Croatia has made significant progress on its journey to Eurozone entry, but only Romania and Bulgaria have worse institutions than those operating here...

As Poslovni Dnevnik/Ana Blaskovic writes on the 10th of June, 2020, Croatia continues to receive informal signals about joining the European Exchange Rate Mechanism in July, commonly known as the ''Eurozone waiting room'', the European Central Bank (ECB) praised Croatia's progress in bringing the domestic economy closer to the European average, but the problem remains in its very poor institutional quality.

Of all of the European Union's member states, only Romania, Greece (but under the umbrella of the euro) and Bulgaria have institutions which are worse than those here in the Republic of Croatia.

''The strength of the institutional environment remains an important factor in the sustainability of convergence in the future. The quality of institutions and governance is relatively weak in all observed countries except Sweden, especially in Bulgaria, Romania, Croatia and Hungary,'' they warn from the German city of Frankfurt, adding that this poses a risk to economic resilience and sustainable convergence.

Therefore, Croatia (as well as any other EU member state with its own national currency) doesn't currently meet the conditions for Eurozone entry/the introduction of the euro, which is not the case when it comes to entering the exchange rate mechanism for which the political green light still remains on.

"None of the observed countries participate in the ERM II, but Bulgaria and Croatia have both submitted official requests to join the mechanism. Bulgaria did so back in 2018, and Croatia did the same in 2019. By taking on policy commitments, the two countries have taken some important steps towards joining the mechanism soon,'' it said.

Given the plan for the rapid implementation of the euro, the next convergence report will be crucial, as it will provide a true assessment of the country's readiness to replace the national currency - the Croatian kuna.

Obstacles, however, can realistically be expected on two fronts. The first is the quality of institutions where Croatia is at the tail end of the EU because it requires substantial (and indeed painful) reforms of the business environment for which there is a complete and utter lack of political will present at the moment. The second is the country's fiscal plan, because due to the coronavirus crisis, public debt and deficit is set to explode, so sooner or later, government expenditures will have to be put on the table.

However, the debt boom will affect all member states, so it remains to be seen whether the European Union will stick to Maastricht's nominal criteria or whether they will be revised in the "new normal".

The report points out that seven countries have made uneven progress in convergence since 2018, and Croatia is in the minority, which is recording improvements. The ECB assesses price stability, budget balance and public debt, long-term interest rates, exchange rate stability, and the quality of institutions and governance.

When it comes to the inflation criterion, the compliance of most countries has deteriorated, but Croatia's hasn't. Bulgaria, Poland, Romania, the Czech Republic and Hungary recorded inflation rates well above the reference 1.8 percent, while they are lower in Sweden and are significantly lower here in Croatia. Due to deflationary pressures in the coming period, inflation is expected to decline due to a sharp drop in oil prices.

On the wings of pre-epidemic growth, most have made progress in reducing fiscal imbalances, including Croatia. Croatia and others are doing well in estimating their budget balances, back in 2019, it was lower than the set 3 percent of GDP. Only Romania had an overdraft, which led to an excessive deficit procedure in April 2020. Although the debt ratio in Croatia and Hungary was above the 60 percent of GDP threshold, it was declining until the end of last year. Due to the ongoing pandemic, the budget deficit and debt ratio are expected to grow in all seven countries due to the slowdown in the economy and fiscal aid packages.

There is no problem in the field of exchange rate convergence either; the kuna has shown little volatility, while the Bulgarian lev was fixed against the euro within the currency board (1.95583 lev for 1 euro). Other currencies were traded under flexible exchange rate regimes where the exchange rate of most was very volatile, especially during the tensions in the financial markets in March 2020, they note from Frankfurt.

The ECB's historically low interest rate policy spills over beyond the Eurozone, a benefit that countries without the euro can also feel. In Romania alone, long-term interest rates are higher than the 2.9 percent reference value, while the lowest long-term interest rates are recorded in Bulgaria and Sweden.

Although the report notes that the existing CNB Act is not in line with central bank independence regulations, this part of the document was completed before the legislative changes which came about in April, which were subsequently assessed positively.

It's worth mentioning that the convergence report is a two-year document that is not related to the process of entering the exchange rate mechanism, and it assesses the gap between the member state economies that don't yet have the euro with an average of nineteen Eurozone countries.

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ZAGREB, June 10, 2020- High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell, said on Wednesday the Commission would recommend this week the progressive and partial reopening of the EU's external borders as of July 1.

Member States made a decision on March 17 to close external borders to non-essential travel from third countries until June 15, as part of the fight against the coronavirus pandemic.

These are decisions of member states with external borders because European institutions have no jurisdiction over the matter.

The European Commission recommended that this be done in a coordinated manner.

Last week interior ministers of member states agreed to co-ordinate progressive reopening of external borders to travellers from third countries.

The EU's internal borders should reopen by the end of June, mostly by June 15, and in the second stage, at the beginning of July, external borders should also start to reopen.

ZAGREB, June 10, 2020 - Small border crossings between Croatia and Slovenia, which have been closed for nearly three months due to the coronavirus epidemic, could soon reopen, the Slovenian police said on Wednesday.

As Lado Bradac of the Slovenian Interior Ministry told Slovenski Radio, some border crossings might reopen as early as Monday, June 15, followed by the remaining ones reopening by June 29.

These are 27 land border checkpoints along the Croatia-Slovenia border primarily intended for the local population: persons owning land and property in both states and those employed across the border who have to cross the border every day to go to work.

These are interstate crossings that cannot be used by third-country citizens, that is those outside the European Union.

The closure of small border crossings has been causing a lot of problems to the local population on both sides.

To go to work, to work in the fields and vineyards across the border, to visit relatives or friends, they had to use larger international crossings, often kilometers away from the crossing nearest to them.

ZAGREB, June 10, 2020 - Croatia was ranked sixth among 30 European countries in terms of the number of measures for preserving the stability of the economy and the financial sector, the Croatian Financial Services Supervisory Agency (HANFA) said on Wednesday.

Croatia is also one of the nine European countries that have temporarily banned insurance companies from paying dividends.

At today's meeting, HANFA's board discussed measures to preserve financial stability taken in the European Union following the COVID-19 pandemic and measures and recommendations by the Croatian financial regulatory authority issued to companies in Croatia.

"According to the analysis of data published by the European Systemic Risk Board (ESRB) on measures taken by national financial regulatory authorities due to the pandemic, Croatia stands above the European average with about 40 measures, and it was ranked sixth among 30 analysed countries of the European economic belt," the press release said.

At the European level, most measures concerning the non-financial sector were aimed at companies, while those concerning the financial sector were aimed at credit institutions, securities, and markets, as well as the insurance sector.

Croatia is one of nine European countries, which, in addition to other measures, have adopted a measure temporarily banning dividend payments to insurance companies, and is at the top of countries with the highest number of measures for the insurance sector, HANFA underscored.

The board said that HANFA's measures and recommendation for the Croatian non-banking financial sector and its users were adequate and timely. However, the economic consequences of the pandemic for the international financial market still cannot be fully comprehended. Current data hint about the first signs of recovery - from investors making payments into investment funds to mandatory pension funds returning to their levels before the world coronacrisis, HANFA underscored.

They said that at European level, as well as in Croatia, HANFA would "continue to act in accordance with the European Systemic Risk Board's guidelines and make additional independent recommendations (such as the recommendation for moratoriums for leasing companies), depending on the economic state in the country and the influence of international and domestic circumstances on the financial services market."

ZAGREB, June 10, 2020 - Leader of the Restart Coalition and the Social Democratic Party (SDP) Davor Bernardic on Wednesday announced that his government would work actively on a prompt transition towards a circular economy so that it reaches a share of 25% and by the end of the decade creates 100,000 jobs.

"Based on numerous indicators, Croatia is at the bottom in Europe in terms of the judiciary, corruption, living standards, the economy's competitiveness, absorption of EU funds, and in applying a circular economy," Bernardic warned while presenting the Restart Coalition's green development election platform.

"The share of circular use of the material is 4.4% whereas the average in the EU is 11.7%. We are eighth from the bottom with regard to ecological innovations and we account for just 38% of the EU average with regard to productivity in all sectors of the bio-economy or €13,000 in added value for each employee, while in the EU that is €41,000," said Bernardic.

The EU's New Green Deal is a key development document that foresees Europe's social and economic transformation by 2050, which means that Croatia has to work more intensively and faster on the transition from a linear to a circular economy by adopting and implementing the green transformation strategy, he underscored.

Considering that Croatia imports 50% of its food and energy, there is room in these sectors for green development and employing a large number of people, he added. 

One of the first moves will be to adopt a Circular Economy Strategy which foresees the construction of 100 bio-composting and waste sorting plants and 50 smaller bio-gas units with EU funds.

He announced that the main source of green transformation funding would be from the EU's Horizon Europe fund, in addition to state and local government budgets, the Environment Protection and Energy Efficiency Fund, the Croatian Bank for Reconstruction and Development and commercial banks, along with private investments and donations.

SDP green policy advisor Mirela Holy underlined that green transformation has to be the main paradigm of change and that the New Green Deal is the EU's key development document which entails large investments in energy efficiency.

ZAGREB, June 10, 2020 - Parliament Speaker Gordan Jandrokovic said on Wednesday that MPs would not go on holiday following the July 5 election, but that the new parliament would immediately resume work as soon as a parliamentary majority is constituted.

"The situation is such that members of parliament will be required to seriously, responsibly and promptly start work, so there is no doubt that the parliament will resume work as soon as a majority is constituted," Jandrokovic said in Dubrava, where he attended Municipality Day and St. Margaret Parish Day celebration.

He decisively ruled out the possibility that having been elected, MPs could go on holiday.

"It is perfectly normal that once the new parliament is elected, it promptly starts work so that we can pass the new law on the reconstruction of Zagreb and prepare all the measures necessary for what awaits us in the autumn. We thus have to make a number of decisions concerning economic measures and I do not know who could possibly think that the parliament would go on holiday once MPs are elected," the Parliament Speaker said.

Jandrokovic was responding to a reporter's question about how he saw the message from President Zoran Milanovic's office that MPs should not take a break following the constitution of the new parliament.

June 10, 2020 — A luxury cruise set to tour Game of Thrones filming locations in Croatia was postponed to August, with a few changes nodding to life with the coronavirus.

The cellars where Daenerys Targaryen keeps her dragons are actually the walls of Diocletian's Palace in Split. The ancient city of Mereen where that ruler freed slaves is Klis, and the iconic scene in which Khaleesi bathes her Missandechi was filmed in the village of Žrnovica.

This is only a small part of the history of the "Game of Thrones" written in Croatia, which was to become one of the backbones of our film tourism. Foreigners were among the first to recognize this, in the Cruise Croatia agency, with offices in London, San Francisco and Split.

Last year, more than 30,000 people applied for their contest in which the prize was a luxury themed "Game of Thrones" cruise on the route Split - Dubrovnik. 

If it weren't for the coronavirus, the first ship would have set sail now. Cruise Croatia didn't give up on the plan, so the first, and probably the only luxury cruiser, will set off on GOT in mid-August, according to Jutarnji List.

“Last year, the last season of that globally popular series ended, so it seemed to us that it was an ideal opportunity to launch this cruise on one of our smaller ships. We made a prize game that got a lot of world media attention. We managed to fill four ships,” Graham Carter, director of Cruise Croatia, told the paper, adding that the ship that sails these tours has a capacity of 38 people.

Luxury cruise prices range from about €1,800 per person, depending on the boat you choose. However, the coronavirus disrupted the agency's plans, which is why part of the tour was postponed to next year.

“There was a plan for the first two tours to go in June and early July, but we switched them to 2021,” Carter said. “However, we have an appointment in mid-August and we are not giving up on it for now.”

The seven-day journey begins in Split, where after boarding the ship, a tour of Diocletian's Palace follows. The first day includes visits to Klis and Žrnovica, then returns to the boat to hang out with other fans of "Game of Thrones". The next day includes Šibenik, and the third day Vis.

The tour then hits Hvar, Korcula, Mljet and then to Slano. Trsteno Arboretrum is toured as the backdrop of the "palace garden" in Kings Landing, and as the crown of the trip and the final destination is going to Dubrovnik, also known as Kings Landing to the show’s fans. Visitors can expect a detailed tour and a special GoT party.

“It will all culminate just by circling around Lokrum at sunset on one of the traditional ships used to film the series. After that, we take the guests to a secret building, where a themed party will take place,” Carter said

Most of the cruise’s guests come from the US, UK and Canada.

This seven-night cruise takes place on the MS Adriatic Sun Ship, just under 50 meters long with 19 guest cabins. The fact that it is a boutique cruise with a small number of guests is in favor of this agency when it comes to the current situation with the coronavirus.

The staff has been on board all summer, and that the islands that are visited have mostly gone through a corona crisis without a single case of an infected person.

For added safety, common areas on board will be disinfected every half hour to hour, guests will have their temperatures measured, and the crew will include medical staff.

The price of the cruise includes tickets for all the attractions that are visited and even transportation from the airport to the boat. The bar offers unlimited water, tea and coffee, fresh fruit and breakfast, and breakfast is served daily.

The on-board menu is a combination of Croatian and Mediterranean cuisine, including sea bass and lamb, but also Croatian dishes such as pasticada, buzara or soparnik.

The director explained the strategy related to themed cruises. Cruise Croatia includes a wine, yoga and bike cruise.

“The most popular times for cruising on small boats in Croatia are June, early July and September,” Carter said. “During these months, our regular tours on the route Split - Dubrovnik usually sell out. May, August and October are a bit less popular, which is why we are launching specialized cruises in these months, which clients come to because it is a special experience.”

June 10, 2020 — There are more and more foreign tourists in Istria every day, perusing the streets of major centers. But the numbers are a far cry from the same period last year.

The Istrian peninsula has seemed busier. But the groups of Deutsch-speaking tourists should come as no surprise: Germany’s in the middle of its two-week Pentecost holidays.

In this period, in recent years, accommodation in Istria has been filled as if it were the heart of the tourism season. 

In the first eight days of June this year, Istria had 25,000 arrivals and 120,000 overnight stays, which is 14 and 15 percent of last year's turnover in the same period, respectively, according to figures provided by the county’s tourist board.

“These are unusually small numbers for this period,”  the director of the Istrian Tourist Board Denis Ivošević told Jutranji List. “We are also very happy for all of us in tourism because the growth trend is significant.”

The region’s overnight stays quadrupled in a week, from 5,000 to 20,000.

“The Germans started coming and they immediately raised the numbers significantly,” Ivošević said. “Along with the Germans, Slovenians have the largest share. We hope that soon, after June 14, Austrians and others will arrive.”

At the moment, guests mostly choose private accommodation and camps, with guests so far evenly split between the two.

“It only confirms our predictions that camping and private accommodation will be an advantage over large tourist resorts and large hotels,” Ivošević said. “What is important to note at the outset is that this year we simply must not compare with previous years because the situation is extraordinary and the conditions in which it takes place are completely illogical and unpredictable.”

Istria’s local Civil Protection Directorate faced one of the first outbreaks of COVID-19 in Croatia, yet managed to keep new infections at bay. It gave the peninsula a tenuous head start on the pandemic. 

“Any potentially imported case of a newly diagnosed person can take us back to the beginning,” Ivošević said.

Istria started promoting itself aggressively in foreign markets, especially Austria and southern Germany through a campaign under the slogan "Istrien so nah!" (Istria is so close!) 

Istria was actively preparing and promoting itself while the rest of the world struggled to contain the pandemic. A newsletter sent information on the situation in Istria to more than 500 addresses in Austria and Germany, along with information about the opening of accommodation and catering businesses, attractions and other tourist facilities.

It’s now mapping out a series of deals and offers to drum up interest in the summer season.

Istria’s tourism businesses will offer a series of discounts this weekend for various attractions, but also for visiting certain wineries and canteens. 

Over 50 tourism service providers responded to the call, offering their services throughout Istria on June 13 and 14 from 10 am to 6 pm with a 50 percent discount or completely free of charge.

All included facilities - adrenaline parks, museums, castles, caves, protected areas, theme houses and other attractions and experiences, as well as winemakers, olive growers, truffle growers and other local producers are available on the website: www.istra.hr/turizam2020.