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Why Croatia matters to the Western Balkans

The horse trading has begun writes Judy Dempsey. Hours after the polls closed in Croatia’s parliamentary election on September 11, the conservative Croatian Democratic Union (HDZ), which won the most votes, began seeking a coalition partner.

The chances are that the party will form the country’s next government with Most, the Bridge of Independent Lists, which made reform of the economy one of its main campaign slogans. Even if Most does become the junior partner in the government, it’s going to require immense political willpower to rid the country of endemic corruption and overhaul the public administration.

Since the country joined the EU in 2013, Croatia’s reputation in Brussels has been sullied by nepotism, procurement procedures that lack transparency, and unclear if not extremely murky property rights.

Such a reputation not only damages Croatia and the EU, which was well aware of the country’s rampant corruption before it joined the union. That reputation also does nothing for Croatia’s neighbors in the Western Balkans that aspire to become EU members. They see only growing antipathy to further enlargement of the 28-member bloc. For them, Croatia is no shining example for a region that is saddled with corruption, increasing pressure on the media from local oligarchs, and political elites who can tap into nationalism, often at random.

A recent report commissioned by the European Parliament and written by RAND Europe paints a pretty miserable picture about corruption in Croatia (but also other EU countries, particularly Bulgaria and Romania). According to the study, which pulls no punches in its analysis, Croatia has the highest level of corruption in public procurement in the EU. Corruption also drains the coffers of any finance ministry. The report showed that Croatia, as well as Bulgaria, Latvia, and Romania, loses about 15 percent of its annual gross domestic product to corruption.

The World Bank and the European Bank for Reconstruction and Development (EBRD) are a little bit more diplomatic in their criticism of Croatia. In its assessment of Croatia for 2016, the World Bank ranked the country’s competitiveness and business environment 40 out of 189 economies, compared with 39 in 2015. And that was after the Croatian government began tackling corruption and making procurement procedures more transparent. Also, Croatia scored low in dealing with construction permits, coming 129th, as well as receiving low ratings for registering property, starting a business, and dealing with insolvencies.

The EBRD’s Business Environment and Enterprise Performance Survey showed that Croatian businesses were hampered by a lack of access to finance besides having to compete against unregistered or informal firms.

The previous government, led by Tihomir Orešković, a technocrat, was forced to resign in June 2016 after a five-month stint in office. The government was plagued by infighting, irregular business links, and deteriorating relations with Serbia.

It has taken Croatia so long to tackle corruption largely because of the culture of impunity perpetrated by the political elites, who in turn have close links with business and industry. During the 2000s, the corruption surrounding the building of highways, the modernization of the rail network, and the energy sector became notorious. Even then, at a time when Croatia was negotiating to join the EU, Brussels applied insufficient pressure. Finally, Ivo Sanader, prime minister from 2003 to 2009, was charged with corruption in 2011 and wide abuse of office.

Mounting pressure from the World Bank and the EU and influential studies such as RAND’s are forcing Zagreb to combat the sleaze and corruption. Civil society organizations too are mobilizing—just as they have done in Romania. But supporters of clean government in Croatia have no illusions about the economic and political elites who oppose completing the transition to a strong democracy. Nor do civil society activists in the Western Balkans have any illusions as they wait to join the EU. One day.

Judy Dempsey is a non-resident senior associate at Carnegie Europe and is also editor-in-chief of Judy Dempsey’s Strategic Europe’, which is published under the auspices of Carnegie Europe. This article was first published by Judy Dempsey’s Strategic Europe. More information can be found at

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