lalovac.jpg
Photograph: vlada.gov.hr

Social Democrat member of Parliament and former Finance Minister Boris Lalovac said on Thursday that the failure to issue a Eurobond worth a billion euros on the foreign market was a clear political message of lack of confidence in Croatia's unstable government. 

"Implementing reforms and ensuring government stability requires the support of at least 80 parliamentary deputies," Lalovac said at a news conference he held after the issuing of a Eurobond worth a billion euros, necessary for the payment of debts, was postponed indefinitely.

"This is not an economic but a political message. Political risk is the problem and it should be dealt with as soon as possible," Lalovac said, recalling problems in Greece that were caused by political instability.

"We don't have a government and there is no quorum in the parliament. The ruling majority does not have a unanimous position on anything. That's dangerous. They cannot even adopt a report on the HNB (central bank). They are unable to adopt a single report and they are talking about reforms," he said.

Lalovac warned that if the situation continued, the finance minister could find himself under great pressure in the autumn.

"Thanks to the tourist season it will be possible to meet financial obligations in the next three months, but after September, there will be problems with public finance," said Lalovac, wondering how loans taken by the motorway and rail operators HAC and HZ would be repaid if the state failed to obtain new loans.

"How will the government launch the sale, that is, the privatisation of state property when investors don't trust them. It will be very difficult to regain their trust and they will offer the lowest price," he said.

The former minister warned that macroeconomic indicators showed that Croatia should have been able to borrow at an interest rate of 2.5-3% but that it was unable to do so even at an interest rate of 5%.

"This is a clear message from investors - pull yourselves together," said Lalovac.

Finance Minister Zdravko Maric said on Wednesday that the Eurobond issue was postponed due to an assessment that better financial terms should be sought. He added that everything was under control and that the postponement would not threaten or change anything in this year's budget process or budget execution.

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