ibid., pp. 3-4. 1981 Ibid., p. 4. 1973

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greenhouse gases.1982 More information on Croatia’s emission of greenhouse gases can be found in the chapter on environment.

17.1.2 Energy consumption and production

Figure 17.1: Final energy consumption in Croatia in the period 2001-2012.1983

During the 1990s, energy consumption in Croatia declined as a result of the wars. Even though energy consumption declined, Croatia had to import a lot of energy, since power plants located in the former Yugoslav republics stopped delivering electricity to Croatia.1984 When Croatia started to recover from the war and the transition was initiated, business intensified and industrial activity increased. These in turn led to increased energy consumption.1985 Now the Croatian economy has reoriented itself towards less energy intensive activities, such as tourism.1986 Figure 17.1 shows that after 2009, when Croatia faced the consequences of the global economic crisis, energy consumption started to decrease.1987 In 2012 the final energy consumption was 5.9 million tonnes of oil equivalent1988. The most used energy sources in Croatia are oil products (45 percent), electricity (22 percent) and natural gas (18 percent).1989 The share of renewable energy in gross final energy consumption in 2012 was 16.8 percent.1990

1982

Ministry of Economy, Labour and Entrepreneurship, 2009, p. 4. Eurostat. Table: ten00095. 1984 Božičević, Vrhovčak, Tomšić and Debrecin, 2006, p. 1869. 1985 Schneider, Duić and Bogdan, 2007, p. 1731. 1986 Božičević, Vrhovčak, Tomšić and Debrecin, 2006, p. 1869. 1987 International Energy Agency, 2009, p. 11. 1988 Eurostat. Table: ten00095. 1989 Eurostat. Table: ten00095; ten00096; ten00097; ten00098. 1990 Eurostat. Table: t2020_31. 1983

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Figure 17.2 The production of primary energy in Croatia in 2012. 1991

Figure 17.2 shows the production of energy in Croatia in 2012. Natural gas is the main energy product (47 percent). The second biggest energy product in Croatia is renewable energy (34 percent), which will be discussed in more detail below. Croatia also produces crude oil (16 percent) and natural gas liquids (two percent). In the past years the production of renewable energy and natural gas has increased, while crude oil production decreased.1992 Whereas Croatia consumed 5.9 million tonnes of oil equivalent in 2012, they produced 3.5 million tonnes of oil equivalent. Therefore, Croatia had to rely on energy imports for the remaining 2.4 million tonnes of oil equivalent.1993 As mentioned above, Croatia depends on energy imports, especially on oil imports.1994

17.1.2.1 Crude oil and natural gas As mentioned above, oil and natural gas are important energy sources for Croatia. On average, the share of oil in the final energy consumption is around 50 percent, and that of natural gas is around 25 percent.1995 Because both oil and natural gas are expected to remain important in the future, it is necessary to guarantee the supply of these energy sources. The energy supply of oil and natural gas can be guaranteed by diversifying the supply through new projects and by building oil stock and natural gas storages.1996 Because the consumption and production of natural gas have grown over the past years, natural gas should be the focus of the development in the energy sector.1997

1991

Eurostat. Tables: ten00078; ten00079; ten 00081. Karasalihović Sedlar, Hrnčević, and Dekanić, 2011, p. 4193. 1993 Eurostat, Table: ten00095; ten00076. 1994 Karasalihović Sedlar, Hrnčević, and Dekanić, 2011, p. 4194. 1995 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 16. 1996 Ibid. 1997 Ibid., p. 54. 1992

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17.1.2.2 Renewable resources In figure 17.3 below, the different forms of renewable energy produced in Croatia are visualised. The most important sources for renewable energy are biofuels (59 percent) and hydro-power (34 percent). Other renewable energy sources, such as wind-power and biogas, are produced to a lesser extent. In 2012 the share of renewable energy in Croatia’s energy consumption was 16.8 percent. The target for 2020 is 20 percent.1998

Figure 17.3: Renewable energy production in Croatia in 2012.

1999

Renewable energy sources can play an important role in the security of energy supply because they could provide a diversified supply of energy sources. The fossil fuels that emit a lot of greenhouse gases could be replaced by the cleaner renewable energy sources.2000 In 1997 Croatia started five energy programmes for biomass and waste, solar energy, wind energy, small hydro plants, and geothermal energy. The overarching goal of these programmes is to increase the share of renewable energy in the final energy consumption. Specific goals depending on their potential are set for every renewable energy source.2001 All renewable energy sources have potential. There is, for example, potential in solar thermal energy, but less potential in solar photovoltaic energy due to its high costs. Croatia has a lot of forests, which provide potential in biomass. While geothermal energy is now mainly used for medical purposes, it could also produce electricity. Croatia tries to stimulate the development of small hydroelectric plants, as big hydroelectric plants demand large investments and are slow in providing the return on investment. Croatia produces very little wind energy and by building wind parks this renewable energy source can be exploited.2002 1998

Eurostat. Table: t2020_31. Eurostat. Table: ten00081. 2000 Schneider, Duić and Bogdan, 2007, p. 1732. 2001 Božičević, Vrhovčak, Tomšić and Debrecin, 2006, p. 1870. 2002 Božičević, Vrhovčak, Tomšić and Debrecin, 2006, p. 1870; Ministry of Economy, Labour and Entrepreneurship, 2009, p. 1999

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17.1.2.3 Nuclear power plants Croatia is a co-owner of the nuclear power plant in Krško, Slovenia. Between 1999 and 2003, this nuclear power plant did not deliver to the Croatian electricity grid due to a dispute between Croatia and Slovenia.2003 In the 2009 energy strategy Croatia mentions its plans to initiate its own nuclear programmes for energy sources.2004 Croatia considers the nuclear programme to be a necessary development. The establishment of a nuclear power plant would increase their competitiveness, lower carbon dioxide emissions, secure the energy supply and reduce electricity prices.2005 Before Croatia will build its own nuclear power plant, the national infrastructure should be prepared. This includes a range of activities, such as developing a regulatory framework, generating finances for the nuclear programme, and research prospective locations. If the infrastructure is prepared, the Croatian Parliament has to decide if the power plant should be build. 2006

17.1.2.4 District heating system The Croatian District Heating System distributes heat to around 10 percent of all households. However, the technology is outdated and could be more energy efficient. The full potential of district heating is not realised due to presumed poor management by District Heating Systems and cities. The development of the District Heating System could be more sustainable by using biomass, geothermal energy, and steam and hot water from industries.2007

17.1.3 Challenges and potential There are two possible scenarios developed for the future of Croatia’s energy sector: the business-as-usual projection and the sustainable development projection. The business-as-usual projection does not take government interventions into account and thereby projects the final energy consumption following the market trends and consumers’ habits. The sustainable development projection takes into account the measures necessary to produce the desired outcome of more energy efficiency and more use of renewable sources. This projection will be used throughout the remainder of this section.2008 It is expected that there will be more use of renewable energy like solar thermal energy, 37.

2003

Božičević Vrhovčak, Tomšić and Debrecin, 2006, p. 1869. Ministry of Economy, Labour and Entrepreneurship, 2009, p. 42. 2005 Ibid., p. 43. 2006 Ibid., pp. 42-3. 2007 Ibid., pp. 49-50. 2008 Ibid., pp. 29-30. 2004

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biomass, wind power, hydroelectric power and geothermal power. Furthermore, it is expected that the transport sector will use more biofuels. These renewable energy sources will substitute the use of fossil fuels, like natural gas. Croatia will produce less oil and natural gas, due to exhaustion of their domestic sources. This will lead to greater dependence on the import of oil and natural gas. This does not need to be a challenge for Croatia, since, as mentioned above, Croatia has potential for being a regional energy hub. The production of more renewable energy sources will also pose a solution for the risks related to the increasing dependence on imports.2009

17.2 Environment The aim of the European environmental policy is to ‘promote sustainable development and protect the environment for present and future generations’.2010 The acquis chapter on environment and climate changes consists mainly of legal acts on ‘water and air quality, waste management, nature protection, industrial pollution control and risk management, chemicals and genetically modified organisms (GMOs), noise and forestry.’2011 In 2012, the Commission concluded that Croatia had met the commitments of the acquis regarding environmental policy, however Croatia still needed to implement and enforce some of the legislation.2012 There has been improvement in the cooperation with the public, NGOs, and law enforcement institutions.2013 Croatia has also taken necessary measures to reduce the greenhouse gas emissions to realise Kyoto Protocol and Europe 2020 targets.2014 Regarding some issues, however, Croatia will need to take more measures and implement the required legislation. These issues are in the area of waste and wastewater, hazardous substances in electronic equipment, and in environmental impact assessments. Regarding other issues, Croatia is granted more time to align its legislation to European standards.2015 By the end of 2017, Croatia needs to have improved its industrial pollution control and risk management installation and to have restricted its pollution by large combustion plans.2016 There are deadlines for building waste management centres, urban water collection and treatment

2009

Ministry of Economy, Labour and Entrepreneurship, 2009, p. 7; p. 10; pp. 31-32; p. 53; Karasalihović Sedlar, Hrnčević, and Dekanić, 2011, pp. 4193- 4195. 2010 European Commission, 2013 (A), http://ec.europa.eu/enlargement/policy/conditions-membership/chapters-of-theacquis/index_en.htm, last accessed on 18.03.2014. 2011 Ibid. 2012 European Commission, COM (2012) 338 Final, Brussels, p. 45. 2013 Ibid., p. 43. 2014 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 9. 2015 European Commission, COM (2012) 338 Final, Brussels, p. 43. 2016 Ibid., p. 44

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systems, and the quality of ‘urban water for human consumption’2017 by the end of 2018. And by the end of 2020, Croatia needs to have improved its landfills for biodegradable municipal waste. To realise these goals, Croatia will need to invest in human resources and the administrative capacity of the Ministry and Agency of Environment.2018

17.2.1 Environmental policy Capacity insufficiencies within the Ministry of Environment could be an explanation for the lack of environmental strategy and policy documents available in English. The 2009 Energy Strategy, however, does include objectives on sustainability and the environment. The strategy’s main aim regarding the environment is to develop a sustainable energy sector. It also states that Croatia acknowledges their responsibility regarding climate change, and that Croatia is willing to fight climate change in an international context.2019 The priorities regarding the development of a sustainable energy sector lie with reducing the emission of greenhouse gases and with increasing the use of renewable energy sources. To reduce the emission of greenhouse gases, more efficient use of energy, more use of renewable energy sources, and a more efficient transport system are needed.2020 Furthermore, Croatia wants to further develop the technology to capture and store carbon dioxide.2021 Regarding renewable energy sources, Croatia acknowledges the potential of biomass, wind energy, and nuclear power (as was discussed in the chapter on energy).2022 Croatia has, in the context of the Europe 2020 Strategy and the Kyoto Protocol, set several targets for 2020 to realise a reduction in greenhouse gas emissions and an increase in the use of renewable energy sources. In 2020, Croatia hopes to have decreased their final energy consumption in comparison with the average final energy consumption in the period between 2001 and 2005. Croatia aims, furthermore, to use 10 percent biofuels in transport, and to have a 35 percent share of renewable energy in electricity generation, and a 20 percent share of renewable energy in final energy consumption in 2020.2023

17.2.2 Environmental issues In this section, two Croatian environmental issues will be highlighted: the soil contamination by landmines and the emission of greenhouse gases.

2017

European Commission, COM (2012) 338 Final, p. 43. Ibid. 2019 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 2; p. 6. 2020 Ibid., p. 8. 2021 Ibid., p. 10. 2022 Ibid., p. 8. 2023 Ibid., pp. 17-18. 2018

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17.2.2.1 Soil contamination by landmines

Figure 17.4: Mine suspected areas in Croatia.2024

There are no exact numbers on the amount of territory that is contaminated by landmines, but it is estimated that 633.3 square kilometre of the Croatian territory, around 1.1 percent, is contaminated by landmines. This so-called mine suspected area2025 (MSA), covers 12 of the Croatian counties and more than 100 towns and municipalities. These landmines are a result of the 1990s Wars, and were mainly placed by the Yugoslav People’s Army.2026 Next to presenting a danger to humans, these landmines also have environmental impacts as they can cause land degradation. Land degradation is defined as ‘the substantial reduction or loss of the intrinsic qualities […] of land due to land use or processes arising from human activities’.2027 The degree of land degradation depends on the amount of mines, the chemical elements in these mines, and the previous land use. There are four ways in which landmines can cause land degradation. First of all, they can make land inaccessible to and unusable for the population. Second, the biodiversity can be damaged, as landmines can influence the flora and fauna. Mines pose an extra burden on endangered species like the European brown bear. Between 1991 and 1994 almost four percent of the Croatian brown bear population died due to these landmines.2028 A third form of land degradation is ‘micro-relief 2024

EEA, http://www.eea.europa.eu/soer/countries/hr/land-use-state-and-impacts-croatia, last accessed on 29.04.2014. HCR, http://www.hcr.hr/en/minSituac.asp, last accessed on 29.04.2014. 2026 Ibid. 2027 Berhe, 2007, p. 4. 2028 Ibid., pp. 6-7. 2025

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disruption’,2029 in which a changed soil structure leaves the area more vulnerable to erosion. Lastly, landmines can cause chemical contamination, due to the accumulation of ‘nonbiodegradable toxic waste’,2030 present in the landmines.2031

17.2.2.2 The emission of greenhouse gases As part of the Kyoto Protocol and Europe 2020 Strategy, Croatia aims to reduce the emission of greenhouse gases. While Croatia has not set a national goal, the European target for 2020 is to reduce greenhouse gas emissions by 20 percent.2032

Figure 17.5: Greenhouse gas emissions and final energy consumption in Croatia. 2033

Figure 17.5 shows the total greenhouse gas emissions in the period 2000-2011, and the final energy consumption in Croatia in the period 2001-2011. The final energy consumption is included, because it is connected to greenhouse gas emissions: around 75 percent of the greenhouse gas emissions is connected to the production of (non-renewable) energy.2034 As becomes clear from the graphic, the greenhouse gas emissions initially rose since 2000, peaked in 2007, and afterwards gradually decreased. A same sort of pattern becomes visible in the Croatian final energy consumption, which peaked a year later, in 2008, and has since then decreased. More information on the final energy consumption can be found in the section on energy. In comparison to the base year 1990, Croatian greenhouse gas emissions are now at 2029

Berhe, 2007, p. 8. Ibid., p. 9. 2031 Ibid., pp. 8-9. 2032 European Commission, http://ec.europa.eu/europe2020/europe-2020-in-your-country/hrvatska/progress-towards2020-targets/index_en.htm, last accessed on 03.05.2014. 2033 Eurostat. Table: ten00095; Table: ten00072. 2034 Ministry of Economy, Labour and Entrepreneurship, 2009, p. 4. 2030

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89.12 percent.2035 Though the greenhouse gas emissions have in the past years been reduced, Croatia will have to make more efforts to realise the Europe 2020 target.

17.3 Conclusion Croatia’s energy policy is focused on its potential as an energy hub. Croatia has potential to be an important energy hub in the region for the transportation of electricity, oil, and natural gas. Connected to this potential are Croatia’s energy policy objectives of security of supply, the development of a competitive energy system, and the development of a sustainable energy sector. Croatia currently mainly uses oil products, electricity, and natural gas. However, for these energy sources it is mainly dependent on energy imports. Croatian can possibly expand the use of renewable energy for their own benefit. There is potential in different kinds of renewable energy. Renewable energy could then be used as a substitute for fossil fuels, such as oil and natural gas, and thereby Croatia would also be able to reduce their emission of greenhouse gases. The Croatian environmental policy is aligned with the European environmental policy and EU environmental legislation, as well as with the Croatian energy strategy. The main environmental objective of the energy strategy is to develop a sustainable energy sector. In order to realise this the emission of greenhouse gases has to be reduced, energy has to be used more efficiently, and there should be more use of renewable energy. Two current environmental issues are the soil contamination by landmines and the emission of greenhouse gases. Part of Croatia’s territory is contaminated with landmines, which have a negative environmental impact. Landmines can cause land degradation and negatively influence the flora and fauna in Croatia. Croatia aims to reduce its greenhouse gases emission but does not specify its goal. Following the European target of a reduction in greenhouse gases emission of 20 percent, Croatia is going in the right direction but will need to make some more efforts.

2035

Eurostat. Table: tsdcc100.

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18. The Croatian mentality In this section a generalisation of the Croatian mentality will be discussed. The main aspects of the Croatian mentality that will be discussed are based on literature and conducted interviews. It is argued that Croats value certainty; this results in a preference for rules, standards, and consistency. They want security in their lives, and therefore will try to avoid uncertainty and control the future. In their work, Croats appreciate it when they are informed about the goals and their work hours.2036 In the interviews it was argued that due to this preference for certainty, reforms are not always appreciated.2037 Croats are both individualistic and collectivistic. They value their individual achievements and success, and accept the resulting hierarchical order and inequalities that exist in society. They are, furthermore, competitive and willing to take action to reach their goals. 2038 Yet, they are also somewhat collectivistic in the sense that they take care of each other. Croats are loyal and committed to one another. They value consensus, equality and solidarity, and take an interest in others.2039 Due to this individualistic and collectivistic mix Croats are considered to be hard workers.2040 Their appreciation of achievements and success is reflected in the fact that they take work seriously. Croats prefer to keep their private and business relationships separated, and value a formal distance with their employee. It is argued that they will hide their emotions during business contacts.2041 However, Croats are not keen on working overtime, as family and friends are important to them. It has been argued that these are the Mediterranean and Catholic influences on Croatia. The family ties are very strong and this can result in children living longer with their parents compared to children in Western Europe. Friendship and trust are also important in economic relations.2042 While literature states that Croats focus on the present and the future, the opposite was stated in the interviews.2043 It was argued that Croats are holding on to their past too much; both to the Second World War and the 1990s Wars. The war is still everywhere and they seem to be stuck in the past.2044

2036

Zdravkovic and Amine, 2007, p. 457; Goić and Bilić, 2008, p. 50; Lažnjak, 2011, p. 1027; Hofstede, 2014; Interview 7. Interview 18. 2038 Zabkar and Brencic, 2004, pp. 209-210; Goić and Bilić, 2008, pp. 50-51; Hofstede, 2014. 2039 Zdravkovic and Amine, 2007, p. 457; Zubcevic and Luxton, 2011, p. 134; Hofstede, 2014. 2040 Zdravkovic and Amine, 2007, p. 458; Lowther, 2004, p. 16-17. 2041 Zdravkovic and Amine, 2007, p. 457; Goić and Bilić, 2008, p. 50-1. 2042 Zdravkovic and Amine, 2007, p. 457; Zubcevic and Luxton, 2011, pp. 133-134; Interview 7; 39; 42. 2043 Goić and Bilić, 2008, p. 51. 2044 Interview 1; 7; 27; 31; 32; 46; 47. 2037

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This can be linked to the so-called socialist mentality. The socialist mentality is still very much present in Croatia. It has been argued that the socialist mentality does not support innovativeness: initiatives are not taken, and reforms are postponed. There is not much critical thinking and people feel like they cannot change anything, because they do not have any influence. The socialist mentality is characterised by passiveness and the idea that the state will take care of things.2045 This passive stance can in turn be linked to blaming others and in not taking responsibility. It has been argued in the interviews that Croats do not always take full responsibility for their own actions, but instead blame someone else. This is also the case with unemployment, which is often blamed on nepotism and corruption.2046 Both literature and interviewees stated that Croatia is a society based on face-to-face contact and relations. Nepotism and corruption are considered to be part of their South European society. Because it is part of their society, people previously did not realise that it was a bad thing.2047 In conclusion it can be argued that the literature and interviews have provided a generalised image of the Croatian mentality. This mentality is claimed to be somewhat passive due to socialist influences. However, the Croatian mentality is also characterised by the preference for certainty, the appreciation of achievements and success, the importance of family and friends, and a professional attitude towards work.

2045

Interview 6; 7; 9; 11; 15; 17; 27; 37; 39; 50. Interview 2; 39. 2047 Zabkar and Brencic, 2004, p. 210; Interview 1; 2; 9; 15; 18; 23; 27; 32; 38; 39; 45; 50; 58. 2046

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19. War veterans The wars, almost twenty years ago, have left Croatia with a considerable amount of veterans. There are more than 500 0002048 veterans in Croatia, who in Croatian are called: ‘Croatian defenders from the Homeland War’. In Croatia a person is considered to be a veteran when he or she has served a minimum of five months in the Croatian defence as a volunteer or as a member of the Croatian army.2049 After the war, many veterans joined veteran associations, of which the Association of Croatian Military invalids of the Homeland War (HVIDR) is the largest. These associations try to look after the interests of their members. The Ministry of Veterans’ affairs is the governmental institute that deals with the veterans. Veterans and their families are guaranteed certain privileges and the ministry tries to support the veterans in their reintegration into society. This has been a difficult process, as many veterans had trouble returning to ‘normal life’. Many veterans could not find a job, or had no place to live and suffered from Post-Traumatic Stress Disorder (PTSD).2050 Moreover, when the HDZ was in power, they initiated to pay the pensions of the veterans. This policy has been criticised for not helping to reintegrate the veteran into society, as the pensions are paid permanently instead of temporarily. By paying the veterans permanently it does not motivate them to find a job and ensure reintegration.2051 Especially since the pensions are above average. In 2009, the average pension was 2 166 kuna, an average military pension was 3 525 and an average 1990s Wars pension was 5 861 kuna. The paying of pensions by the state is not the case for the total veteran population. However, the government also pays for other social privileges such as housing and tax allowances, disability benefits, and healthcare.2052 Therefore, the costs of the veterans are a big expense for the Croatian government. One of the main problems with veterans is that there are people who claim to be veterans but have not fought at all. Trough nepotism or bribing, people are given the status of veteran and receive the privileges. It is argued that the numbers are even growing. According to an official of the Ministry of Veterans affairs in 2010, there are approximately 10 000 pretenders.2053 In order to understand the role of the veterans in society, it is crucial to look at the media. Research has shown that the media has represented the veterans in various ways. During the war and shortly after, the soldiers were presented as heroes they had been willing to sacrifice their own lives for the independence of the country. However, after the war the image of veterans changed swiftly. As the government policies towards the veterans were criticised 2048

Clark, 2013, p. 1931. Pesorda et. al, 2012, p. 148-p. 149. 2050 Car, 2008, p. 156. 2051 Clark, 2013, p. 1938. 2052 Ibid., p. 1937. 2053 Ibid., p. 1935. 2049

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the veterans became ‘victims of a society which had no good solution to ease their way’.2054 Another representation by the media of veterans is the one of tricksters. This happened when the media discovered that fake veterans received state subsidies or the fact that veterans sold their privileges to others. The last representation of veterans is a very negative one, as it regards veterans as enemies of the state. Due to the traumas some veterans suffer from, they are considered to be a threat to society. Many veterans have become distrustful, unpredictable and can be very violent.2055 They are also considered a threat because some veterans killed themselves in public places. Several times civilians died because of these suicides. In 2008 when a prominent war general, Ivan Korade, killed multiple persons, after which he went into hiding and eventually killed himself. The number of veterans that has committed suicide since the end of the war is estimated at 2000.2056

2054

Car, 2008, p. 157. Clark, 2013, p. 1934. 2056 AP, http://bigstory.ap.org/article/serbia-massacre-puts-spotlight-balkan-vet-woes, last accessed on 22.04.2014. 2055

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Conclusion This report has provided a broad and multifaceted analysis of the Republic of Croatia: a comprehensive overview of the most relevant historical, cultural, political, judicial, and economical components of Croatia. The Copenhagen Criteria have served as a guideline in this analysis. This report has also described the culture and history of Croatia as these elements have helped shaping Croatia into its current form. Furthermore, this report has evaluated to some extent whether Croatia, at the time of writing, complied with these Copenhagen Criteria. Since its independence and transition from a socialist state to a democracy with a market based-economy, Croatia has progressed: in the past twenty years it has made improvements and adjustments to successfully transform and prepare for EU membership. In theory Croatia has complied with the Copenhagen Criteria: it is a functioning democracy with a market-based economy that can cope with competitive forces, and it has implemented the acquis. However, our literature study and field research have shown that in practice there are still some issues. Croatia has come a long way, yet it is not possible to change everything in 20 years: the so-called socialist mentality that is present in Croatia both proves and explains this point. This socialist mentality is inherited from the socialist former Yugoslavia. It is characterised by passiveness, paternalism, and the lack of innovativeness, competitiveness, and political will to reform. This mentality proved to be an obstacle in the transition towards a market-based economy, in the privatisation process, in competition policy, and has led to mistrust of the judicial system. This socialist mentality is thus an obstacle in realising Croatia’s potential. It has been expressed by interviewees that it will take at least one generation in order to adopt a more proactive and innovative mentality. Furthermore, it will also take an education system that teaches students to think critically and to be innovative. While this mentality is not part of the Copenhagen Criteria, it is relevant and influences the extent to which Croatia complies with these criteria. The remaining part of the conclusion will describe the challenges Croatia is facing, some of which are influenced by the socialist mentality, as well as Croatia’s potential. The topics that will be discussed are the following: Croatia’s administrative capacity to implement laws, growing confidence in politicians, corruption, investment climate and challenges for the labour market. These topics were brought to the fore by interviewees and the authors believe that these topics are key issues in understanding and describing Croatia at the moment of writing.

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Croatia’s administrative capacity to implement laws During the accession phase Croatia made big steps in the field of administrative law. Many acts on Croatian Administrative Law were amended, however, several challenges remain. The flaws of Croatia’s bureaucracy that need to be resolved are the backlog and length of court cases in civil and court proceedings, the complexity of administrative procedures and the lack of accessibility to administrative procedures. Furthermore, according to our literature study and interviews, the Croatian bureaucracy affects two important aspects of daily life: the human rights situation and the economy. Firstly, this report showed that the backlog and length of cases, the complexity of procedures and the lack of accessibility can violate the rights of citizens of Croatia. Croatian citizens are discouraged to take cases to court due to aforementioned problems. In addition, it was stated that access to the judicial system for citizens with low income is inadequate. The administrative procedures also influence the right to a fair trial as these procedures are not always used correctly. An effective enforcement of citizens’ rights can best be improved by reducing the length and complexity of court proceedings. This could help to remove the backlog of cases. The backlog could also be created due to the difficulties judges have with certain topics, for instance anti-discrimination legislation. By supporting judges on these topics, the backlog of cases could also be removed. Secondly, the misuse of administrative and civil procedures influences the functioning of Croatia’s economy. There exists a lacuna in Croatian public administration: the lack of transparency in land ownership makes it difficult for companies to buy real estate. The various administrative barriers, which could be described as bureaucracy, further discourage foreign investors from investing in Croatia. Croatia could advocate greater transparency in its public administration and bureaucracy to deal with these inaccuracies. This could in turn attract FDIs, which will most likely have a positive effect on Croatia’s economy and employment rate. Lastly, the misuse of Croatian Administrative Law affects Croatia’s national budget: if the tax administration is more adequate, Croatia could collect more taxes. As a result, this will have a positive effect on Croatia’s budget deficit. It became apparent that the knowledge of European legislation among Croatian judges constitutes a problem to effectively enforce the EU rules and acquis – especially the ECJ case law. Many judges are not used to this system because they were not educated in this field of law at university. On the contrary, Croatian judges have proven to be capable to implement ECHR law. Therefore, it can be expected that judges will be able to work with ECJ law in the future as well. Another positive note is that Croatian lawyers are mostly aware of ECJ case law and this might indicate that it should be just a matter of time until the judges are aware of this case law too. 298

Growing confidence in politicians One of the subjects that came up as a common ground between the different interviewees was the lack of confidence in the current politicians. This is of course related to the different convictions and allegations of corruption of the politicians. Corruption is, however, not the only topic where this lack of confidence became apparent. It also came up as part of the governmental policies and the way the local and regional authorities are being managed. There has recently, however, been some change for the good that could combat this lack of confidence. The lack of confidence in the current politicians was already broached on in the literature study, as a large majority of the Croats did not trust their government according to a 2004 survey. The interviews confirmed this. This is furthermore augmented by the arrest and conviction of former Prime Minister Sanader for corruption during his time in office. This corruption case has severely damaged the trust of the Croats in the country’s democratic processes and institutions. This lack of confidence results in the unwillingness of the Croats to pay taxes to a system they do not trust. There are also problems with the confidence in politicians on regional and local level. Many of our interviewees acknowledged and confirmed that there are too many local authorities. These local councils also require an administration and the tax base of these municipalities is simply not big enough to sustain their administration and to execute their tasks properly. It became apparent in interviews that quite a few of the politicians in these councils were replaced during the last elections by younger politicians of small parties. These new politicians put their full efforts to improving the life of their electorate by allocating more money to their municipality’s competences instead of their administration. Furthermore, the interviewees expected that more minor parties such as the ORaH party are to be set up and win a few seats in parliament at the expense of the HDZ and SDP. They believed the electorate had enough of the current political and economic situation where politicians finance their lifestyles at the detriment of the tax-payer. As a result of these changes on local, regional, and national level, our interviewees were confident in the emergence of new political parties in the national parliament and that these grassroots politics would be positive for the restoration of confidence in the politicians.

Corruption Corruption in Croatia can be seen in different aspects of day-to-day life as our interviews informed us. This is the case even though the fight against corruption was part of the accession negotiations. Corruption can be found at different governmental levels. On the national level, for 299

instance, former Prime Minister Sanader is the most prominent example of how far corruption in Croatia can go. The regional and local authorities also experience forms of corruption, where the politicians do not care for their electorate, but rather care for their own wellbeing. This results in money being spent on luxuries for their administration while they have to cut back on funding for their competences as a regional or local authority. As a result, the public administration is even perceived as an impediment to the country’s development. Nevertheless, the Croats still consider their society, which is based on face-to-face contacts and relations, as a part of their South European heritage. This, however, does seem to play into the hand of corruption and nepotism. This culture of having face-to-face contacts and knowing someone who could help you out with a job is also used by Croats to blame their misfortune on. For instance, Croats that are unemployed blame the system, as people with contacts are seen to be hired faster than they would. It is more and more perceived as unacceptable if someone were to hire a friend and especially if that person is less qualified than other prospective hires. Corruption in the healthcare sector is also a familiar phenomenon. It is not uncommon for patients to pay a fee to skip the waiting lists as the waiting lists in the Croatian public healthcare system are a huge problem. As an effect, doctors have a reputation of being corrupt, while also having poor communication skills and a lack of interest and motivation. These latter two could be explained by the fact that doctors could easily earn more if someone were to pay them for a higher spot on the waiting list. As a result, a majority of the Croats puts money aside to either be able to go to the private healthcare sector or to be able to skip the waiting lists in the public health sector. Corruption during the privatisation process was a major problem as well. Several of the high officials and members of the HPF, Croatian Privatisation Fund, have been accused and convicted of bribery and other corrupt activities. This was even the main focus of the campaign of the current President of Croatia, Ivo Josipović. He promised to do something about the people who gained a lot during the privatisation process. He played his cards very well as privatisation is regarded by Croats as similar to corruption, outright theft, egoism, nepotism and localism. Media coverage on corruption is one of the last problems related to corruption that we have come across. Journalists may face harassment if they are working on topics such as corruption. This leads to self-censorship and a low amount of news items in the media that could raise the awareness of the Croats concerning corruption. However, corruption is more and more perceived as unacceptable by the Croats. If this attitude towards corruption remains then this problem might be tackled more effectively.

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Investment climate The investment climate in Croatia has not been the most stable one. This is in part due to internal factors, such as the 1990s Wars and the above-mentioned problems, but also due to external factors such as the development of the world economy. However, the country does have a lot of opportunities, which could amount to new foreign direct investments. The authors of this report have discerned these investment opportunities as Croatia’s main possibility to become a major trading partner for many countries in the world. The first opportunity that has been discerned is the investment in infrastructure. Croatia has four of the ten pan-European corridors going through its country and this could already stand on itself as a huge opportunity for Croatia if it were to make use of these corridors. Croatia’s road network is very decent, as the government has allocated most of its budget towards this network. On the contrary, the railway and waterway networks have been heavily underfunded and are therefore very inadequate to sustain high volumes of trade. The improvement of the railway network has been a priority for the EU and Croatia. Furthermore, one of the pan-European corridors is a waterway on the longest river in the EU, the Danube. If Croatia manages to create a canal between the Danube and the Sava River and restore the rivers and their ports then these waterways too could be of major use for trading. Good infrastructure could help the seaports that can accommodate ocean-going ships as this is required to process the goods arriving at those ports. The case has been made that if the infrastructure is in place goods could be faster transported from the ports to the hinterland and be distributed there via the different types of infrastructure. Furthermore, Croatia’s transport sector will benefit greatly from this development as Croatia has a favourable geographical position: close to Middle and Eastern Europe as well as closer to the Suez Canal than the Western European ports. Transporting the newly arrived goods from the ports to their destination could be an important part of Croatia’s economic development. Croatia could also be an important hub in the energy market of Europe due to its geographical position. There are plans of building pipelines for natural gas that go through Croatia and given that the EU wants to diversify its gas supplies it could be major player on the EU energy market. Furthermore, Croatia’s energy system in general is very competitive due to its diverse energy structure. More investments into these areas should eventually lead to more innovations, which subsequently brings along a higher productivity and a more competitive Croatia on the international scale. Another important opportunity this report has discerned is tourism. Currently, most of the tourists visit Croatia during the summer months, while the other months are not very popular. There are however quite a few possibilities to promote tourism in these months too. Croatia could use its pristine environment on its numerous islands for health tourism, but also 301

maritime tourism. More inland, there are opportunities in adventure tourism, cultural tourism and rural tourism. Many of our interviews already saw a few of these opportunities and hoped the EU could help Croatia by providing funds to increase the pace in which changes could be made. If Croatia uses the EU funds properly then quite a few, if not all, of these opportunities could be exploited. Furthermore, if the government manages to diminish its problems of its public administration and corruption than investors might be keen to invest into the country as well. Adding to this, Croatia will need to establish research institutes and universities to create brain gain and to attract foreign firms and to combat brain drain. If, however, Croatia does not manage to exploit some of these opportunities then unemployment might stay a problem.

Challenges for the labour market Croatia is currently facing high unemployment. This high unemployment is a structural problem that has been around since Croatia’s independence, and was worsened by the recent economic and financial crisis. There are several causes for the high unemployment rate. The labour market rigidity and trade unions make it hard for employers to lay off employees, which makes them reluctant to hire new personnel. Furthermore, the social security system and student support system create incentives for people to stay unemployed. Another cause for the high unemployment is the socialist mentality: the Croats wait for the government to provide a solution to the problem and blame nepotism and corruption for not being able to get a job. Furthermore, the marketbased economy does not provide high job security as the socialist economy did. Lastly, there is high youth unemployment which is partly caused by the gap between the skills and knowledge learned in the educational system, and those required in the labour market. The high unemployment rate has two consequences. Firstly, the high unemployment in combination with a low labour market participation has led to higher social costs for the Croatian government. Secondly, the high unemployment rate in combination with low rates of economic growth have resulted in the flourishing of unofficial economic activities, which have led to the growth of the underground economy. Croatia has the potential to reduce high unemployment: it can create jobs by investing and improving those sectors with the highest potential. This could result in more income for its citizens, which in turn could increase private spending. The sectors which the most potential have been discussed above when the investment climate was described, and include infrastructure, the transport sector and the energy sector. In order to reduce youth unemployment Croatia has developed two programmes and 302

benefits from European programmes. Croatia introduced the one-year internship programme and the Croatian Qualifications Framework to close the gap between the educational system and the labour market. Furthermore, interviewees have stated the importance of the European Lifelong Learning Programme, and specifically the EU’s student exchange programme Erasmus. Croatia and its citizens should fully utilise these programmes in order to stimulate employment and to close the gap. Croatia has come a long way in twenty years and has made multiple improvements, adjustments and reforms. However, as demonstrated the country does not meet all EU standards yet. Croatia needs to further consolidate its efforts made for its EU accession, as well as maintaining all old and implementing new EU legislation. This is, of course, because EU accession is the first step and being an EU-member, and obeying the EU treaties and Copenhagen Criteria, is an ongoing process. This is not only Croatia’s task: the EU plays an important role in realising the implementation of the acquis in Croatia, and in realising Croatia’s potential. By doing so, Croatia and the EU will tie the knot indefinitely.

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338

Appendixes Appendix I List of ministerial positions of the current Croatian government. Name

Ministerial Position Party

Zoran Milanović

Prime Minister

SDP

First Deputy Prime Vesna Pusić

Minister and Minister of Foreign

HNS

and European Affairs Deputy Prime Milanka Opačić

Minister and Minister of Social

SDP

Policy and Youth Deputy Prime Minister and Branko Grčić

Minister of Regional

SDP

Development and EU Funds Deputy Prime Ranko Ostojić

Minister and Minister of the

SDP

Interior Slavko Linić

Minister of Finance

SDP

Ante Kotromanović

Minister or Defence

SDP

Orsat Miljenić

Minister of Justice

Independent

Arsen Bauk

Minister of Public Administration

SDP

Ivan Vrdoljak

Minister of Economy

HNS

Name

Ministerial Position Party Minister for

Gordan Maras

Entrepreneurship

SDP

and Trade

339

Mirando Mrsić

Minister of Labour and Pension System

SDP

Minister of Maritime Siniša Hajdaš Dončić

Affairs, Transport

SDP

and Infrastructure Tihomir Jakovina

Darko Lorencin

Minister of Agriculture

Minister of Tourism

SPD

IDS

Minister for Mihael Zmajlović

Environment and

SDP

Nature Protection Ministry of Anka Mrak – Taritaš

Construction and

HNS

Physical Plannin Predrag Matić Rajko Ostojić Željko Jovanović

Andrea Violić

Minister of War Veterans Minister of Health Minister of Science, Education and Sports Minister of Culture

Independent SDP SDP

HNS

340

Appendix II List of International organisations in which Croatia has a member status ACRONYM

NAME

DATE OF JOINING

WIPO

World Intellectual Property

08.10.1991

Organisation ICAO

International Civil Avication

09.05.1992

Organisation OUN

Organisation of the United

22.05.1992

Nations UNIDO

United Nations Industrial

02.06.1992

Development Organisation WHO

World Health Organisation

11.06.1992

UNESCO

United Nations Educational,

07.07.1992

Scientific and Cultural Organisation UPU

Universal Postal Union

20.07.1992

ILO

International Labour

06.08.1992

Organisation IMO

International Maritime

08.10.1992

Organisation INTERPOL

International Criminal Police

04.11.1992

Organisation WMO

World Meteorological

08.11.1992

Organisation IMF

International Monetary Fund

14.12.1992

INTELSAT

International

14.12.1992

Telecommunications Satellite Organisation IMSO

International Mobile Satellite

26.12.1992

Organisation IAEA

International Atomic Energy

12.02.1993

Agency ISO

International Organisation for

01.01.1993

Standardisation MIGA, ICSID

The World Bank Group

19.05.1993

Multilateral Investment

16.06.1997

Guarantee Agency International Centre for the

01.07.1993

341

Settlement of Investment Disputes WCO

World Customs Organisation

04.10.1993

WTO

World Tourism Organisation

04.10.1993

FAO

Food and Agriculture

06.11.1993

Organisation IOM

International Organisation for

23.11.1993

Migration ICCROM

International Centre for the

01.02.1994

Study of the Preservation and Restoration of Cultural Property ITLS

International Tribunal for the

05.04.1995

Law of the Sea OPCW

Organisation for the Prohibition

13.04.1995

of Chemical Weapons IIAS

International Institute of

01.07.1995

Administrative Sciences IHO

International Hydrographic

23.11.1995

Organisation UNIDROIT

International Institute for the

01.01.1996

Unification of Private Law ISBA

International Seabed Authority

28.07.1996

IIR

International Institute of

02.07.1998

Refrigeration PCA

Permanent Court of Arbitration

02.10.1998

OIML

International Organisation for

24.01.1999

Legal Metrology WTO

World Trade Organisation

30.11.2000

CEFTA

Central European Free Trade

07.11.2003

Agreement NATO

The North Atlantic Treaty

01.04.2009

Organisation EU

European Union

01.07.2013

342

Index A Administrative Law · 63 Adult education · 260 Ageing · 219, 240, 241, 243, 244, 247, 334 Agriculture · viii, 211, 212, 214, 215, 216, 217, 304, 310, 318, 325, 330, 338, 340 Anti-Discrimination Act · vi, 79, 80, 319 Architecture · ii, 33, 48, 50, 51, 52 Austria · 3, 34, 91, 124, 184, 197, 203 Austro-Hungarian Empire · 4, 5, 33, 34 Axis powers · 8, 11, 12 B Bandić, Milan · 108, 109 Belgrade Coup · 9 Bologna Process · 252, 254 Border dispute · 140, 146, 147, 149, 308 Brioni Agreement · 25 C CEFTA · vi, 143, 153, 156, 166, 176, 203, 303, 340 Censorship · 266, 271, 272, 273, 277 Central Powers · 4 Cermak, Ivan · 124 Cetniks · 328 CFSP · 137, 138 Chapter 23 · 78, 87, 96, 98, 126, 135, 142, 313 Chapter 31 · iii, 136, 137, 138, 311 CIT · iv, vi, 226, 227 Civil Law · ii, 62, 63, 64, 73, 88, 100, 235 Civil society · 31, 113, 266, 269, 270 Company law · ii, 57, 71, 76 Competition law · 76, 331 Concentration camp · 10 Constitution · ii, 6, 13, 16, 17, 18, 20, 22, 39, 57, 58, 59, 60, 61, 62, 63, 66, 74, 75, 76, 79, 81, 85, 88, 90, 91, 92, 107, 109, 110, 111, 112, 114, 145, 271, 273, 277, 303, 305, 326, 329 Corfu Declaration · 5 Corruption · iv, ix, xvi, 48, 66, 68, 105, 111, 126, 127, 131, 135, 141, 149, 151, 168, 170, 176, 177, 178, 179, 230, 233, 234, 235, 236, 237, 238, 273, 291, 294, 296, 297, 299, 319, 323, 328 Council of Europe · 94, 235 County · 31, 97, 106, 109, 114, 115, 116, 132,

183, 187, 189, 207, 209, 225, 268, 327 Criminal Code · 66, 79, 80, 87, 92, 100, 134, 235, 271, 272, 332 Croatian army · 3, 292 Croatian Democratic Union · vii, 23, 26, 46, 89, 104, 323 Croatian mentality · iv, 71, 290, 291 Croatian National Bank · 58, 152, 318, 329 Croatian Peasant Party · vii, 5, 105 Croatian police · x, 95, 96, 130, 131, 132, 133 Croatian Privatisation Fund · vii, 165, 170, 297 Croatian Question · 6, 7 CSDP · 137, 138 Cultural heritage · xiv, 30, 32, 33, 49, 199, 256 Cultural Policy · i, 29, 30, 31, 329 D Dayton Agreements · 27, 119 Defence · iii, 18, 48, 60, 124, 130, 134, 136, 137, 138, 146, 292, 311 Direct effect · 74, 76 Discrimination · 66, 67, 78, 79, 80, 81, 82, 83, 86, 87, 88, 92, 93, 94, 95, 99, 100, 101, 145, 261, 262, 272, 322 E Education · iv, vi, x, xv, 13, 41, 44, 58, 61, 64, 76, 78, 80, 86, 99, 101, 116, 133, 134, 160, 162, 163, 165, 168, 199, 215, 217, 224, 236, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 294, 303, 308, 312, 313, 316, 317, 322, 324, 326, 330, 331, 333, 338 Education of judges · 99, 101 EFTA · vi, 157, 253 EMU · vii, 154, 155 Energy policy · 278, 279, 289 Entente Alliance · 4, 5 EPL · vii, 220, 221, 228 ERM II · 154, 155 Estonia · 156, 175 Ethnic minorities · ii, 26, 78, 79, 81, 82, 83, 101, 102, 145 EU law · ii, 62, 74, 75, 76, 98, 100, 144 Euro · vii, 223, 224, 226, 248, 309, 314 European Bank for Reconstruction and Development · 139 European Commission · vi, 31, 32, 64, 66, 68, 69, 70, 71, 78, 79, 80, 81, 82, 83, 84, 86, 87, 88, 92, 93, 98, 100, 125, 126, 127, 129, 134,

343

136, 138, 141, 143, 144, 146, 147, 148, 154, 156, 157, 158, 159, 160, 161, 165, 166, 169, 170, 171, 176, 179, 181, 182, 184, 189, 193, 194, 207, 212, 214, 216, 219, 224, 244, 246, 250, 251, 252, 253, 254, 263, 264, 266, 272, 278, 285, 288, 310, 311, 312, 313, 331 European law · 57, 74, 101 European Union · ii, vi, vii, xiv, 32, 58, 62, 69, 74, 101, 124, 125, 128, 130, 138, 143, 156, 162, 302, 305, 309, 313, 318, 319, 321, 323, 329, 331, 340 Exchange rate · 152, 154, 157, 193, 194, 206, 223 External border · 129, 130

I ICT · viii, 204, 205 ICTY · viii, xvi, 104, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 135, 158, 304 Illyrian · 3, 51, 53 IMF · viii, 139, 152, 155, 321, 339 Inconsistency · 100, 102 Independency · 82 Independent State of Croatia · viii, 9, 52 Industry · 207, 210, 221, 301, 303, 306, 330 Inflation · 315 Infrastructure · 165, 182, 184, 186, 187, 188, 269, 324, 326, 338 Investment climate · iii, 175, 298

F FDI · vii, 153, 160, 162, 171, 172, 173, 230 Film · ii, 30, 50, 52, 331 First World War · i, 4, 27, 322, 324 Fisheries · vi, 212, 214, 216, 310, 325 Foreign Policy · 308, 318, 329, 330 Free zones · 71, 73, 74, 231 Freedom of expression · 18, 66, 266, 271, 272, 277

J Joint Criminal Enterprise · viii, 123 Josipović, Ivo · 108, 109, 112, 140, 297 Judges · 60, 61, 64, 76, 81, 87, 95, 96, 97, 98, 99, 100, 101, 125, 135, 147, 295 Judicial system · ii, xvi, 3, 61, 63, 64, 69, 76, 78, 81, 82, 83, 85, 87, 93, 98, 99, 100, 101, 102, 126, 145, 149, 176, 294, 295

G

K

GDP · vii, x, 96, 152, 153, 154, 155, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 170, 173, 175, 178, 179, 180, 194, 196, 204, 205, 208, 211, 216, 228, 230, 254 Gender equality · ii, 82, 92, 93, 95, 219, 310 Germany · 4, 8, 9, 12, 34, 187, 197, 203, 212 Gotovina, Ante · 27, 121, 122, 123, 124, 125, 135, 304, 324, 328, 334

Karadjordjevo · 24 King Alexander I · 6, 7, 9 King Peter · 9, 13 Knin · 24, 25, 189, 271 Krsko Nuclear Power Plant · 146, 147 Kukuriku · 104, 105, 110, 111, 116, 117, 323 Kuna · 152, 154, 157, 206, 209, 211, 223, 226, 292, 310

H

L

HDZ · vii, 23, 26, 89, 104, 105, 106, 107, 108, 109, 110, 119, 120, 121, 123, 128, 135, 166, 169, 292, 296, 319 Health insurance · vi, 227, 243, 245, 246, 247, 255, 334 Healthcare · iv, 236, 238, 245, 246, 247, 248, 292, 297, 323 Higher education · iv, 115, 252, 254, 257, 258, 259, 260, 262, 263, 264, 308 Hitler, Adolf · 9 Homeland war · 118, 120, 121, 123, 135, 292 House of Counties · 114, 307 House of Representatives · 114 HZZ · vii, 250 HZZO · viii, 246, 247, 249

Labour force · iii, 151, 166, 212, 218, 219, 220, 263 Labour market · iii, iv, 92, 93, 94, 113, 159, 160, 161, 164, 166, 194, 218, 219, 220, 221, 222, 227, 228, 230, 247, 252, 258, 259, 260, 263, 264, 294, 299, 300 Latvia · 156, 175, 222 Legal protection · 82, 87, 91, 99, 101 LGBT · viii, 78, 79, 86, 87, 88, 89, 90, 95, 99, 101, 102 Lifelong Learning · viii, 255, 260, 300, 316 Literature · ii, xiv, xv, 29, 30, 37, 48, 49, 50, 51, 66, 68, 290, 291, 294, 295, 296, 305, 319, 332 Lithuania · 128, 156, 175 Ljubljanska banka · 148

344

M

R

Markač, Mladen · 124, 304 Matica Hrvatska · 17 Media concentration · 266, 273, 274, 277 Media independence · iv, 266, 275, 277 Media ownership · 273, 274, 277 Media policy · iv, 266, 269, 328 Mesić, Stjepan · 104, 108, 109, 170 Milošević, Slobodan · 21, 22, 23, 24, 25, 26, 28 Minimum wage · 223 Municipalities · 63, 65, 73, 112, 114, 115, 116, 189, 254, 287, 296 Music · ii, 30, 31, 41, 50, 52, 53, 256, 332

Račan, Ivica · 119, 120, 121 Radić, Stjepan · 6 Republic of Serbian Krajina · 25 Restructuring · 166, 167 Right to information · 266, 271

N National Council · 5, 83, 325 NATO · viii, 108, 120, 134, 135, 136, 137, 138, 139, 146, 196, 323, 326, 327, 340 Nepotism · 168, 176, 177, 206, 230, 291, 292, 297, 299 Netherlands · 117, 148, 166, 174, 197, 205, 223, 224, 248, 318, 327 Non-Alignment Movement · viii, 16 Norac, Mirko · 120, 121 O Ombudsperson · 59, 80, 82, 83, 86, 87, 88, 93, 94, 95, 100, 327 Operation Storm · 27, 120, 123, 124, 125, 156, 305 P Partisans · 11, 12, 45 Pavelić, Ivo · 7, 9, 107 Pelješac Bridge · x, 142, 143 Pension · iv, vii, xvi, 93, 154, 162, 204, 227, 243, 244, 292, 309, 326, 332, 338 Piran Bay · 146, 147 PIT · iv, viii, 226, 227 Plan 21 · 105, 116, 117, 323 Poland · 8, 156, 175, 197 Ponte, Carla del · 121, 122, 124 Population growth rate · 240 Power Purchasing Parity · viii President · ii, 9, 19, 21, 22, 23, 59, 60, 61, 62, 104, 107, 108, 109, 110, 112, 114, 125, 135, 140, 141, 148, 170, 297, 312, 313 Price level · 175, 315 Privatisation · iii, vii, 165, 166, 167, 168, 170, 191, 204, 297, 307, 327

S SAA · viii, 70, 78, 120, 156, 234 Sanader, Ivo · 104, 122, 123, 127, 236, 237, 238, 296, 297 SANU Memorandum · 326 Sarajevo Declaration · 85, 139 SDP · ix, 104, 105, 106, 107, 108, 111, 121, 128, 135, 296, 337, 338 Second World War · i, 8, 24, 34, 45, 52, 140, 200, 245, 290 Self-stereotypes · 47 Separatist · 7 Serbia · xvi, 4, 5, 11, 13, 16, 18, 20, 21, 22, 23, 24, 25, 27, 28, 37, 43, 46, 48, 118, 119, 122, 125, 129, 135, 136, 137, 139, 140, 141, 142, 149, 172, 174, 184, 187, 203, 209, 215, 242, 248, 311, 313, 319, 322, 329, 331 Serbian refugees · 83, 84 Shipyards · 307 SME · ix, 177 Social Democratic Party · ix, 104 Social Economic Council · 113 Social security · iv, x, xv, 93, 219, 220, 221, 223, 226, 227, 230, 243, 299, 310 South Slaves · 5, 27 South Slavic state · 5 Sporazum · 7, 8 Srebrenica · 26, 329 Stalin · 14 Stereotypes · i, xv, 29, 47 Student support · 254, 255, 264, 299 Supremacy · 62, 74, 75, 76 T Tax · iv, vi, viii, ix, x, 72, 74, 117, 162, 163, 169, 176, 177, 223, 225, 226, 227, 228, 229, 231, 243, 255, 292, 295, 296, 303, 319, 325, 331 Tax burden · iv, 227, 228, 229 Tax evasion · iv, 163, 228, 229, 303 Tax wedge · 227, 228 Tito-Stalin Split · 328 Tourism · 35, 153, 181, 190, 195, 199, 301, 302, 303, 306, 307, 321, 322, 323, 326, 327, 329, 330, 334, 338 Trade union · iii, 10, 58, 80, 113, 222, 299, 333

345

Transparency · 100, 233, 238, 253, 260, 273, 278, 295 Transport · ix, 165, 181, 182, 184, 186, 187, 188, 202, 269, 304, 306, 322, 326, 331, 338 U Ukraine · 136, 304, 305, 308, 327 UN · ix, 16, 26, 67, 92, 117, 125, 137, 238 Underground economy · iii, 178 Unemployment · iii, iv, xvi, 144, 151, 153, 154, 159, 160, 161, 166, 178, 206, 218, 220, 221, 228, 230, 243, 250, 263, 264, 291, 299, 314, 315 UNESCO · ix, 32, 33, 34, 49, 199, 261, 328, 333, 339 United States · ix, 139 US · ix, 4, 15, 27, 34, 137, 139, 173, 174, 175, 178, 209 USKOK · ix, 235, 237 Ustaša · 7, 8, 9, 10, 11, 12, 24, 27, 323, 331 V VAT · iv, ix, 74, 162, 163, 226, 228 VAT rate · 162, 163, 226 Veterans · xvi, 85, 86, 89, 219, 292, 302, 304, 328, 338 Vukovar · 25, 85, 86, 187, 227, 304, 321

W War crimes · 66, 117, 118, 122, 125, 126 World Bank · 145, 161, 162, 163, 164, 165, 175, 177, 182, 183, 184, 185, 189, 205, 218, 220, 221, 222, 244, 332, 335, 339 World Trade Organisation · ix, 157, 335, 340 Y Youth unemployment · 218, 221, 263, 264, 299 YRU · ix, 7 Yugoslav Army · 131, 134 Yugoslav Committee · 5 Yugoslav Radical Union · ix, 7 Yugoslavism · 4 Z Zagreb · 17, 31, 34, 35, 38, 41, 45, 46, 49, 50, 53, 87, 88, 89, 90, 104, 108, 114, 116, 124, 131, 140, 142, 145, 148, 183, 184, 188, 197, 204, 207, 209, 223, 235, 236, 259, 301, 302, 303, 304, 305, 306, 307, 308, 309, 318, 319, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 336

346