PM advocates independent monetary policy

Prime Minister Tihomir Oreskovic said on Monday the Croatian National Bank (HNB) must be independent, brushing off efforts by members of his cabinet’s junior coalition partner to amend laws that would strip the central bank of some of its powers and change monetary policy.

"My position is clear: monetary policy has to be independent, which is the case in all European countries," Oreskovic told Bloomberg.

He also said his government would start a roadshow this summer to drum up interest in a planned sale of 1.5 billion euros of bonds and other investments Croatia, which needs to diversify its economy away from tourism to sustain growth.

The Finance Ministry, which would lead the international sale, would use the proceeds to refinance an equal amount of debt maturing this year, Oreskovic said.

Bloomberg said that the European Union’s newest member was trying to maintain economic expansion after a six-year recession that wiped 12 percent off gross domestic product before it ended in 2015. "Policies include reining in the fiscal deficit, selling about 30 billion euros of state assets and repaying debts. Oreskovic, a former pharmaceutical executive who took office in January, faces his first test as head of government on Friday, when parliament votes on his draft budget."

Oreskovic told Bloomberg he was confident his fiscal plan would be passed, vowing to lock in reforms and attract investors to overhaul public companies and establish new factories in the Balkan country. Among the planned moves are consolidating hospitals, cutting procurement costs, reducing the number of state agencies and cutting redundant programs.

"Croatia has a huge untapped potential," said Oreskovic. "Everyone knows Croatia for its tourism, but we have resources beside just the tourism. Energy has a huge interest, as well as infrastructure projects, and we have a highly skilled and talented workforce that can compete on a global level."

Oreskovic also said he aims to stabilise the debt level, which the central bank calculates at about 85 percent of GDP, before reducing it in the following years.

Croatia’s government will start a roadshow this summer to drum up interest in a planned sale of 1.5 billion euros ($1.7 billion) of bonds and other investments in the Adriatic nation, which needs to diversify its economy away from tourism to sustain growth.

The Finance Ministry, which would lead the international sale, would use the proceeds to refinance an equal amount of debt maturing this year, Prime Minister Tihomir Oreskovic said Monday in Zagreb. The yield on government bonds due 2025 fell one basis point to Friday’s closing levels at 3.786 at 4:10 p.m. in the Croatian capital, compared with 3.810 percent for similar-dated Hungarian debt, data compiled by Bloomberg showed.

The European Union’s newest member is trying to maintain economic expansion after a six-year recession that wiped 12 percent off gross domestic product before it ended in 2015. Policies include reining in the fiscal deficit, selling about 30 billion euros of state assets and repaying debts. Oreskovic, a former pharmaceutical executive who took office in January, faces his first test as head of government on Friday, when parliament votes on his draft budget.

He said he’s confident his fiscal plan will be passed, vowing to lock in reforms and attract investors to overhaul public companies and establish new factories in the Balkan country. Among the planned moves are consolidating hospitals, cutting procurement costs, reducing the number of state agencies and cutting redundant programs.

‘Untapped Potential’

“Croatia has a huge untapped potential,” said Oreskovic. “Everyone knows Croatia for its tourism, but we have resources beside just the tourism. Energy has a huge interest, as well as infrastructure projects, and we have a highly skilled and talented workforce that can compete on a global level.”

Oreskovic said he aims to stabilize the debt level, which the central bank calculates at about 85 percent of GDP, before reducing it in the following years. He wouldn’t give specific targets. Oreskovic also brushed off efforts by members of his cabinet’s junior coalition partner to amend laws that would strip the central bank of some of its powers and change monetary policy.

“My position is clear: monetary policy has to be independent, which is the case in all European countries,” he said.

Brexit Test

Oreskovic, an ex-chief financial officer at Teva Pharmaceutical Industries Europe, is the first prime minister who doesn’t hail from the two parties that have dominated Croatia since it broke away from Yugoslavia in 1991. He grew up along Lake Ontario, just south Toronto, living outside Croatia for most of his life. He was tapped to lead the coalition of the Croatian Democratic Union and the newly formed Bridge party, after the Social Democrats lost elections in November.

In the interview, he touched on a range of issues including the U.K.’s June referendum on leaving the EU, Balkan coordination of the migrant crisis and the country’s effort to join the passport-free Schengen area. Oreskovic said he’s firmly committed to EU problem-solving, which sets him apart from politicians in the post-communist east including Hungarian Prime Minister Viktor Orban, who’s criticized the bloc and urged a claw-back of sovereignty.

“Perhaps a Brexit situation is a good test,” said Oreskovic, referring to the popular term for a possible British EU departure. “We have our challenges and differences, but at the end of the day it is about compromising. That’s an example that Europe, when faced with challenges, comes up with concrete solutions.”

Last update: Mon, 14/03/2016 - 22:06
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