ZAGREB, 28 Jan 2022 - President Zoran Milanović on Friday accused the government of Prime Minister Andrej Plenković as the most corrupt Croatian government yet.

"Plenković is protecting the people who are simply corrupt. I cannot call it any other way," Milanović said in an interview with RTL television.

Milanović said that Plenković's chief of staff Zvonimir Frka Petešić had deliberately registered his residence on Dugi Otok island so that he could qualify for a state-owned apartment in Zagreb. 

Frka Petešić "is fully aware that what he has done is punishable under the law, yet he enjoys the prime minister's protection," he added.

Milanović rejected the idea of his being an opposition leader in Croatia. "Not only am I not, but I feel bad in this position. All this that I am saying, which I have to say and will keep on saying, is just an unnecessary burden to me. This should not be my job."

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January the 21st, 2022 - Rising Croatian fuel prices was an issue for drivers several weeks ago, more precisely back at the tail end of 2021, and the government had to step in and place a cap on the price of fuel in order to make the situation sustainable. It looks as if the same is going to need to be done again with a new packet of measures.

As Poslovni Dnevnik writes, the government is set to compile a new package of measures to reduce the impact of rising energy prices on people if prices continue to rise, Prime Minister Andrej Plenkovic announced on Wednesday.

''In the case of price increases, in addition to limiting Croatian fuel prices, we'll raise the fees provided to socially disadvantaged households, and when it comes to the price of electricity and gas, we're going to be relying on HEP, which can take over and reduce the impact on people and households,'' announced Plenkovic in response to a question on the matter asked by Mirela Ahmetovic (SDP).

As the third element, PM Plenkovic mentioned VAT, which amounts to 13 percent for electricity and 25 percent for gas. He explained that the rise in energy prices was caused by supply disruptions, the ongoing disruption as a result of the coronavirus pandemic and extremely high demand.

"Households across the Republic of Croatia haven't yet seen an increase in electricity prices and will not experience them until April the 1st, and the same is true with the price of gas," he assured.

Earlier on Wednesday, he announced that the state could step in and limit Croatian fuel prices again, if prices continue to rise next week.

When it comes to the price of Croatian fuel prices, the government limited the price to approximately 11 kuna just three months ago and kept that price for a period of two months, thus avoiding a blow to driver's wallets and bank accounts.

"After that, we left things to the market, and yet we noticed that the current fuel prices are higher once again. If we have an estimate that the price will continue to rise next week, we will once again step in and place a cap on Croatian fuel prices, with the exception of premiums,'' concluded Plenkovic.

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ZAGREB, 3 Jan 2022 - The Croatian government will continue doing its best to help the Đuro Đaković company survive, and conditions are being created for the company's long-term sustainability with the support of a strategic partner from the Czech Republic, the government said in a statement on Monday.

The statement was issued following a meeting between Prime Minister Andrej Plenković and the leadership of the Slavonski Brod-based mechanical engineering company.

"At the meeting, both sides welcomed the European Commission's decision of late December 2021 to approve the program for Đuro Đaković's restructuring. The government had communicated intensively with EC officials and the EC's decision is a clear signal that the plan for the Đuro Đaković Group is viable," said the statement, released after talks between PM Plenković and Đuro Đaković Group Management Board member Pavel Maroušek, Đuro Đaković Special Vehicles Management Board chairman Danijel Marić, and Đuro Đaković Special Vehicles Management Board member Goran Matanić.

The statement quoted PM Plenković as saying that the government would continue doing its best to help the company survive and support restructuring activities.

"Following the stage when, with the government's support, the continuation of production and wages for the workers were ensured, we are entering a stage when conditions are being created for the long-term sustainability of Đuro Đaković, with the support of the strategic partner from the Czech Republic," Plenković said.

The Đuro Đaković officials presented the company's plans and production activities for the coming period.

PM Plenković said that the government would very soon give final approval of the program for Đuro Đaković and adopt other accompanying documents, thus creating conditions for an efficient restructuring process.

EC approved restructuring aid for Đuro Đaković in late 2021

On 22 December, the European Commission approved Croatia's plan to grant Ðuro Ðaković a total amount of €57.4 million in restructuring aid.

The measure will enable the company to finance its restructuring plan and restore its long-term viability with the support of a private investor, the consortium of Czech companies DD Acquisition, the Commission said.

On 8 May 2020, the Commission approved rescue aid to Đuro Đaković in the form of a Croatian state guarantee on a €40.31 million loan. The guarantee allowed the company to meet urgent liquidity needs and continue its activities while limiting distortions to competition until approval of the restructuring plan. At the time, Croatia committed to submit a restructuring plan for Đuro Đaković within six months following the first disbursement of the guaranteed funds.

Croatia submitted a restructuring plan and notified the Commission of its plans to grant restructuring aid to the company. The planned restructuring aid will take the form of a debt-to-equity swap and a guarantee on potential future commercial claims for a total amount of €57.4 million. The restructuring plan provides that a private investor, i.e. the consortium of Czech companies active in the same sector, “DD Acquisition”, will participate in a share capital increase with cash and in-kind contributions of approximately €64 million.

Following the capital increase, the new investor will become the controlling shareholder of Đuro Đaković and will support various aspects of its restructuring with cash and synergies, and contribute its experience and market knowledge.

The Commission found that the aid is necessary to ensure that Đuro Đaković will be viable long-term without the need for continued public support. This will also be ensured by the acquisition of control of the company by a private investor with core activities in the same industry.

The Commission also found that the aid is appropriate, as it supports a comprehensive restructuring plan running until the end of 2023, and proportionate, with an own contribution of over 50% of the restructuring costs provided by the company and the investor at market terms.

Compensatory measures, in particular the withdrawal of the company from the project engineering market through the liquidation of the subsidiary Ðuro Ðaković Industrial Solutions and the discontinuation of the production of three types of wagons, are provided to limit potential distortions of competition on the market for freight wagons where the company operates.

Đuro Đaković employs 733 people and has a diversified industrial portfolio including defense, transport, industry, and energy.

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ZAGREB, 30 Dec 2021 - The government on Thursday adopted a plan for legislative activities in 2022, envisaging 195 laws, with the Justice and Public Administration Ministry expected to put forward 33 bills and the Finance Ministry and the Ministry of the Interior 30 bills.

Twenty-one bills refer to the assessment of the effect of legal regulations, 78 bills refer to the euro changeover, and 11 laws will be amended in the context of indicators determined in the National Recovery and Resilience Plan.

The government adopted a conclusion obliging the competent state administration bodies to fully meet the obligations taken over and entrusted the Legislation Office to regularly report to it on the implementation of the plan as well as on the implementation and status of procedures for the assessment of the effects of regulations and consultations.

The government also adopted a draft program for the takeover and implementation of the EU's acquis in 2022, as well as a draft plan for the alignment of Croatian legislation with the EU acquis in 2022.

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ZAGREB, 30 Dec 2021 - The government decided on Thursday to suspend the buyback of INA from MOL due to new legal circumstances stemming from the Supreme Court's final ruling against former PM Ivo Sanader, who was found guilty of receiving bribes from MOL executive Zsolt Hernadi.

Sanader was given six years and Hernadi, who is beyond the reach of Croatia's authorities, was given two years in this graft case.

The Andrej Plenković government also decided to launch a review of the 2016 ruling of the United Nations Commission on International Trade Law (UNCITRAL) under which Croatia lost an arbitration case it brought against MOL before that court based in Geneva.

The government authorized the Economy Ministry to request the Federal Supreme Court of Switzerland to review the UNCITRAL decision so as to declare an amended contract on the relationship between the shareholders in INA and a contract on the gas business, both signed in 2009, null and void.

The ministry is also authorized to continue activities concerning Croatia's participation in the arbitration process which the Hungarian oil and gas company MOL initiated in 2013 before the International Centre for Settlement of Investment Disputes (ICSID), an arbitration institution in Washington.

In February 2017, Croatia filed a lawsuit with the Swiss Federal Court requesting the annulment of the arbitration ruling in the case Croatia v. MOL that was conducted in line with UNCITRAL arbitration rules. However, the Swiss court rejected Croatia's request in October that year.

In late December 2016, UNCITRAL overruled Croatia's request to nullify amendments to a 2009 contract on management rights in the oil and gas company INA and a gas business master agreement, finding that evidence was not sufficient to prove that the amendments were the result of corruption activities.

This prompted Prime Minister Andrej Plenković to state on 24 December 2016 that his government had decided to regain ownership of INA by buying the entire stake held by MOL.

In August 2019 the government chose the Anglo-French investment bank Lazard as a consultant for its plans for the buyback. Lazard presented a preliminary report on due diligence in June 2020 and a final report in September 2020, giving an estimate of INA's value.

MOL is the single largest shareholder in INA, holding 49.1% of the stock (4,908,207 shares), while the Croatian government holds 4,483,552 shares or 44.8%. Private and institutional shareholders hold 608,241 shares or 6.1%.

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ZAGREB, 30 Dec 2021 - The government is pausing the buyback of the Hungarian energy group MOL's stake in the INA oil and gas company because of new legal circumstances arising from a Supreme Court verdict and is launching a review of the shareholders' agreement and the gas business agreement, Prime Minister Andrej Plenković said on Thursday.

Speaking at the start of the cabinet meeting, Plenković said that proceedings against the first amendment to the INA shareholders' agreement and the gas business agreement were being launched because the government believes that in light of the Supreme Court's final judgment the agreements cannot be sustained.

In late October, the Supreme Court upheld the trial court verdict sentencing former Prime Minister Ivo Sanader to six years in prison for taking a bribe from MOL CEO Zsolt Hernadi. Hernadi, who remains beyond the reach of the Croatian authorities, was given two years in prison.

Plenković said that the government's decision was based on legal opinions, adding that the government had consulted the State Attorney's Office, the International Law Department at the University of Zagreb's Faculty of Law, and the government's legal representatives in proceedings with MOL.

"In these changed circumstances, we consider it opportune to pause the process of the possible buyback of shares which MOL holds in INA until this new legal circumstance has been resolved," the prime minister said.

The Croatian government and MOL signed the first amendments to the INA shareholders' agreement and the gas business agreement on 30 January 2009.

Under the amendments, the number of Supervisory Board members was increased from seven to nine, with five seats allocated to MOL, three to the government, and one to the employees. The Supervisory Board chair is designated by the government.

The Management Board has six members, of whom three represent the government and three MOL, while MOL nominates the Management Board chair, who has a casting vote.

The master gas business agreement provided for the sale of the Okoli gas storage facility and the gas trading company to the government. In December 2009, the government and MOL signed the first annex to the gas business agreement under which the government's obligation to buy the gas business was delayed until 1 December 2010.

For more on politics, follow TCN's dedicated page.

November the 11th, 2021 - The Croatian state is set to sell its share in the famous Ston saltworks (Solana Ston), which has been in operation since way back in the fourteenth century.

As Poslovni Dnevnik/Marija Brnic writes, there are ten more participants in the entire ownership structure of the well known Ston saltworks next to the Croatian state, and the Centre for Restructuring and Sales (CERP) will soon announce the sale of its ownership stake.

The decision of the Governing Board, chaired by the Minister of Physical Planning, Construction and State Property, Darko Horvat, set the starting price at a public tender of up to 1.4 million kuna for the state's share of 9.14 percent, which is equal to three and a half times the amount of the nominal value of that share.

In the overall ownership structure of the Ston saltworks, in addition to the Croatian state, there other participants (the number of which is mentioned above) including the director, Svetan Pejic. The oldest Croatian saltworks, built during the time of the Dubrovnik Republic, formerly a state of its own, has unfortunately been operating at a loss for years. It ended pandemic-dominated 2020 with almost three million kuna in losses, and the transferred losses amounted to a concerning 37 million kuna in total.

The company had revenues of 1.5 million kuna and they were more than halved compared to a few years earlier. The director explained in the financial report that the coronavirus pandemic also contributed significantly to the Ston saltworks' overall decline. It otherwise eight full-time employees, and unlike before, it had no export revenues to speak of.

The value of the Ston saltworks lies in its approximately 50 pools for salt production, but part of it is covered with asphalt that needs to be removed for the production of ecologically clean salt for the type of food for which the saltworks is best known, and it is a condition for resolving property relations which are ongoing.

The sale of the state's share will go through a public auction, which will be 45 days after CERP announces the tender.

For more, check out our dedicated business section.

November the 8th, 2021 - Five Croatian companies are suing the state as a clap back against the epidemiological decisions made by the National Civil Protection Directorate in the face of the ongoing coronavirus pandemic.

As Poslovni Dnevnik writes, Tomica Drvar from the Svikoncerti (Allconcerts) agency said on Dnevnik Nova TV that they're seeking compensation for what he believes are ''double standards''.

''For example, we as travel agencies didn't receive any compensation for any drop in traffic we had, but only for preserving jobs,'' explained Tomica Drvar, who will sue the state because he believes that the government's economic measures and the way they're handed out is not fair. Tomica's travel agency's traffic has dropped 97 percent over the last two years, and the loss stands at about three and a half million kuna of revenue per year.

"It's difficult for us to say how much we would be satisfied with. All Croatian companies have their individual own revenues and expenses, but I must emphasise that our state has done absolutely nothing to compensate its businessmen and company owners,'' he added.

In addition to Tomica, four other Croatian companies are filing a lawsuit against the state with the same request. They're playing the card that the state has violated the constitutional rights of business owners with the decisions made by the National Civil Protection Directorate, but also in the way they have introduced economic measures. Specifically speaking, they're referring here to articles that say that no one can be brought into a position in which they're being discriminated against. All of this is going ahead with the support of the Voice of Entrepreneurs Association (Udruga Glas Poduzetnika).

“So, they gave people grants to preserve jobs, but that all went on workers, and the compensation that Germany or Austria gave to their companies was simply lacking in Croatia,'' explained Branka Prislic from the Voice of Entrepreneurs Association.

The state rejected a peaceful solution to the dispute, according to them. There has so far been no comment on the matter released from the Ministries of Justice and Labour so far, which is not surprising given the statements of their boss on this issue.

"I think we've done everything that the state could have done in these circumstances," Prime Minister Andrej Plenkovic said back in July.

Rejecting that claim, the heads of five Croatian companies say they are ready to go all the way to the European Court of Human Rights on this issue. They haven't specified the exact financial amounts they're seeking, but as has since been found out, it is at least hundreds of thousands of kuna in compensation per company.

For more, make sue to check out our dedicated politics section.

ZAGREB, 28 Oct 2021 - The Croatian government has projected growth for this year at 9.0 percent, while budget revenue for 2022 is forecast at HRK 164.5 billion, Prime Minister Andrej Plenković said at a cabinet meeting on Thursday.

"Based on macroeconomic indicators for the national economy and external environment, and prevailing expectations, real GDP growth for 2021 is projected at 9 percent, which surpasses the real GDP level from 2019," Plenković said.

Under the amended budget for 2021, revenue has been increased by HRK 3.3 billion to HRK 153.6 billion and expenditure by HRK 6 billion to HRK 173.3 billion.

The budget is expected to show a deficit of HRK 19.7 billion or 4.7 percent of GDP. General government will run a shortfall of HRK 18.9 billion or 4.5 percent of GDP, the prime minister said.

Based on the general government fiscal balance, the public debt to GDP ratio is expected to decrease by 4.2 percentage points to 83.1 percent of GDP this year.

Total budget revenue for 2022 is projected at HRK 164.5 billion, Plenković said.

The government expects continued strong growth of economic activity at a rate of 4.4 percent in 2022, 3.7 percent in 2023, and 3.1 percent in 2024.

The budget deficit is forecast at 2.6 percent of GDP in 2022, 2.4 percent of GDP in 2023, and 1.9 percent of GDP in 2024.

The public debt to GDP ratio is expected to decline to 83.1 percent of GDP in 2021, 80.7 percent in 2022, 78.0 percent in 2023, and 75.3 percent of GDP in 2024.

This indicates that in the period considered Croatia will meet the fiscal convergence criteria for joining the euro area, the prime minister said.

"Before the outbreak of the crisis, government policies were focused on achieving macroeconomic stability by laying the foundation for sustainable economic growth and stable public finance. Its policies were recognized by international financial institutions and rating agencies, which have upgraded and maintained Croatia's credit rating at investment grade despite the negative consequences of the pandemic," Plenković said.

He said that all this had given Croatia fiscal room for crisis response, adding that the projected growth rates for this and next year showed the strength and resilience of the Croatian economy.

(€1 = HRK 7.521247)

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October the 22nd, 2021 - Economy Minister Tomislav Coric has attempted to reassure the public that the government is willing to do all it can to deal with the situation around increasing fuel prices.

As Poslovni Dnevnik/Suzana Varosanec writes, the government is considering additional measures in case of continued increase in fuel prices after 30 days of direct intervention in the market through the adoption of a decree on the matter, and according to the Minister of Economy and Sustainable Development Tomislav Coric, there will be a slightly fairer distribution of responsibilities to come.

According to Tomislav Coric, in the coming weeks, the Croatian Government will analyse the situation, and although they hope to reduce prices, he says, at the moment it isn't expected that this will happen soon, so the concrete actions of Banski dvori are again set to be guided by allowing the price to remain stable and trying to ensure a “fairer distribution of responsibilities that is initially at the disposal of distributors”.

By freezing prices for a period of thirty days, the main aim was for companies and residents to be able to "catch their breath and stabilise their expectations'' in the current situation.

According to Prime Minister Andrej Plenkovic, distributors' margins are high enough to take on this "first wave" of price increases, which, according to the calculations( for diesel fuels that businesses predominantly use) at today's prices means encroaching on margins of 63 lipa per litre of diesel fuel.

The government's move in the first wave is considered to be correct because it has temporarily stopped a whole series of price increases, according to consultant Davor Stern.

In addition, oil circles are speculating about possible government moves which are yet to come, including the possibility of correcting a systemic injustice without interfering with the tax system by amending the basis for calculating VAT, which would result in lower prices for the end users.

In this sense, if the calculation were done on the price of fuel, and with excise duties from which fees on roads and railways are exempted, such a base would result in a reduction in prices overall.

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