Diplomats hope for thaw in EU’s relations with Croatia

Date: 16/12/1999

RELATIONS between the Union and Croatia are set to thaw significantly after descending to icy levels earlier this year.

Hopes of an improved climate rest on two key political developments in Zagreb. Even before the death last weekend of President Franjo Tudjman, there were already signs that more moderate elements within his Croatian Democratic Union (HDZ) party - with which the EU has had so many run-ins - were gaining ascendance.

The parliamentary elections to be held on 3 January could also herald a change in government in Croatia, with opinion polls suggesting that the HDZ will lose its majority.

Despite the high-level political standoff of recent months, the Croatian government has made significant progress in adapting its legal framework to EU standards. The Office of European Integration has produced an integration action plan evaluating in detail the degree to which Croatian legislation needs harmonising with Union laws and all new legislation is being drafted with EU standards in mind. Implementation is currently more selective than some might hope for, but technically speaking, Croatia is not in bad shape.

However, a new government would find some of the Union's other conditions for eventual membership tougher to meet.

The main opposition alliance, consisting of the Social Democrats (SDP) and the Social Liberals (HSLS), has already pledged to cooperate in a number of areas where the HDZ offered only warm words.

It would certainly have no qualms about dismantling state control over the media or reforming the electoral law. But encouraging Serb refugees to return to their homes in Croatia, and guaranteeing the safety of those who do, will be more difficult.

Per Vinther, the European Commission's special envoy to Croatia, suggests that the EU's economic demands may prove the toughest goals to reach. Croatia is in recession, with gross domestic product expected to contract by 1.5-2&percent; this year, and company insolvency is a major problem.

The government's wide budget deficit leaves little scope for sparking recovery, particularly on the scale necessary to tackle unemployment, now running at 20&percent; in Croatia. Nor should Zagreb expect much financial support from the EU. The Commission expects to spend €5 billion on south-east Europe (excluding Bulgaria and Romania) between 2000 and 2006, but Croatia's needy neighbours - particularly Kosovo, Albania and Macedonia - are likely to absorb a hefty chunk of this.

The regional tag is a sore point for Croatia. The EU continues to regard local integration as a precursor to Union accession, while Croatia has spent years trying to distance itself from the Balkans.

The issue is not just a matter of political rhetoric - there appears, quite simply, to be little economic incentive for Croatia, or other states in the region, to cultivate free trade with each other.