November 5, 2015 / 1:40 PM / 2 years ago

In Croatia's close-run election, the focus is migrants and the economy

ZAGREB (Reuters) - Croatia’s ruling Social Democrats can claim success on the two biggest issues facing the country - Europe’s migration crisis and a sluggish economy just climbing out of recession - but it faces a tough fight to retain power in an election on Sunday.

Migrants wait for registration at a new winter refugee camp in Slavonski Brod, Croatia, November 3, 2015. REUTERS/Antonio Bronic

A compassionate stand on migrants and signs of economic growth have helped Prime Minister Zoran Milanovic and the Social Democrats regain ground. Recent public opinion polls show it still trails the conservative HDZ party, though.

Faced with tens of thousands of migrants from the Middle East traversing Croatia since mid-September, Milanovic’s government has largely tried to accommodate them, aside from short-lived bans on border crossings from Serbia.

It clashed publicly with Hungary and Slovenia over the flow of people, many of them refugees from war, through the Balkan peninsula to western Europe.

Milanovic has said Croatia must take a humane stand and facilitate their flight. That seems to play well with Croats, who remember the violence and displacement after the collapse of Yugoslavia in the 1990s.

“Such a stand is emotionally close to the experience of many Croats,” said political analyst Ivan Rimac. “The government showed that in something it can be rather efficient.”

The opposition HDZ disagrees. The party, which steered Croatia to independence from Yugoslavia and through the 1991-95 war that followed, has nationalist hues, playing on issues of national identity and family values in the mainly Catholic nation of 4.4 million people.

It accuses Milanovic of being soft on the migrants, who are pouring from Serbia into Croatia at a rate of 5,000, sometimes 10,000 per day, although they move swiftly on to Slovenia and beyond. Some wanted the army to be deployed.

The Social Democrats say they deserve another four-year mandate. They take credit for restoring the economy to growth, after six years of recession that has wiped out around 13 percent of Croatia’s national output since 2008.

Gross domestic product is forecast to grow 1.2 percent this year and around 1.5 percent next year. The Social Democrats are campaigning under the slogan “Croatia is growing”.

  

GAME OF TWO WEAK TEAMS

Any party would need 76 seats in parliament to win an outright majority. Both the main parties would fall short now - HDZ taking around 65 seats, the Social Democrats five or so fewer. A coalition government look inevitable.

In the latest opinion poll, conducted in October, the HDZ had close to 33 percent support. The Social Democrats trailed by around one percentage point.

Analysts expect Most (Croat for “bridge”) to play a central role in coalition talks. An economically liberal party founded three years ago, it brands itself as a fresh alternative to the two major parties. It is likely to press for reform of the public sector and a more business-friendly policy.

“Most is acceptable to both sides, but the question remains if they or some other small party will be willing to join the government or merely support a minority government, voting only for policies that correspond to their program,” said political analyst Viseslav Raos.

Croatia is one of the EU’s poorest states, depending heavily on foreign tourists flocking each year to its Adriatic coast and islands. Both the main parties promise to cement the recovery and build a competitive economy.

But economists say both are vague on details, and neither has shown it would tackle the bloated public sector, creaking pension system, loss-making state companies and poorly managed health system.

“We are simply producing too little and are in dire need of private-sector investment,” said Goran Buturac of the Zagreb Economic Institute. “Our GDP is now growing by some 3.5 billion kuna ($502 million), while we need around 11.5 billion kuna each year just for interest repayments.”

“Politicians are still spreading the illusion that public- sector reform can continue to be postponed,” said Damir Novotny, an independent analyst.

“But Croatia does not have much time, maybe a year or two at most, to display determination to move from mostly state-dominated to the private-sector based economy. Otherwise, creditors will become wary and borrowing may turn expensive.”

Croatia borrows at one of the most expensive rates in the EU, about 1.5 percent for one-year debt, compared with the 0.44 percent Germany paid at the end of October to borrow for 10 years. Its public debt is close to 90 percent of GDP, and this year’s deficit is projected at 4.5 to five percent of GDP.

The EU, which made Croatia its 28th member in mid-2013, has placed Zagreb within its excessive deficit procedure to reduce the budget gap to below three percent of GDP by the end of 2017.

Voters remain skeptical. “The two biggest parties have already shown many times they care too little about the prosperity of the country and too much about their own interests,” said education entrepreneur Dinka Krcelic.

($1 = 6.9682 kuna)

Editing by Matt Robinson, Justyna Pawlak and Larry King

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