tihomir orešković.jpg
Photograph: HINA/ Lana SLIVAR DOMINIĆ/ lsd

Investors very much appreciate the fact that Croatian Prime Minister-designate Tihomir Oreskovic attended their winter conference in the Austrian ski resort of Kitzbuehel, which was attended by about 100 investors from Europe and America, and their key message is that Croatia needs to stop its public debt from increasing and should not interfere in monetary policy, chief economist at UniCredit Bank Erik Nielsen said in an interview with Croatian Television (HTV) on Sunday evening.

"The impression was: here is a man who really wants to do business. (He was) very well received indeed. He didn't promise anything. He was very clear that he came to listen. He was curious about what investors cared about. He was interested in getting to know the key creditors of Croatia. He was quite clear that he was not in a position to promise anything and no one expected him to promise anything," he said.

Nielsen said that the key message to Croatia was that changes were necessary, that measures should be adopted to prevent public debt from increasing further and that there should be no interference in monetary policy. He said that Croatia's political orientation was also important, given the current situation in countries such as Poland and Hungary. 

The rest of the interview will be broadcast in an HTV current affairs programme on Wednesday.

In a confidential report addressed to hundreds of financial investors, Nielsen made his observations about Croatia after a day and a half of talks with Croatia's prime minister-designate and central bank governor, saying that it was worth keeping an eye on Croatia, according to the Jutarnji List daily of Monday. 

Nielsen said in the report that his main recommendations to Oreskovic, which also reflected the views of most of the conference participants, were that Croatia needed to stop its public debt from increasing, guarantee further independence of the monetary authorities, ensure the continuation of the monetary and exchange rate policies that had been the guarantor of stability during the years of crisis and abandon the plan for monetary reform. He also noted that Croatia should insist on its commitment to the European Union. 

In order for Croatia to reduce its debt-to-GDP ratio, he said that it should implement a fiscal adjustment of 1.5 per cent of GDP (4.6 million kuna) to produce a primary fiscal surplus of 1 per cent of GDP. This adjustment should be made primarily on the expenditure side of the budget, rather than by increasing taxes, and should be carried out within two years. Privatisation and reform in the public sector and the judiciary and measures to increase competitiveness should continue.

Mr Oreskovic's priorities and his commitments to these goals are beyond any doubt. If he manages to form a government that will adopt an appropriate reform programme, that will mark measurable progress for this country, which has been in crisis for many years and deserves a better future, Nielsen said in his report.

He said that investors were flattered by the fact that Oreskovic came to their conference to find out the views of the most signficant market stakeholders about key challenges facing his future government.

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