At the beginning of the new European Semester, the European Commission said on Thursday that Croatia was one of 16 countries which needed in-depth reviews of the macroeconomic situation to see if macroeconomic imbalances wee unwinding or accumulating.

The Commission will release the findings of the in-depth reviews in February, together with reviews of each member state's economic policy.

Today the Commission released the Annual Growth Survey, the Alert Mechanism Report and the Joint Employment Report. The release of these documents marks the beginning of the European Semester, a mechanism to coordinate economic policies within the EU to prevent another financial and debt crisis.

In the Alert Mechanism Report, the Commission noted Croatia's risks "as regards external and public debt sustainability and labour market adjustment."

"Therefore, the Commission finds it useful, also taking into account the identification of an excessive imbalance in February, to examine further the persistence of macroeconomic risks and to monitor progress in the unwinding of excessive imbalances," the document says.

Economic and Financial Affairs Commissioner Pierre Moscovici told a press conference that for five of those 16 countries - Bulgaria, France, Croatia, Italy and Portugal - excessive macroeconomic balances had been found and that they called for resolute political action and specific monitoring.

"In February 2015, the Commission concluded that Croatia was experiencing excessive macroeconomic imbalances requiring decisive policy action and specific monitoring, in particular involving risks related to weak competitiveness, large external liabilities and rising public debt, coupled with weak public sector governance, and dismal employment performance in a context of subdued growth," the document says.

Moscovici said it was necessary to do another in-depth review now to see the progress made so far and that there was no need to prejudge the outcome.

The speed of adjustment in Croatia was relatively slow and unequal given the prolonged recession and subdued price dynamic, he said when asked to comment on the situation in Croatia.

The current account has turned into a surplus, thanks to a marked decrease in internal demand and improved competitiveness, but the external debt remains high, which is why a considerable amount goes for loan servicing. The public debt continues to grow, while the private sector is deleveraging. The unemployment rate remains high, while employment continues to decrease. We therefore believe that structural reforms have contributed to the adjustment, but implementation should have been speedier, Moscovici said.

The Commission says in the Alert Mechanism Report that the "current account turned into a surplus in 2013 as growth of export volumes picked up and outpaced that of imports. The negative NIIP (net international investment position), as well as high net external debt, did not improve and remain at high levels. Despite recent annual gains in export market shares the cumulative losses remain very substantial."

"Even if below the threshold, private sector debt is high compared to peer countries. While banks are well-capitalized, credit growth remains weak in a context of deleveraging pressures, high NPLs (non-performing loans) and a weak macroeconomic outlook," the Commission says.

"Past compression of economic activity coupled with limited wage adjustment has taken a toll on employment, including long term and youth unemployment. People at risk of poverty or social exclusion continue to represent a relatively large share of the population. That said there are recent positive economic developments and an improved economic outlook."

Related stories

EC says Croatia still has excessive macroeconomic imbalances

FinMin pleased with EC's decision

Croatia faces corrective action, says EC Vice-President

Latest news

Syrian opposition rules out future role for President al-Assad

The Syrian opposition said Friday it would not accept any role for President Bashar al-Assad in the future of the war-torn country, reacting to a recent US shift saying that removing al-Assad is no longer a priority for Washington.

Russian Army integrates breakaway forces of Georgian province

Parts of the small fighting forces of the Georgian breakaway province of South Ossetia have been placed under Russian military control, Russian Defence Minister Sergei Shoigu said on Friday.

Czech Republic's Pilsner Urquell beer is now Japanese

Japanese brewing company Asahi completed its takeover of the Czech brewery Pilsner Urquell on Friday, Asahi said in a statement.

Judge approves 25-million-dollar settlement of Trump University case

A US district judge on Friday approved a 25-million-dollar settlement of lawsuits and state fraud allegations against Trump University, the US president's now-defunct business venture.

Former Thai premier Thaksin to junta on reconciliation: 'Cut me out'

Former Thai prime minister Thaksin Shinawatra on Friday announced that he is not interested in the junta-led reconciliation process, three days after the junta handed him a half-a-billion-dollar tax bill for his past business deal.

Dalic: We welcome possible deal between Agrokor and banks

The government welcomes the possibility of an agreement being concluded between the Agrokor food company and creditor banks, and the bill on vitally important companies is not a fallback plan but the result of the government's care for the overall economic and financial stability of Croatia, Deputy Prime Minister and Minister of Economy Martina Dalic told a press conference in Zagreb on Friday.

Croatia, China sign action plan for cooperation in agriculture

The Croatian and Chinese ministries of agriculture on Friday signed an action plan for cooperation in the field of agriculture for the period 2017-2018, the Croatian ministry said in a statement.

ZSE indices up, Agrokor shares in focus of investor interest

The Zagreb Stock Exchange (ZSE) indices on Friday rose by more than 1.8%, with stocks of the Agrokor food and retail concern being in the focus of investor interest again.

Berlin police defend handling of Berlin market attacker

Berlin police defended themselves on Friday against accusations that they stopped surveillance on Berlin Christmas market attacker despite knowing in June 2016 he was dangerous.

Croatia, creditors tailor emergency measures to save tottering giant

Croatia's tottering retail and food giant Agrokor reached an agreement with its creditors, putting its debts standby and allowing it to continue working during emergency restructuring, the Croatian branch of Austria's Erste Bank said Friday.

Agrokor's creditors say standstill agreement to go into force today

A standstill agreement regarding the Agrokor concern's existing financial obligations to banks will take effect on Friday, additional capital will be injected into the concern in the coming days and the concern will be actively restructured, which includes a change of its management, it was said on Friday after a meeting between Agrokor's suppliers and creditor banks.

Palestinians, UN slam Israel's new settlement plan

Palestinians, Israeli activists and the UN lambasted the government of Israeli Prime Minister Benjamin Netanyahu on Friday, a day after it gave the go-ahead for the first new West Bank settlement in a quarter of a century.

South Sudan rebels release three abducted foreign oil workers

South Sudanese rebels have released three foreign engineers they abducted in early March in the oil-rich Upper Nile region, Foreign Affairs Ministry official Mawein Makol Arik said on Friday.

Turkish opposition: Imprisoned party chief has gone on hunger strike

The head of Turkey's pro-Kurdish opposition party has launched a hunger strike from prison.

European leagues threaten Champions League schedule clashes

The European Professional Football Leagues (EPFL) on Friday threatened schedule clashes on Champions League matchdays in an ongoing dispute with the governing body UEFA.

Danish court revokes citizenship of IS volunteer

A Danish appellate court on Friday stripped a man of his Danish citizenship for volunteering to fight for the extremist Islamic State in Syria.

Banks and Agrokor agree on key elements of standstill agreement

Member banks of the coordinating committee of financial creditors and representatives of the Agrokor food company have in principle agreed on key elements of a standstill agreement, which is expected to be signed later today, announcing changes in the company's management team, Erste Bank said in a statement on Friday afternoon.

Syrian man on trial in Sweden; mosque attack labelled terrorism

A Syrian man went on trial Friday in the southern Swedish city of Malmo, charged with terrorism and arson after an attack last year on a building used as an assembly hall by Shiite Muslims.