The current political situation in Croatia is a glaring example of how ambitious politicians can threaten the good of a nation. In January of this year, Croatia installed a most unusual Prime Minister Tihomir Oreškovic, a young reformer (50 years old), an outsider, a CEO and the first independent prime minister in Croatian modern history. Oreškovic who was working in Canada is not a creature of the two establishment parties in Croatia and is also therefore an independent reformer and clearly not owned by the political establishment.
Upon arrival, the Prime Minister promptly engaged in serious economic reform and the GDP growth in Croatia in his first quarter exceeded expectations. The Prime Minister also happens to enjoy wide support in Croatia but as you would expect the ruling political class in Croatia, marred for decades in corruption and on occasion criminality, is now seeking to bring down the government and Oreškovic, and this is what makes reform and hope in this small Central and Eastern European nation so difficult.
Prime Minister Oreškovic has launched a new wave of privatizations in order to reduce the role of government in the economy. The government recently sold its share in the electrical company Koncar for nearly 50 million Euros. International observers have welcomed the reform package proposed by the Prime Minister. Oreškovic has repeatedly stated that his main aims are to consolidate public spending and to improve the business climate in order to foster job creation. The budget deficit is expected to fall below 3% this year.
At the center of the crisis that could bring down a reform government in Croatia is the deputy Prime Minister Tomislav Karamarko, head of the Croatian Democratic Union party (HDZ). Karamarko has been under severe pressure stemming from alleged conflict of interest charges involving a lucrative business relationship between the Hungarian oil company MOL (Magyar Olaj), and Karamarko’s wife, Ana. The Hungarian company is fighting an arbitration battle against the government over its takeover of the Croatian company INA Group.
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Mr. Božo Petrov, head of the junior political coalition partner MOST (Bridge of Independent Lists), called on Karamarko to resign igniting a crisis inside the government. In retaliation, Karamarko now fighting for his political survival has decided to bring down his own government. On Tuesday, Karamarko and members of the HDZ party—called for a no confidence vote in Parliament.
Oreškovic has sought to revitalize the fragile economy by stabilizing Croatian debt, cutting government agencies and cutting redundant programs. He is also seeking to attract investors after a six-year long recession that wiped out 12 percent of GDP in Croatia. Oreškovic has also argued for another vital reform in European nations, “My position is clear: monetary policy has to be independent, which is the case in all European countries.”
Also at risk now is the Prime Minister’s effort to conclude a bond offering of 1.5 billion dollars, which has been stalled due to the enormous instability that Karamarko and his political allies have created. Undoubtedly, the interest rates for such an offering will trend upwards at greater cost to the Croatian people if Croatia does not survive the political turmoil. This process is already at hand. Last week, Moody’s Investors Service downgraded Croatia’s debt rating citing the fragility of the government. Karamarko and his allies are bringing a world of hurt to the Croatian people. The rating downgrade to Ba2 was shared by Standard & Poor’s and Fitch Ratings.
Indeed, if the Croatian government were to fail, investors would be reluctant to invest in Croatia, as a stable and secure opportunity for business success seems to be quickly fading away. A collapse of the government after barely six months would continue to perpetuate the slow economic growth and joblessness that previous governments had perpetuated in Croatia.
Ironically, the shortsighted members of the HDZ party who are supporting Karamarko are likely to be the first casualties of the collapse of the government. The HDZ is plummeting in the polls and no one expects that trend to change with Karamarko still at the helm.
Wednesday afternoon, in late breaking developments, more sensible minds in Europe and the HDZ party have risen to oppose the no confidence vote and ousting of PM Oreškovic. Undoubtedly, the looming crisis is causing some to reconsider. HDZ members of the European parliament in the European People’s Party penned a letter in opposition to Karamarko’s plan to bring down the government. Also, Gordan Jandrokovic, a prominent member of the HDZ party and Chairman of the European Affairs Committee of the Croatian parliament who had initially signed for the no-confidence vote petition, is wisely withdrawing his support for Karamarko. It is hopeful still that responsible members of the HDZ party will come back to their senses. Wednesday evening, Željko Reiner, speaker of the parliament of Croatia, also decided to jump into the fight augmenting the political crisis by supporting the calls for the resignation of the Prime Minister.
It is high time the Croatian people contact their representatives and foresee the damage that all this unnecessary fabricated political turmoil by ambitious politicians such as Karamarko, and the HDZ will cause to their well-being and the future of Croatia. It is people like Karamarko and his supporters that ignore the voice of the Croatian people and after years of economic recession are prepared to keep their position even if it brings back the economic woes that caused thousands of Croatian’s to leave their country.
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