April the 2nd, 2021 - The number of Croatian emigrants in Germany has doubled since Croatia joined the European Union (EU) back in July 2013 and freedom of movement laws became applicable to the country.

As Poslovni Dnevnik writes, there were 426,845 Croatian emigrants in Germany last year, which means that the number of Croatian citizens in that country almost doubled after Croatia's accession to the EU because there were 224,971 of them registered there back in 2012, Vecernji list reports.

According to the National Statistics Office in Wiesbaden, Croatian emigrants in Germany are in 6th place when it comes to foreign immigrants after the citizens of Turkey, Poland, Syria, Romania and Italy. Last year, 26,335 Croatian citizens immigrated from Croatia to Germany.

In the pandemic dominated year, Germany had the lowest influx of foreigners, but the question is how comforting it is that fewer Croatian citizens emigrated last year, especially compared to the worst years of exodus in 2018, 2017, and 2016 when, according to the precise German statistics, more than 50,000 Croatian citizens arrived in Germany.

Political scientist and historian Tado Juric from the Croatian Catholic University predicts that due to the change in the way of working brought about by the pandemic, which will increasingly lead to more and more remote work, the emigration of Croats to Germany could stop within around five years, and some of those previous Croatian emigrants in Germany could also return.

"The West won't give up on importing labour for some time to come as a key measure in rebuilding its population. But even that will not last forever. Under the influence of the fourth industrial revolution, which gained unprecedented acceleration with the appearance of the coronavirus crisis, a completely new form of economy was created.

Teleworking will replace many jobs in such a way that after the socialisation of workers and students, which we're only just witnessing, many occupations will move into the field of teleworking. That means that a worker from Moldova, for example, will do from his apartment what a Croat is doing now in Stuttgart. My assessment is that in five years, due to this complete transformation of the way of working that teleworking brings, emigration from Croatia will stop, but there will also be a bigger return of former emigrants home,'' said Juric.

For more on Croatian demographic issues, follow our politics page.

March the 18th, 2021 - An opportunity for Croatian entrepreneurs is coming up on July the 1st this year as EU web store and e-commerce changes are on the cards.

As Suzana Varosanec/Poslovni Dnevnik writes, the flourishing of the online world and e-commerce under the influence of the ongoing coronavirus pandemic is continuing to alter the habits of consumers, and thus regulates regulators to simplify procedures, which is exactly the case in the European Union (EU) where the web shop business system is set to be significantly simplified beginning on on the 1st of July.

According to auditor Dubravka Kopun, the forthcoming EU web store changes will probably contribute to greater exchange within the bloc, but they raise the question of whether the amendment of the EU VAT Directive is a real opportunity for Croatian entrepreneurs and whether they can increase their exports as a result. Namely, Croatian taxpayers will be positively affected by these upcoming EU web store changes when they deliver goods at a distance to customers or other non-taxpayers (from Croatia to the EU), who are obliged to determine whether they must calculate any VAT placed on the item from the destination EU member state in which the delivery arrives.

“Starting from July the 1st, this process will be significantly simplified through the One Stop Shop system, which means that deliveries must be subject to the VAT of the EU member state where the goods are delivered to either citizens or to other non-taxable persons, but this doesn't require registration in every EU country. An exception has been made for small entrepreneurs, who don't have deliveries exceeding 77,000 kuna (excluding VAT) on an annual basis, and in that case such entrepreneurs charge Croatian VAT regardless of where their end customers are from," explained Kopun.

All other entrepreneurs, he says, will be obliged to calculate the VAT of the EU member state to which they're delivering their goods, and for this it will be enough just to register with the Tax Administration in Croatia. The indebtedness and payment of VAT for each individual EU country will be "at the expense of the Croatian Tax Administration, which further redirects these funds (after mutual compensations) to the tax administrations of other EU member states."

"Some EU member states have announced separate applications from companies before the start of sales in individual countries, which is why it is necessary to first check whether there are special provisions related to prior notification, and provisions relating to the appearance of the output invoice issued in each member state," warned Kopun, pointing out that regulations are still being prepared, but Croatian entrepreneurs, as well as those from other member states will certainly have to register in these jurisdictions before they start selling items online.

Online shopping is a form of distance selling where goods and services are offered to potential buyers through means of remote communication, and the goods are delivered to the buyer directly by the seller or through an intermediary. Since the beginning of the restriction of business activities due to the COVID-19 pandemic, interest in e-commerce has grown significantly. Figures on this topic around the world have and continue to confirm this.

“Current projections of American consumer habits for example suggest that by 2023, as many as 91 percent of the total population will be shopping online. Therefore, the opening of e-commerce during this pandemic period is certainly crucial for both the short-term and long-term strategic achievement of business goals," said Kopun.

For more on Croatian entrepreneurs, follow our business section.

March the 14th, 2021 - From being one of the best countries in the entire world when it came to handling the coronavirus pandemic to one of the worst and almost back again, it has been a rollercoaster ride for Croatia as the spread of the novel coronavirus and its accompanying variants continues. Despite the much talked about vaccine finally being here, things are not going smoothly in a deeply embarrassing twist for the EU, and the EU vaccine share is leaving Croatia in the lurch.

As Poslovni Dnevnik writes, the Republic of Croatia is one of the biggest losers when it comes to the distribution of vaccines within the European Union, ie it is one of the countries that are most deprived of the delivered doses of vaccines in relation to the number of inhabitants, with only Latvia and Bulgaria being worse off than us.

The calculations of well-informed EU officials, who for obvious reasons wished to remain anonymous, show that Croatia would be deprived of almost 150,000 doses of the coronavirus vaccine in such a distribution, and the real result of that deep inequality will be seen only in the second quarter, Vecernji list reported. At the same time, some countries are profiting greatly from these strange calculations of doses and arrangements within the Vaccination Steering Committee, a body set up by the European Commission (EC) to help them.

Although EU member states have agreed that the distribution of vaccines is key, in terms of population, which is only fair and correct, the data shows that this principle is not being respected in reality. Croatia, whose population accounts for 0.91 percent of the EU's total population, had received 394,170 doses by March the 9th, which represents a negative trend even at that early stage of the EU vaccine share/rollout.

The delivery rate for each EU country in relation to the number of inhabitants shows that Croatia would be in the red by as much as 27 percent, which - translated into a vaccine - would mean 148,522 doses less than it deserves, according to data collected by EU officials which Vecernji was privy to.

The worst of all is Latvia with a negative rate of 62 percent and a deficit of 158,946 doses, Bulgaria with a minus of 59 percent and less than 545,281 doses, followed by Croatia. At the top of the scale in terms of the EU vaccine share, among the winners, is Malta, which is in the ¨plus¨ with an enviable rate of 155 percent, Germany with 11 percent and Denmark with 10 percent.

The problem of unequal treatment and deviation from the agreement was warned of recently by no less than Austrian Chancellor Sebastian Kurz, who pointed a finger directly at the Vaccine Steering Committee, boldly and openly calling it "a bazaar where vaccines are traded."

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March the 9th, 2021 - About 40,000 Croatian citizens made a living from working on online platforms back in 2019, and such work should finally be regulated, Vecernji list writes on Monday. Could this result in better Croatian working conditions for thousands of people?

As Poslovni Dnevnik writes, the European Commission (EC) launched the first phase of consultations with European social partners back during the middle of last week on how to improve the working conditions of people working through digital work platforms.

The start of that consultation coincided with a historic ruling in Milan in which Italian courts ordered four large food delivery companies to employ more than 60,000 delivery workers and pay more than 700 million euros in fines for failing to provide them with adequate working conditions.

Similar lawsuits have been filed in other European countries, including Spain, Switzerland and the United Kingdom, and there are more and more judgments being handed out in which courts side with the workers, who to date have mostly been drivers and delivery people. France was the first in the EU to legally oblige companies that built their business empires through digital platforms to pay their workers who work through these platforms insurance in the event of an accident at work, but even in France their employment status is not fully defined.

Political action was launched from the very top of the EU to establish clearer rules for this proverbial game. The public consultation on the topic will last at least six weeks, during which employers' associations and trade unions will present their views "on the need and direction of possible EU action to improve working conditions through [online] platforms".

Many of these platforms are also available in Croatia and thousands of suppliers are engaged through them, and the EU-level move could lead to far better and more secure Croatian working conditions for those making a living in this way.

The Croatian Ministry of Labour also announced that the forthcoming amendment to the Labour Law will also apply to those who conduct their work through online platforms, and pointed out that Croatia will also look for a way to provide certain protection to people who work in this way, reports Vecernji list.

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February the 19th, 2021 - Croatian Finance Minister Maric has spoken of his confidence of how Croatian negotiations are progressing in relation to the payout of European Union (EU) funds.

As Poslovni Dnevnik writes, Finance Minister Maric has stated that intensive communication is being undertaken and is currently taking place, with 45 meetings having been held so far with all departments involved in them. 

''Just as it is for all European Union member states, Croatia is obliged to send the final version of the document regarding their payout by the end of April this year,'' stated Finance Minister Maric.

"After that, there will be a process of evaluation of the document by the European Commission, and the Council needs to say something on those lines too, and then, accordingly, programmes will be approved for everything that will be written inside it," he added.

In the Croatian state budget itself, he noted, the vast majority of these funds aren't there yet and Croatia has no plans to make space for that. However, he added, the country can count on the fact that according to the latest information we have on a thirteen percent advance for the first year of use of the total amount of grants for 2021,'' as was reported by HRT.

"Most importantly of all, the document is significant in itself, but its implementation is even more important. Most of them are grants and I think we negotiated it very well and we have an above-average share of grants. For the most part, those 6 billion come from the Recovery and Resilience Fund.

The European Commission's remarks aren't only directed towards Croatia, but towards all countries for which the relationship between investment and structural reforms related to recovery must be more evenly coordinated. We'll use loans if necessary, but of course the focus is on grants,'' concluded the Finance Minister Maric before the government.

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February the 16th, 2021 - A few Croatian projects from very different parts of the country, stretching from the coast to continental Croatia, are all in line to win the EU Mies Award. One Sibenik-based project stands out.

As Marija Brnic/Poslovni Dnevnik writes, the completion of "Sibenska Poljana" about half a year ago in the historic Dalmatian coastal city of Sibenik provoked various reactions and speculation about whether or not the project involving the main town square was the best, but for the European Commission (EC) and the Mies van der Rohe Award, it deserved a nomination for the most important European award for modern architecture, the ''EU Mies Award 2022.''

There can be no argument that Croatian projects often do very well, but the aforementioned Dalmatian city's urban mobility project, which also solved the problem of parking in the old town of Sibenik worth as much as 99 million kuna in total, has caught attention.

The project was co-financed with money from the Cohesion Fund, and was designed by a team of architects from the Dubrovnik Atelier Minerva, while Split's Lavcevic, Brodosplit and Kamen from Pazin were in charge of its actual realisation

Sibenska Poljana is otherwise one of a few Croatian projects of a total of 449 projects that have been nominated so far. The finalists will be selected a year from now in February 2022 and the winner will be chosen in April.

In addition to Sibenska Poljana, other nominated Croatian projects include the Seecel buildings in the Croatian capital of Zagreb, the Galic winery from Kutjevo, Rural household on Hartovski vrh in Zumberak, the Zadar-based project "four houses for four brothers", the Motovun winery and Roxanich hotel, the Grand Park Hotel in Rovinj, the Ivanja Elementary School Reka, the renovation of the Urania cinema in Zagreb, and Trg tradicijskih obrta (Traditional crafts' square) in the northern Croatian town of Varazdin.

Total Croatia News recently published the first extensive article to cover all of the Croatian entries for the Mies van der Rohe Award. You can check out all of these amazing Croatian architectural achievements here

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January the 15th, 2021 - The United Kingdom has officially left the European Union (no, really this time) and its transition period which ran until December the 31st, 2020, has now ended. The UK is now a third country and that carries implications for its citizens. How are Brexit Brits in Croatia affected and how can they secure their legal residence status? 

I have been covering residence rights, citizenship and all things Brexit for a while now, and with a number of in depth articles easily accessible and regularly updated, I thought it would be best to do a quick and simple one on how Brexit Brits in Croatia can make sure their residence and other related rights go unaffected now the UK's transition period has drawn to a close.

I recently wrote an article explaining the ins and outs of the Withdrawal Agreement, you can read that here. Now let's get down to business by outlining some basic points which can be read about in more detail in the aforementioned link.

1) If you were resident in Croatia (legally) before the end of the UK's transition period - you are protected by the Withdrawal Agreement and can stay, enjoying broadly the same rights as you did before.

2) You do not need to apply for a new residence status, you are merely registering the fact that you are covered by the Withdrawal Agreement and as such as obtaining a new ID card which no longer has the letters EGP (Europski gospodarski prostor/European Economic Area) on it, but Article 75 (the law you are now protected by). The system is one of declaration pursuant to Article 18, paragraph 4 of the Agreement.

3) Once you have permanent residence as a British citizen covered by the Withdrawal Agreement, you are free to be absent from Croatia for five consecutive years without losing any of your rights.

4) Family members (such as current spouses and registered partners, parents, grandparents, children) may join their family member in the future.

5) Children born after the transition period will also be protected by the Withdrawal Agreement, wherever they are born.

Now that is out of the way, let's look at just what you need to do. As explained by MUP, you are protected and covered by the Withdrawal Agreement but you still need to take a few administrative steps which should be painless (I know, I can hear the laughter). Let's look at what you need to do.

The residence status of British nationals and their family members will be regulated pursuant to Article 18, paragraph 4 of the Agreement (which is a declaratory scheme). Accordingly, British nationals and their family members who are subject to the Withdrawal Agreement will not be obligated to apply for a new residence status as a requirement for their legal residence in Croatia. Rather, a declaratory system will be applied on the basis of which British nationals and their family members will have a residence status on the basis of the very fact that they meet the conditions laid down in the Agreement and will continue to have the said status for as long as they meet these conditions. This means that their residence status is not subject to the constitutive decision of the competent authority.

The conditions of residence are, and will remain, the same as those under current European Union law on free movement. In essence, British nationals meet these conditions if they are any of the following:

1) Workers or are self-employed.

2) Are enrolled at a private or public establishment, for the principal purpose of following a course of study, including vocational training; and have health  insurance and sufficient resources for themselves and their family members.

3) Have sufficient resources and health insurance.

4) Are family members of another person who meets these conditions.

5) Have already acquired the right of permanent residence and are therefore no longer subject to any conditions.

So how do Brexit Brits go about registering for their new ID cards under this declaratory scheme? 

If you already hold permanent residence in Croatia:

If you're already a permanent resident (you have lived in Croatia lawfully for five years or more), you are no longer subject to any conditions and you will need to send a copy of your valid passport or travel document (this can be an ID card but if you're British you'll know this isn't really a thing in the UK) and fill in Form 9B. You will need to send these documents in PDF form via email to the administrative police station responsible for your area/for the area in which your permanent residence is registered.

If you have acquired the right to permanent residence but have never registered and as such don't have a residence card, you will need to demonstrate sufficient evidence that you have lived in Croatia for five years or more and still do.

A list of administrative police stations and their email addresses and contact numbers can be found at the bottom of this page.

If you hold temporary residence in Croatia:

If you're a temporary resident (you have lived in Croatia lawfully for less than five years), you will need to fill in Form 7B and send a copy of your valid passport/travel document, you will need to send these documents in PDF form via email to the administrative police station responsible for your area/for the area in which your temporary residence is registered.

If you have never registered and as such don't have a temporary residence card, you will need to demonstrate sufficient evidence that you have lived in Croatia in line with the EU's freedom of movement laws and still do.

A list of administrative police stations and their email addresses and contact numbers can be found at the bottom of this page.

If you're the family member of a British national covered by the Withdrawal Agreement:

If you're the family member of a British national (you obtained the right to live in Croatia as the family member of an EEA citizen) you will need to fill in Form 8B and send a copy of your valid passport/travel document, you will need to send these documents in PDF form via email to the administrative police station responsible for your area/for the area in which your residence as the family member of an EEA/British national is registered.

If you have never registered and as such don't have a temporary residence card, you will need to demonstrate sufficient evidence that you have lived in Croatia in line with the EU's freedom of movement laws as the family member of an EEA/British and still do.

A list of administrative police stations and their email addresses and contact numbers can be found at the bottom of this page.

I don't have a residence card/resident status, what documents should I present?

A work contract, certificate of employment issued by the employer (clearly stating employment period, OIB, seat of the company), proof of self-employment.

Proof of enrollment at an establishment for following a study, including vocational training.

Rental agreement or property sale contract, or title deed.

Utility bills, bank statement covering certain period.

Proof of covering health insurance costs/using health insurance.

Documents proving family ties.

Narodne Novine also explains what documents are needed if you want to read it in Croatian.

British citizens living in Croatia have until the 30th of June 2021 to register. They will not lose any rights if they fail to do so, but they may face an administrative fine if they fail to meet the deadline.

December the 15th, 2020 - You might remember the mammoth article I did a couple of years ago on the minefield which is Croatian residence procedures. I'm going to do a brand new one as opposed to constant updates to that one. The Croatian Law on Foreigners, often somewhat amusingly referred to as the Aliens Act, is an extensive document full of legal jargon and references to Articles that most (normal) people have somewhat of an allergic reaction to. For some unknown reason, I don't, so I'm going to explain the changes due in 2021, one by one. 

I'm not going to cover anything that has already been written about extensively in the article linked above, and instead only detail changes that are due in 2021.

Please note that the procedures for some of these new residence permits and new rules haven't yet been set in stone, therefore I'm not going to detail any application procedures until they officially become law (and that means appearing in the infamous Narodne Novine). Anything else would be hearsay and lead to confusion in what is already a needlessly headache-inducing process for many people.

BRITISH CITIZENS LIVING IN CROATIA

First of all, let's address the question on the lips of every ''Brexpat''. British nationals who hold regulated, lawful residence (be that temporary or the more desirable permanent status) are entitled to remain living and working in Croatia broadly as they did when the UK was an EU member state. I will summarise the main points of this article (which I absolutely encourage you to read very thoroughly if you're a British expat in Croatia).

1) Brits who hold residence before the end of the transition period are safe - If you are a British citizen and you hold legal residence in Croatia, you are covered by the Withdrawal Agreement which entitles you the right to continue living in Croatia. These are acquired rights derived from you having exercised your right to freedom of movement as a former EEA citizen.

2) A declaratory system, not a new application - You will need to exchange your existing residence permit (be it temporary or permanent) for a new card before the 30th of June, 2021 at the police administration/station responsible for your location of residence. This is not a new application, merely an exchange to a card which will state that you are the holder of the rights afforded to you by the entering into force of the Withdrawal Agreement. Those documents will be issued either free of charge or at a cost not exceeding that paid by Croatian nationals for similar documents.

3) All time spent living legally in Croatia is counted towards being granted permanent residence - For those Brits who don't yet have permanent residence in Croatia and are still waiting for their five years of temporary residence to pass before applying, you're safe. Croatia will count all time spent on your temporary residence permit (from before and after the end of the UK's transition period) towards granting you permanent status. For those who already hold permanent residence, nothing will change for you other than what was explained in point 2 (above).

4) Brits who move to Croatia after 01.01.21 will not be covered by the Withdrawal Agreement - Acquired rights here refer to British citizens who utilised EU law in order to live in Croatia only. British citizens who move following the end of the UK's transition period will not be covered by the Withdrawal Agreement and different rules will apply to them as they will be treated as third country nationals.

5) Brits who are covered by the Withdrawal Agreement and hold permanent residence can leave Croatia for 5 years in a row without losing their rights - If you're a British citizen and you have permanent residence in Croatia or indeed any other EEA country, you can be absent for a period of up to 5 consecutive years without losing your status as a permanent resident.

As I stated, I really encourage you to read this article in order to find out about your status, rights and things you need to do in much, much more detail. The article also explains and links domestic and EU law, as well as that set out in the Withdrawal Agreement, which can be read in full in PDF form here should you want to know even more.

Let's move on to other changes due in 2021.

DIGITAL NOMADS:

I'm no dinosaur, but I have to admit that this term always makes me grin a little bit. I'm not entirely sure why because as a translator, I too am location independent although I live permanently in Zagreb. The idea of working from anywhere is something that was unfathomable not so long ago, but alas - this is the modern way, as the Kaiser Chiefs might say. Much has been written by TCN about this, and we even have a digital nomad currently in Croatia writing for us and providing an insight into her experiences so far. You can read her work here.

Jan de Jong, a Dutch entrepreneur living in Croatia, managed to get the ball rolling for the up and coming digital nomad visa. He has since formed a digital nomad association and you can read about the ins and outs of that, as well as the story behind the visa here and here.

It all started with an open letter from Jan de Jong on LinkedIn addressed to Prime Minister Plenkovic, and the rest is history. As of 2021, a new category of residence permit will be ''born'' and it will be precisely for digital nomads. There are some catches which make it a bit tricky, and there will certainly be things which need to be ironed out. One clause is that a digital nomad cannot work for a company registered in Croatia.

As soon as more is officially available as 2021 arrives, we will update you with a detailed guide on 1) precisely who Croatia will consider to be a digital nomad, 2) what they need to present to evidence that, and 3) what they need to do to apply for this new temporary residence status in Croatia.

The digital nomad visa is an evolving story (here is the December 15, 2020 article on the new tax law regarding nomads, for example). You can follow the latest in the dedicated TCN digital nomad section.

THIRD COUNTRY NATIONALS (NON-EEA, NON-SWISS CITIZENS) WHO HOLD PERMANENT RESIDENCE IN THE EEA

You can find out the procedures for third country nationals who already hold residence in another EU/EEA member state or indeed in Switzerland here (scroll down to the heading: What if you're a third country national with approved permanent residence in another EEA country already?

2021 will bring new procedures for third country nationals who already hold permanent residence (please note that this is only permanent residence, not temporary residence) somewhere else in the EEA who want to move to Croatia. It is important to note that it has always been easier for third country nationals with established, long term (permanent) residence in an EEA country to move to another EEA country, but the rules vary from member state to member state.

Until 2021, if you want to stay in Croatia for longer than three months (before the expiration of the visa or residence card issued to you by another EEA country) you can apply for a temporary residence permit at your local police station in Croatia, or in the Croatian consulate of the EEA country which approved your permanent residence there. The application can be found here.

The new Croatian rules for such individuals due in 2021 aren't yet available. When they are updated in the Croatian Law on Foreigners and published on Narodne Novine, we will be sure to provide an update with all of the relevant information, advice and instructions.

MEMBERS OF THE CROATIAN DIASPORA WHO DO NOT HOLD CROATIAN CITIZENSHIP

It can often be heard how difficult it is for those with Croatian heritage who don't have Croatian citizenship to get their hands on that little blue passport. As with all administrative processes in Croatia, it can either be so easy that you're sure someone somewhere has missed something, or so needlessly difficult that it leaves you rocking in a dark corner, surrounded by thousands of copies of your birth certificate. The Croatian Law on Foreigners has (finally) seen that this is an issue, and a new residence permit for people with Croatian heritage but no Croatian citizenship is coming in 2021.

In order to be approved for this new residence permit coming next year, you'll need to be issued a special certificate from The Central State Office for Croats Abroad (click here for more), along with an application and other, accompanying documents which will certainly involve proof of identity etc, which haven't yet been detailed. The Ministry of the Interior hasn't yet finalised what needs to be done for people who want to apply for this particular residence permit. By the time 2021 rolls around, things will hopefully be more clear and we will provide a detailed update on what is needed.

For more on residence, citizenship and administrative procedures related to the Croatian Law on Foreigners, you can follow me here.

November the 21st, 2020 - The famous 22 billion euros from Brussels has an additional sum attached to it in the shape of aid for the negative consequences caused by the ongoing coronavirus pandemic, and this marks a truly historic chance for the Croatian economy.

As Poslovni Dnevnik/Iva Boban Valecic writes, after two months of painstaking negotiations at a summit in the Belgian capital, Plenkovic announced that 22 billion euros will flow into Croatia when the new seven-year EU budget was finally agreed in July.

In addition to this budget, a fund has been agreed from which the financing of the consequences of the coronavirus crisis will be financed. The total value of both documents are eyewatering amounts, but what made this deal be immediately referred to as historic is not the dizzying amount itself, but the fact that massive joint EU borrowing was agreed for the first time.

In the arduous negotiations that preceded this agreement, the frugal quartet, Austria, the Netherlands, Denmark and Sweden, which were called European misers for opposing joint borrowing, had to be broken.

At the insistence of these countries, the ratio between grants and loans that will be available to EU member states in favour of borrowing has changed, so about half of the total money to overcome the economic, health and other consequences of the coronavirus crisis will be allocated non-refundable funds and half soaked up by borrowing.

Almost 6 billion euros in grants and another 2.35 billion euros in soft loans will be available to Croatia from the new recovery instrument, which is an unpecedented opportunity for the Croatian economy. The good news for Croatia was also brought about by the agreement on this new financial perspective.

Over the next seven years, additional money is planned for less developed regions and rural areas, but also for demographics, which Croatia insisted on during the negotiations. An additional benefit is that the earlier rate of the co-financing of projects from the European budget of 85 percent for less developed regions has survived, although some countries have insisted that it be reduced and the national component raised to 30 percent. According to some calculations, Croatia will therefore save 6 billion kuna over the next seven years.

There is also the famous "N + 3" rule, according to which money can be absorbed three years after the year in which the budget commitments are made, which also goes in the Croatian economy's favour.

The realisation of this agreement, however, is going through difficult trials. The final adoption of the package in the European Parliament is currently being blocked by Hungary and Poland, dissatisfied with the fact that project funding is linked to the rule of law in EU member states.

The realisation of the European budget will probably be delayed because of that, but there is no doubt that an agreement will be reached in the end.

In the meantime, it is important for Croatia to prepare well for the withdrawal of money that should be available to it, because this very generous envelope requires additional effort from the usually ill-prepared domestic administration, which must work on concluding projects from the financial perspective and prepare strategic documents for withdrawing money from the Mechanism for recovery, as well as 12.7 billion euros from the EU budget.

As a first precondition for withdrawing this money, the Croatian Government recently identified a proposal for a National Development Strategy for the next ten years.

The National Recovery Plan, which will enable the withdrawal of money from the Recovery Mechanism, should also be based on this strategy. It should be borne in mind that such plans will also be adopted by other member states, and large and economically developed countries will certainly incorporate the interests of their own producers.

Although agreement at EU level is largely in favour of less developed members, their technological backwardness is a burden, especially given that a high share of green and digital transformation projects will be required from projects in the Recovery Mechanism.

Therefore, as economist Zeljko Lovrincevic recently warned, the Croatian economy is threatened by a scenario in which as much as two thirds of that withdrawn money could flow to the west through technology, and to the east through labour, which is also very much insufficient in Croatia.

The government will therefore have to take care to support the interests of the Croatian economy as much as possible through the National Recovery Plan and the policies that will result from it, because the historic chance that Croatia has through these mechanisms could otherwise turn into yet another historic fiasco.

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As Novac writes on the 25th of September, 2020, in addition to Croatian economic recovery, the withdrawal of money from European Union funds, including the new New Generation instrument, will have a decisive impact on budget movements, not only next year, but throughout the projected period until 2023. Will EU cash be the saviour in this crisis situation? Probably.

The total budget revenues, as stated in the guidelines for drafting the budget presented by the Minister of Finance Zdravko Maric, will amount to 147.1 billion kuna next year, which is 25 billion kuna more than this year. Compared to back in 2019, they increased by seven billion kuna. Revenues from aid are growing the most, and they're mostly related to EU cash: they will amount to 25.1 billion kuna, 7 billion kuna more than this year, and compared to 2019, they will increase by as much as 10.3 billion kuna. Of the other revenues, the level from last year, also known as the pre-crisis year, should almost reach the revenues from the VAT, with a growth of 23.9 percent and will amount to 54.1 billion kuna, only 700 million kuna less than last year.

Mainly due to the increased withdrawal of money from EU funds and the availability of that EU cash, the Croatian Government will be able to afford an increase in expenditures of 10.4 billion kuna (7.1 percent), so it will amount to a total of 157.6 billion kuna. Expenditures for material things will grow the most, by 16.6 percent or 2.3 billion kuna, and most of this increase will be financed from EU cash. For these needs, 9.1 billion kuna will be withdrawn, 1.8 billion kuna more than this year, and it will be used for "repairing the damage caused by the Zagreb earthquake and on material expenditures in state-owned health care institutions", as well as on other projects and activities within the Competitiveness and Cohesion Operational Programme.

Another important expense for the state budget is the compensation of revenues to local units due to the reduction of income tax. The government has earmarked 2.2 billion kuna for this purpose. A total of 33.6 billion kuna will be spent on budget aid next year, which is 6.5 billion kuna more than this year. In addition to assistance to local units, this increase includes additional allocations for contributions to the EU budget, then equalisation funds for decentralised county functions, as well as expenditures for employees, and it will increase by 377.7 million kuna when compared to 2020.

When it comes to staff expenditures, the government is clearly counting on successful negotiations with the unions. These expenditures are planned in the amount of 23.6 billion kuna, which is 1.3 billion kuna more than this year.

Expenditures for pensions, as a result of regular adjustment, will increase by 1.2 billion kuna, and social assistance funds will increase by 407.5 million kuna.

Having in mind the experience from the past few years, which shows that the withdrawal of EU cash is significantly less than planned in the end, the question arises as to how realistic it is to expect that the government will manage to achieve these rather ambitious announcements in 2021. Danijel Nestic from the Institute of Economics says that there is indeed a systemic problem in budget planning and that revenues from European Union funds are constantly overestimated.

''As these revenues are lower than planned in the end, the expenditures for which they're planned are also reduced. This doesn't affect the increase of the deficit, which is certainly very important for the Ministry of Finance, but the fact is that better planning is necessary in case of withdrawal of EU cash,'' explained Nestic, adding that he isn't ruling out the possibility that the planning for such things has been improved.

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