Prime Minister Tihomir Oreskovic described Friday's meeting with union federation leaders as excellent, saying it was agreed to activate the Economic and Social Council and create a platform for dialogue.

"We discussed the state of the Croatian economy, with Finance Minister Zdravko Maric presenting the indicators, and we had an open discussion. I took the opportunity to present our programmes and the way we will reduce the debt, but the focus was on how to raise the living standards of all citizens," Oreskovic told reporters.

He said the European Commission had released a new economic forecast and that he thought the direction was positive. "It's necessary to increase GDP and reduce the debt and the deficit," he said, adding that it was necessary to see how to increase investments and stimulate small and medium enterprises.

Oreskovic said he would have an open dialogue with the unions. "They are our partners and that was the main topic, that we will deal with issues together and move forward."

Asked about a 6% base salary increase for public-sector employees, he said this was on the table and would be discussed but that it was very important for everyone to have a clear picture of the situation and that it was necessary to deal with the challenges.

Asked about a new war veterans' minister, Oreskovic said the position would be filled "in the shortest time possible", possibly next week.

Asked about the pledge made by the Croatian Democratic Union (HDZ) during the parliamentary election campaign that 1,000 euros would be given for every newborn, Oreskovic said the 2016 budget would be known by the end of March. "We need to see how to rationalise the budget. We'll increase it in some places and reduce it in others. The budget will be crucial for implementing reforms," he said.

As for downsizing the number of counties, he said it was necessary to make public administration more efficient. "All options are on the table," he said.

Asked if he would replace Security and Intelligence Agency (SOA) chief Dragan Lozancic, Oreskovic said he would decide about the right time for that together with the president. In the meantime, President Kolinda Grabar-Kitarovic's office said that she had signed a decision to relieve Lozancic of his duties because he had breached the law on the security and intelligence system.

Later in the day, the government told Hina that Oreskovic would decide on the president's initiative to replace Lozancic next week.

Under the law, a decision to replace the SOA chief is co-signed by the prime minister and the president. The president signed a decision to replace Lozancic this afternoon and forwarded it to the government. The government confirmed receipt and said the prime minister would decide on it next week.

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