PM: Reforms to cut public debt and accelerate growth

Prime Minister Tihomir Oreskovic on Thursday underscored that the National Reform Programme was aimed at cutting the public debt and accelerating economic growth through 61 reform measures in four key areas.

Speaking at a press conference after the government session on Thursday when the programme was adopted, Oreskovic presented the programme saying: "We have a problem!" He noted four key areas that reforms would address: public debt, business climate, administration and judiciary, and education.

The reforms, Oreskovic underscored, aim to increase the growth of Gross Domestic Product (GDP) from last year's rate of 1.6% to 2.3% in 2018 while at the same time reducing the public debt from almost 87% to 83% and the unemployment rate from over 16% to 13%.

One of the first measures that Oreskovic said he wanted to implement over the next few months already, was to reduce the public debt by about 100 to 200 million euros through the privatisation of public companies that would be conducted with the participation of pension funds. He said that pension funds that already have stakes in some state-owned companies have expressed an interest in increasing their stakes, but did not disclose which companies would be put on sale first.

When that is resolved, he said he would embark on a roadshow with Finance Minister Zdravko Maric, firstly to London and if need be to the USA, to present the reform plan to investors and to show that results are being achieved.

Asked whether the plan had sufficient support in parliament and about the situation concerning political stability, Oreskovic said that these were "spins and balloons (in the media) and had the government not been functioning today there would be no reform package."

Reforms in welfare and pension allowances through the introduction of an assets test would contribute to reducing public debt this year to 85.9% of GDP and down to 80% of GDP by 2019.

The real impact of pension reforms, according to Labour and Pension System Minister Nada Sikic, is expected around 2030 of about 2.4 billion kuna because changes to penalties for early retirement are planned to be introduced as late as 2025 and for a later retirement in 2028.

Until then, particularly in 2017 and 2018, Sikic said, we expect the opposite - that the cost of the pension system will increase because a large number of people will retire out of fear of reforms.

Sikic underscored that it is not true that everyone would have to retire at the age of 67. Everyone who previously entered the labour market, or completed their secondary or primary education will be able to obtain a regular pension aged 61 with 41 years of service. Everyone else, she said, may remain working even after they turn 67.

She said that she could not see why pension reforms aroused such fear in public and underlined that she was more afraid that the European Commission would say that we have been too mild because penalties for early retirement in other European countries are much higher and we opted for the lower. Apart from that, she added, countries in our neighbourhood pay much more into the pension system, so we have the opportunity to pay more or remain working longer.

Reforms in the health system are aimed at eliminating the health sector's debts by the end of 2018 which each year amount to almost HRK 2.5 billion.

In order to improve the business climate in the country, the government plans to regulate land title registers, reform public procurement procedures, make significant investments in research and development and, Oreskovic particularly stressed, in reducing non-tax fees by about HRK 300 million within three months.

Reforms to administration and judiciary will be conducted through IT and rationalising the number of agencies.

Speaking about public administration reform, the prime minister said that an analysis would be conducted of local government to see what the optimal number of municipalities would be.

Education reform envisages curriculum reform and strengthening life-long learning and vocational education.

Responding to questions concerning changes to the tax system, Oreskovic confirmed that there would be no changes this year and before any were made a detailed analysis would be conducted to see "that when they are introduced tax policies will be stable and not be changed every six months."

Reporters were interested in whether this government could adopt the euro as the country's currency, and Finance Minister Zdravko Maric said that by joining the European Union, Croatia had undertaken to adopt the euro and that the only criterion that has not been met for that is the public debt. If trends with the public debt go as planned, that process could be accelerated and Croatia could enter the currency mechanism system in 2020, which precedes the adoption of the euro.

At the end of his presentation of the reform programme, Oreskovic presented a graph showing relations within his team. He described the functioning of his team as "forming, storming, norming and performing".

Every team goes through phases, first it is formed, then there is the brainstorming phase of healthy debate, then norms are agreed on, which are then followed by performance, Oreskovic explained.

That is a normal phase for every team and what is important is results, he said commending his entire team for their efforts in preparing the reform programme.

"We all got together, Deputy Prime Minister Tomislav Karamarko, Deputy Prime Minister Bozo Petrov. We had some healthy brainstorming, discussions about the reforms and that is why I am convinced that these reforms that all we ministers together recommend are a quality document," he stressed.

Last update: Tue, 28/06/2016 - 17:51

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