Friday 24 November 2017

New member's economic problems replicated across Europe

Colm Kelpie

Colm Kelpie

WITH rising national debt, sky-high unemployment and a five-year-long economic recession, the newest member of the European club looks an awful lot like the rest of us.

Croatia this week, became the newest member of the European Union, bringing with it problems that are replicated in countries across the continent.

Two decades after it declared independence from Yugoslavia, the Adriatic state is in what is likely to be its fifth year of recession, with unemployment surging as high as 21.9pc earlier this year.

The state, with a population similar to Ireland's at 4.4million, enjoyed the beginning of political and economic reforms in the early part of this century after years of war in the 1990s.

Buoyed by a return to peace, the economy grew by four to five per cent per year before the global financial crisis occurred.

The European Commission has warned Croatia to keep its spending under control, with public debt at almost 60pc of gross domestic product (GDP) and the budget deficit close to 4pc of GDP.

DEFICIT

The debt is expected to rise to 62.5pc of the value of the economy next year, up nearly 10 percentage points from 2012 and breaking the EU's 60pc official ceiling. The budget deficit is forecast to widen to 4.7pc of GDP this year, from 3.8 pc in 2012 and, unless tackled, to 5.6pc next year – all above the 3pc EU limit.

Like Ireland, it is likely to have to implement strict and most likely harsh reforms and cuts to get that figure down.

Zagreb's EU membership has raised hopes for a surge in foreign direct investment in the €44bn economy.

The commission, however, warns of Croatia's widening budget deficit, soaring public debt and generally uninviting business environment, dented by a lack of competition, poor legal protection for investors and a weak public administration.

The kuna currency, introduced in May 1994, is kept in a tightly managed float, with analysts predicting the country will not join the euro before 2020.

The country is one of seven that emerged from the ashes of Yugoslavia during a decade of war in the 1990s. Slovenia was first to join the EU, in 2004, but Serbia, Bosnia, Macedonia, Montenegro and Kosovo are still years away.

The six other countries of the western Balkans are unlikely to join the bloc before the end of this decade, as the fallout from Yugoslavia's violent collapse in the 1990s, as well as corruption and sluggish economic growth, continue to slow their progress.

These include Albania, Bosnia, Kosovo, Macedonia, Montenegro and Serbia.

They'll be closely watching Croatia's EU infancy to test whether membership of the bloc will bring sufficient benefits.

(Additional reporting Reuters)

Irish Independent

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