Investments key for recovery, round table hears

Union representatives who took part in Tuesday's round table on the macro-economic policy in the next government's term were agreed that investments in production and exports were crucial for Croatia's economic recovery, but were not unanimous about the direction of the monetary policy and state spending cuts.

The round table was organised by the MHU union federation, whose president, Vilim Ribic, said salaries in education were frozen even when there was no recession. He objected to propaganda "which claims that state spending is excessive and the state a necessary evil." He said the fight for competitiveness under the pressure of the International Monetary Fund had become permanent, with the aim to dissolve the welfare state, education and health care.

He objected to reforms solely to cut costs and dismissed claims that unions obstructed reforms. He said unionists, as experts in their fields, were the ones who constructively and specifically participated in reforms, while politicians struck them down.

Ribic asked representatives of political parties and coalitions if state expenditures must be cut more, why the public debt did not go down although salaries in the public sector did, if Croatia should introduce the euro, if the kuna exchange rate should be changed, if they intended to reduce the general VAT rate and if the public debt would increase because of that or if public spending would be slashed.

Ivan Vukovic of the Pametno (Smart) party was for slashing expenditures, saying the budget deficit must be reduced to zero so as to reduce the risk and price of borrowing and make the central bank completely independent of politics once again.

He welcomed the government's decision to start dealing with Swiss franc loans, but warned that banks had filed suits and that losing the dispute could significantly shake the state budget. He was against converting all Swiss franc loans into euros, saying that, because of higher costs, the central bank would have to intervene with 73 percent of foreign currency reserves. He said Croatia should introduce the euro.

Esad Turkovic of the Sustainable Development of Croatia (ORaH) party would strengthen parliament's control over the central bank, reduce labour taxes and introduce new ones instead, notably on property and capital.

Ljubo Jurcic of the Labour and Solidarity Coalition said increasing production and employment was the basic macroeconomic policy goal.

Ivo Jelusic of the Social Democratic Party-led Croatia Is Growing coalition said "world players impose rules of the game which aren't in Croatia's favour." He said Croatia was in an unequal position when compared to its neighbours because they had lower interest rates. He said changes which could be generated by the European, not the Croatian, left wing were necessary.

He said the outgoing government had made doing business easier by not taxing reinvested profit, adopting a law to stimulate investment, and rescinding 58 non-tax levies. "We reduced income tax, which has increased personal consumption. Now all GDP components are growing."

Jelusic said that despite the high interest rates it was forced to pay, the government had managed to achieve a primary budget surplus, but Tomislav Coric of the Croatian Democratic Union (HDZ) refuted this.

Coric said investment and higher exports were crucial for GDP recovery, as well as more effective budgetary expenditures. He said Croatia needed more rational spending and smart fiscal consolidation.

Last update: Tue, 27/10/2015 - 21:29

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