4,000 reasons why Croatia must be patient

Date: 09/10/2003

A BULKY document was recently sent to the Croatian government by the European Commission. It contains 4,000 questions on the country's readiness for membership of the European Union.

Much will depend on the answers they receive. The Commission is required to give its formal opinion to the EU's Council of Ministers before there can be any question of opening membership negotiations. The Croatians are in a hurry. When they tabled their application last February, they aimed to catch up with Bulgaria and Romania, who have been negotiating since 2000, with a target date for entry in 2007.

Both these countries are well into the process, though the Bulgarians have leapt ahead of their neighbours. They have provisionally closed 25 of the 30 negotiating chapters, while the Romanians are stuck on 19.

So it will be a tall order for Croatia to catch up, even if the Commission produces a favourable opinion by early next year, which is far from certain. Meanwhile, a major report by the World Bank, Croatia: A Strategy for Growth through European Integration, has greatly encouraged Croatian officials that their efforts so far have been on the right track.

The report, unveiled in Brussels at a European Policy Centre seminar, praises the economic and political progress that the country has made since the end of the war with Serbia in 1993, and in particular since the election of the current President, Stipe Mesic, in 2000.

The enormous decline in output following the break-up of Yugoslavia, and the hostilities with Serbia, has now been made up, the report declares. Inflation, which reached 1,500% in 1993, was down to 2.2% last year, and the exchange rate of the kuna has been stabilized against the euro. The growth rate, which has fluctuated sharply over the years, now seems to have settled down at a healthy 5% or slightly more.

Since 2000, Croatia has opened its economy to global markets through its membership of the World Trade Organization and the Central European Free Trade Agreement, its improved relations with neighbouring states and the commitments made with the EU under the Stability and Association Agreement (SAA) signed in October 2001.

The SAA has provided further stimulus for the Croatian government to press ahead with its reform programmes. But, although the World Bank was lavish in its praise for Croatia's recent efforts, it made clear there was still a long way to go. It listed a series of 'critical bottlenecks' for sustainable economic growth such as high deficits, inadequate land registry and property rights, a poorly functioning judiciary and a politicized and poorly organized public administration.

In the bank's view there are three categories of reforms which need to be tackled. First are those which will be lengthy, but strategically important and need to be started straight away, notably fiscal and public administration reform.

Second are those which could be addressed quickly and at low cost. These included improved property and creditor rights, the rule of law, budget constraints and labour market rigidities.

Finally, there were reforms related to agriculture and the environment which needed to be carefully planned and phased in. On agriculture, the support institutions should be aligned with Common Agricultural Policy requirements straight away, but intervention levels should be reduced to below those currently set by the CAP.

On the environment, it was necessary to move quickly on the institutional side, but to sequence the investments needed to upgrade Croatia to EU standards based on cost-benefit ratios and the availability of resources. The report offers no opinion on how long it might take for Croatia to be ready to join the EU, but the impression it gives is that, if it continues with and accelerates its current reform programmes, it should not prove too distant a prospect, but lengthy transition periods may be necessary.

It is implicit that the democratic course being followed since the death of former president Franjo Tudjman in 1999, must be continued and consolidated. The Croatian ministers present at the seminar were adamant that this would be the case, and reported that opinion polls consistently showed that 75% of Croats were in favour of membership.

One firm condition that the EU has set in considering membership applications is that the state concerned should not have any unresolved territorial disputes with its neighbours. This is a complicating factor for Croatia, which - after much bloodshed - is no longer in contention with Serbia, but still has problems, though of a far lesser order, with Slovenia.

These include problems over the ownership and control of a nuclear power station at Krsko, and disputed sovereignty over a narrow strip of border land. Currently, however, more tension is being generated by a Croatian plan to establish an exclusive economic zone in the Adriatic beyond its present territorial limits. This threatens to leave Slovenia, which has a short coastline between the Croat border and the Italian port of Trieste, without direct access to international waters, though it would retain transit rights.

Croatia claims its move is necessary to protect the biological resources of the Adriatic, which has been grossly overfished, and that it will proceed in accordance with international law and in consultation with neighbouring states and the European Commission. Slovenia, which will become a full member of the EU next May, and would then be in a position to veto Croatia's application, recalled its ambassador in protest on 31 August, but has since relented, and talks are now taking place between the two countries.

If these succeed, the odds are that Croatia will become the 28th member of the European Union (leap-frogging Turkey in the process). But it will be a year or two after 2007.

Dick Leonard is former assistant editor of The Economist and writes on Belgian affairs for The Bulletin. He is a former UK Labour MP and author of numerous books.

Article considers the state of Croatia's readiness for membership of the European Union.

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