Croatian People's Party (HNS) deputy leader and former economy minister Ivan Vrdoljak said on Saturday he was not surprised that Moody's ratings agency had downgraded Croatia's long-term credit rating.

"They (the agency's officials) visited the institutions a few weeks ago and this is their conclusion. We all knew it, it was just a matter of time before Croatia started paying the price for the present instability and its failure to agree on and implement reforms," Vrdoljak told the press after a meeting of the HNS main committee that nominated him for the party's leader ahead of an election convention scheduled for April 16.

Vrdoljak stressed that political and institutional instability was key to attracting investment. "Investments won't come to a politically and institutionally unstable country, which is happening now. They will come with repeated elections, with a stable government and resolute, reform-oriented and not populist decisions," he said when asked about the effect of the decision by all three leading rating agencies to lower Croatia's rating two notches below investment grade.

He boasted that last year, during the term of the previous government in which he had served as economy minister, industrial production and exports had grown. "We managed to put things in order and lay the foundation for creating added values, but they will not be achieved through quarrels, insecurity, ignorance, blackmail and experiments," he said.

Moody's Investors Service on Friday downgraded Croatia's long-term issuer and senior unsecured debt ratings to Ba2 from Ba1 and maintained the negative outlook, saying that the key drivers for its decision were a high public debt and weak medium-term growth prospects. All three leading ratings agencies - Moody's, Fitch and Standard&Poor's - keep Croatia's rating two notches below investment grade, with a negative outlook.

Vrdoljak dismissed criticisms that the agreement he had signed with the Norwegian company Spectrum on oil exploration and exploitation in the Adriatic was a criminal project. "Everyone can see that we made money, we spent nothing, we are the sole owners. Populists should be excluded from political life," he said, adding that he was pleased that the agreement was made public.

The agreement was recently declassified by the High Administrative Court following a request by the H-Alter website. After that there have been accusations in the public that it is a bad deal for Croatia and that the agreement favours Spectrum.

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