Prime Minister Tihomir Oreskovic said on Thursday that the budget guidelines, adopted at a Cabinet meeting earlier in the day, were a realistic plan.

"Economic growth of 2% is a realistic plan. Tomorrow we are having a meeting with European Commission Vice-President Valdis Dombrovskis and it is very important to us that we, as a new government, present a realistic plan," Oreskovic told a press conference after the Cabinet meeting.

The European Commission has forecast Croatia's 2016 budget deficit at 3.9% of GDP, which would make it the highest deficit in the European Union, Oreskovic said, adding that the 3% deficit projected in the guidelines was "a very ambitious, yet realistic plan".

"We are growing. We have reduced the deficit and will focus on debt," Oreskovic said. He said that the guidelines absorbed about 2.5 billion of expenditure and added that the planned reforms would be outlined before the presentation of the budget on March 10.

Finance Minister Zdravko Maric said that budget cuts did not affect pensions and salaries and that the pension budget was even increased because the guidelines provided for a 0.5% increase on years of service. He said that savings were made on material expenses, a portion of subsidies and other expenses.

Responding to questions from the press, Maric said that the basic structure of this year's budget would not be the same as before, adding that this budget had to account for HRK 2.5 billion higher expenditure. Citing an expected contribution from EU funds, he said that this year various projects were expected to be co-financed with between HRK 900 and HRK 1 billion of EU money.

Asked what would happen with a possible HRK 1.8 billion increase in expenditure on public-sector salaries due to a 6% pay rise on account of 2% GDP growth for two consecutive quarters, Maric said that dialogue had been launched on this issue at meetings with union leaders on Wednesday, when the government's view on the reform of the public sector and pay policy were presented. He said he was certain that the unions would back the government during the dialogue over the coming weeks.

Maric said that employment expenditure would not be reduced, but would even be increased, adding that a substantial EU component of that item was a novelty.

Commenting on the statement by IMF Mission chief Khaled Sakr at the end of his visit to Zagreb on Wednesday, Maric said that his statement was encouraging and very realistic, adding that the mission's response to the presented budget framework was very positive.

"The improvements in macroeconomic indicators starting in late-2014 and the broad-ranged policy agenda of the new cabinet are encouraging. Speedy implementation of structural reforms will be essential to sustain durable growth and employment, as well as to reduce vulnerabilities and safeguard against downside risks," Sakr said.

 

(EUR 1 = HRK 7.624)

Related stories

SDP official says guidelines reflect no serious reforms

Budget revenues planned at HRK 113b, expenditures at HRK 120.4b

FinMin: Budget expenditure projected at HRK 120bn

2017 budget guidelines defined, budget gap at HRK 6.8 bn

FinMin: Budget almost balanced, expenditures under control

Government adopts draft 2016 budget

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.