SGI 2022 | Croatia | Executive Summary

Executive Summary

Recent Governments Experts

SGI experts on Croatia

Kristijan Kotarski

Assistant Professor in International Political Economy, Faculty of Political Science, University of Zagreb

Kristijan Kotarski is Assistant Professor in International Political Economy at Faculty of Political Science, University Zagreb, Croatia. He serves as a Head of the Centre for European Studies at Faculty of Political Science, University of Zagreb. At the same Faculty he also serves as a Director for the University of Zagreb specialist degree “Adaptation to the EU: Project Management, EU funds and EU programs”. He has participated in several high-profile international projects such as: Chapel Hill Expert Survey 2019, euandi2019, EMERiCs Project South Korea 2020, Integrating Diversity in the EU (InDivEU), Bertelsmann Stiftung SGI 2020 and ECFR’s Rethink: Europe. His research focus covers several topics: political economy of European integration, Croatian political economy, political economy of China and international monetary relations. So far he has published more than 20 scientific and 40 professional papers. His co-edited volume Policy-Making at the European Periphery: The Case of Croatia was published in May 2019 by Palgrave Macmillan, part of Springer Nature. He also published his research in: Europe-Asia Studies, China Economic Journal, Review of Radical Political Economics, World Review of Political Economy, Croatian Political Science Review.

Zdravko Petak

Prof., Department of Political Science, University of Zagreb

Zdravko Petak is professor of political science at the University of Zagreb, where he lectures on public policy and political economy. His main research areas focus on the politics of decentralization, political economy of federalism, party funding and campaign spending, governance and horizontal policy management, and the Europeanization of public policy. He received his PhD in political science from the University of Zagreb in 1999, and held in 2002–2003 a post-doctoral position in comparative institutional analysis and design at the University of Indiana, Bloomington as part of the Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis. He was president of the Croatian Political Science Association from 1999 to 2002 and is currently a member of the IPSA Research Committee 32 on Public Policy and Administration.

William Bartlett

Sr. Research Fellow, London School of Economics

William Bartlett is senior research fellow in the political economy of South-East Europe at the European Institute, London School of Economics and Political Science. He holds an MA in economics from the University of Cambridge, an MSc in development economics from the University of London, and a PhD from the University of Liverpool. His current research focuses on economic and social development in the Western Balkans. His published works include sole-authored books Croatia Between Europe and the Balkans and Europe’s Troubled Region: Economic Development, Institutional Reform and Social Welfare in the Western Balkans, Routledge, 2008 and numerous articles in refereed journals. He was president of the International Association for the Economics of Participation from 1998 to 2000, and president of the European Association for Comparative Economic Studies from 2006 to 2008.

Martin Brusis (Coordinator)

Political Analyst, Deutsches Jugendinstitut München

Martin Brusis is a free-lance political analyst based in Munich. His research has focused on the quality of democracy and governance in Central and Eastern Europe. Martin has also worked as a consultant and policy advisor with several governments, think tanks and international organizations. He has co-authored the concept and methodology of the Sustainable Governance Indicators. His work has been published in journals such as Comparative European Politics, Governance, Politische Vierteljahresschrift, Regional and Federal Studies, and West European Politics.

Swift economic
recovery

Over the course of 2021, Croatia stayed economically and politically stable. The economy staged a swift recovery due to a combination of several factors, particularly the reliance on extensive furlough schemes that had been rolled out in 2020, the policy credibility furnished by the pending euro adoption in 2023, and mild epidemiological restrictions adopted in 2021 that were in turn very conducive to a successful tourist season of 2021. The government remained firmly in power and was spared from major societal protests, despite the general dissatisfaction of the majority of the population with the direction in which the country is heading.

Marginal gains in
several areas

All in all, there were some marginal improvements in several policy areas such as the labor market, social inclusion, research, innovation and infrastructure, the global financial system, global inequalities and global environmental protection. On the other hand, the only area showing a notable deterioration in performance is the health sector, due to the large number of coronavirus deaths, its dire financial state and the influence of powerful interest groups that have opposed reforms aimed at putting healthcare on a sustainable footing. No major change was evident in other policy areas. On the surface, the government can boast some achievements including the swift economic rebound from the coronavirus-induced recession and the correspondingly improved labor market performance, as well as the imminent successes of strategic importance such as euro adoption and accession into the Schengen Area. However, there are still major unresolved challenges down the road.

Insufficient policy
coherence; concerns
over flow of EU funds

All these developments reveal the incumbent HDZ-led government’s limited commitment to solving various key issues. Given the scale of challenges it faces, including post-earthquake reconstruction, fighting the coronavirus, reforming the economy and the social welfare system, maintaining the pace of economic recovery, and averting demographic decline, current government structures are unable to respond effectively due to the absence of policy coherence and sustainability. Strategic capacity remains weak in spite of the adoption of a new national development strategy. The use of evidence-based instruments, societal consultation and carefully prepared policy communication is more of an exception than the rule. This is most visible in the proportion of legal acts that are adopted using urgency procedures, and which lack satisfactory regulatory impact assessments. Policy coordination and implementation are inadequate, as encapsulated in the failed efforts to launch post-earthquake reconstruction efforts in the Banija region and in the capital city of Zagreb, which were badly hit in March and December 2020. This situation might even lead to the loss of €683.7 million granted to Croatia by European Commission from the EU Solidarity Fund. Therefore, this episode invokes serious concerns over the capacity of Croatia’s governance structures to organize and facilitate the flow of record sums of EU funding granted to Croatia as a part of the NextGenerationEU program and the Multiannual Financial Framework 2021-2017.

Short-term growth prospects good; strong external pressure needed

The sheer fact that Croatia obtained the highest level of funding per capita clashes with its low absorption capacity and the questionable productivity of state investments. In the short and medium run, the EU funding will certainly lift growth prospects. However, the watershed of EU spending, which will comprise a staggering 16%-18% of the general government budget from 2022 to 2024, might overwhelm reform efforts and thereby reduce potential growth. The extent to which the EU-imposed conditionality might transform the status quo remains to be seen. The European Semester did not play a prominent role in the implementation of country-specific recommendations before the outbreak of the coronavirus. The National Recovery and Resilience Plan might lead to the same outcome in the absence of strong external and internal pressure on the government to get its act together. However, the fragmented and feeble opposition will not be a significant source of pressure in the near term. Therefore, the state of democracy is still tarnished by inadequate political representation and participation.