ZAGREB, 15 Oct 2021 - Independent member of parliament Karolina Vidović Krišto said on Friday she had collected signatures of 34 lawmakers for her initiative to launch a no-confidence vote in Finance Minister Zdravko Marić because he had stayed on a yacht owned by a private businessman this summer.

Vidović-Krišto said that she was glad that the initiative was supported by 34 MPs from different ideological groups.

"This is great news for citizens, as the MPs have overcome their partisan frameworks and are fighting for the common good, and that is the fight against corruption," she told a news conference in the parliament.

She said that when it came to the Opposition, only lawmakers from the We Can party and the Istrian Democratic Party (IDS) had not signed her petition.

Vidović Krišto accused Marić of serving "the interests of power centres" rather than working for the benefit of Croatian citizens.

The case of Marić staying on a yacht of a businessman grabbed the limelight in mid-August after some media outlets started speculating whether the minister's short travel on a private yacht constituted a conflict of interest.

The minister said then that the yacht was owned by his friend Blaž Pavičić and that Pavičić had not used any tax breaks or a loan from the Croatian development bank (HBOR) and that he had no tax debt written off during Marić's ministerial term.

During today's news conference, Vidović Krišto accused Marić of lying that the businessman concerned had no business deals with the Croatian state.

She criticised Prime Minister Andrej Plenković for his failure to sack Marić over this case, and accused the prime minister of ignoring the Croatian laws, obstructing the Croatian institutions and disenfranchising the Croatians.

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ZAGREB, 29 Sept, 2021 - Finance Minister Zdravko Marić told a press conference on Wednesday that the money from the National Recovery and Resilience Plan (NPOO) would be granted only to those that met all the criteria.

The European Commission on Tuesday disbursed €818 million to Croatia in a pre-financing payment under the Recovery and Resilience Facility (RFF), which is equivalent to 13% of the country's total financial allocation under the RRF.

Marić said that the government had agreed the pace of expenditure and implementation of reform and investment measures. He said he expected at least 50 projects to be prepared by the end of the year, adding that they concerned digital transformation and the transition to green transformation in the industrial sector. 

"Who will get these funds will depend on tenders and fulfilment of the criteria," the finance minister said.

He announced tenders for the construction of kindergartens and schools, and said that individual projects, such as development of autonomous vehicles by the Rimac company, were also important.

Before the end of this year or early next year, there will be additional tenders for the award of grants for energy efficiency and further green transformation, and some of the funds will also go towards post-earthquake reconstruction, he said.

Asked about the possibility of Croatia losing some of the money because of problems with public procurement, Marić said that public procurement must be efficient because "projects are subject to deadlines, and speed and efficiency are the key."

He noted that the Croatian public procurement law is the most complicated in the EU and needs amending.

Asked who can apply for NPOO funding, Marić said that in the context of the manufacturing industry those would be small and medium-sized businesses, notably those that would contribute to green and digital transformation.

"Funds will be disbursed to all those that fulfil the criteria and requirements," he said, adding that funds would also go towards development of the telecommunications network.

"This 13 percent of the allocation has now been paid, the next €700 million will be paid by the middle of next year and a further 700 million by the end of next year. We need to carry out 34 measures until the end of this year. Some have already been implemented, while some have certain risks," Marić said.

"The next tranche will depend on how many measures have been fulfilled. If we fulfil all 34 measures, €700 million will come in, and if we don't, there will be a certain correction to this amount," Marić concluded.

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ZAGREB, 22 Sept, 2021 - Inflation should be taken very seriously because of the criteria for introducing the euro as well as living standards, Finance Minister Zdravko Marić said on Croatian Radio on Wednesday.

Asked if inflation would threaten Croatia's entry into the eurozone, he said next year's budget deficit would again be within 3%, which would mean that the cost of COVID-19 of over HRK 35 billion would be almost totally a one-off.

The public debt-to-GDP ratio is again decreasing this year already, he added.

He said that inflation, one of the criteria for introducing the euro, had become a topic in recent months and that it must be a maximum 1.5% more or less than in the three member states with the lowest inflation.

Croatia's average inflation is somewhat below the EU average but Greece, Cyprus and Portugal still have very low inflation, which affects the formula for calculating the Maastricht criterion, he added.

But even with those three countries combined, he said, Croatia is still within the criteria for introducing the euro.

He said inflation was, first and foremost, affected by energy prices, oil in particular, and that this was reflected in food and construction material prices.

Speaking of fears of price rises after the introduction of the euro, Marić said that at least six months before it was announced that Croatia was entering the area, prices would have to be displayed in both kuna and euro for a year, perhaps longer.

Although the general VAT rate is not expected to be cut upon accession to the euro area, he did not rule out the possibility of cutting VAT on food.

Marić reiterated that Croatia would receive €25 billion from the EU budget in the next seven years, including €6.3 billion for its National Recovery and Resilience Plan, of which a 13% advance "is arriving in a matter of days."

Marić said he was surprised by the success of the tourism season, notably in July and August, but this month also as the amount of fiscalised receipts in tourism this month so far was up 24% from September 2019.

He announced a 2021 budget revision, alongside preparations for the 2022 budget, for mid-October.

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ZAGREB, 13 Sept 2021 - Finance Minister Zdravko Marić said on Monday that the introduction of the euro as the sole legal tender would impact Croatia's credit rating, and quoted the Fitch agency's presumption that the country's admission to the euro area would raise its credit rating by two notches.

Addressing a meeting of the National Council for the introduction of the Euro as Official Currency in Croatia, which was also attended by the EC Vice President Valdis Dombrovskis, Minister Marić recalled that the 2020 COVID-19 pandemic triggered off a rise in the budget gap, and last year the general government deficit amounted to 7.4% of the country's GDP.

This year, it is estimated at 3.8%.

According to the latest estimates, the budget deficit in 2022 will fall to 2.6% of GDP and to 1.9% in 2023, while in 2024 it is projected to be 1.5% of GDP.

Marić recalled that as a consequence of the higher budget deficit, the public debt also rose in 2020 when it reached 88% of GDP.

This year, the public debt is likely to fall by two percentage points to 86.6%, and in 2022, it is expected to be reduced by a further three percentage points.

Marić expects the public debt to be 76.8% of GDP at the end of 2024.

He announced a shift of the focus to inflation, noting that inflation trends were now present worldwide.

Croatian National Bank (HNB) Governor, Boris Vujčić, said that Croatia's admission to the European Exchange Rate Mechanism (ERM) II had brought the country under the Single Supervisory Mechanism (SSM) and it also joined the Single Resolution Mechanism (SRM).

Concerning the HNB, we are already in the bank union to a large extent. Our experience from participation in the SSM and SRM is good, we have adjusted ourselves to that, Vujčić said.

Commenting on fears of higher prices being triggered off by the euro changeover, the governor pledged the protection of consumers and good communication.

"We are preparing the code of ethics which will be offered to businesses and services to sign, whereby they undertake fair performance during the euro changeover, he explained.

We will introduce monitoring and we will use the best practices of countries that have already converted their national currencies to the euro, he said.

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ZAGREB, 8 Sept, 2021 - Finance Minister Zdravko Marić said on Wednesday a solution to current account overdrafts was expected in the days or weeks ahead and that it remained to be seen if the law would need to be amended.

He was speaking to the press after Prime Minister Andrej Plenković's meeting with representatives of banks' management boards, which was also attended by central bank (HNB) governor Boris Vujčić and Economy Minister Tomislav Ćorić.

Marić said the purpose of the meeting was to exchange information and views on current account overdrafts with a view to finding an adequate and satisfactory solution in which, he added, the government emphasised consumer protection.

He said several good proposals crystallised at the meeting, aimed at protecting social sensitivity, fairness, information and transparency as well as at reaching a solution under which authorised overdrafts would again dominate, as they are regulated by law in much more detail, much more clearly and transparently than tacit overdrafts.

The 2010 Consumer Credit Act recognises authorised and tacit overdrafts, but since 2018 the latter have become prevalent, accounting for almost 95% of all overdrafts, Marić said. Tacit overdrafts have been approved for almost 1.8 million consumers and are being exercised by 840,000.

That happened because under a central bank decision from the end of 2017, pursuant to European regulations, the calculation of the effective interest rate includes the fee for having a current account. As a result, authorised overdrafts became less available to lower income citizens and banks switched to tacit overdrafts.

Marić said a solution should be prompt but not rushed and to the benefit of all consumers. He told people living with tacit overdrafts that the government did not intend to nor would support a solution that would result in a drastic cancellation of overdrafts because that would put additional pressure on their everyday lives and livelihoods. "We'll dispel all fears that this instrument will be annulled and disappear."

A solution may be found by changing the decision within the central bank's remit, but if necessary, the law will be adjusted, he said, adding that if the former option was chosen, that would be known in the next few days, and in case of the latter, in the next few weeks. "We are really not talking about months."

The minister said it was necessary to continue to work on people's financial literacy as well as on product transparency.

Vujčić: The goal is that lowest income citizens don't lose current account overdraft option

The central bank governor said that since Croatia was the only country limiting effective interest rate on overdrafts, the inclusion of the current account fee in the rate as of 2018 resulted in the fee "swallowing" interest, primarily on small overdrafts.

He said that, for example, no interest was paid on overdrafts up to HRK 2,000 and a current account fee of HRK 12.

"We have several different regulations which produce such results and that should be put in order, so that for those with the lowest incomes, and consequently overdrafts, those products don't become unprofitable for banks and they start cancelling them."

Vujčić said the point was to return tacit overdrafts under the same regulations that applied to authorised overdrafts, without a certain number of people with the lowest incomes losing the overdraft option in the process.

"That's the point and that's what we'll do," he said, adding that it remained to be agreed on how to do it.

Croatian Banking Association (HUB) director Zdenko Adrović said that representatives of the banking sector spoke at the meeting about practices in other European countries, expressing hope that the new solution would be in line with those practices.

He stressed that there was no cap on the effective interest rate in other countries, so one of the proposals presented was for the cap on the effective interest rate to be removed and a cap on the nominal interest rate to be possibly introduced.

Adrović said that one of the proposals was for costs related to current account overdrafts to be calculated at "a slightly higher minimum amount", but noted that this was a technical solution that still had to be discussed with the HNB.

Asked by reporters how citizens would now be able to trust banks after they had switched their authorised overdrafts to tacit ones, Adrović claimed that everything was done in line with the law and that authorised and tacit overdrafts were two equal products.

He said that he "assumed" that a "vast majority" of citizens had been informed by their banks about tacit overdrafts, but that a large number of citizens, including himself, "relatively rarely" read notices about possible changes.

Marić: No reduction of VAT on food in 2022

Asked is VAT, including on food, would be lowered considering current price hikes, Finance Minister Marić said that the government had already reduced the VAT rate on some food products, including fresh meat and fish, and fruit and vegetables, and that it planned to reduce VAT on all food products during the current term in office.

But that will happen only after the necessary conditions are met, he stressed, noting that currently and in 2022 there was no fiscal room for such a move.

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ZAGREB, 2 Sept 2021 - The latest macroeconomic trends indicate the upward revision of forecasts of the growth for this year and we now can expect a 7% rise on the year, Finance Minister Zdravko Marić said on Thursday.

He recalled that the government's current forecast is five percent.

Marić said that tax revenue from 1 January to 31 August was 0.7% higher than fin the corresponding period last year while VAT was over four percent more year on year.

YTD profit tax is a little lower as against the same period last year, but that was to be expected given that that is calculated based on the results in 2020. Contributions for pension insurance were 4% higher and that is on track with what we expected, he said.

The only levy that is mildly staggering is for automobiles which he explained by the reduction in some levies and global stagnation in the automobile industry.

As far as budget revenue is concerned, in August alone the value of fiscalised receipts was almost 21% higher than they were in August 2020.

He underscored a key role of the expenditure side for the sustainability of public finances.

Asked by the press about possible inflation in autumn particularly regarding food prices, Marić said that the latest data calls for caution.

According to the latest information from the national statistical office (DZS), inflation in July amounted to 2.8% on the year, the highest rate since April 2013. Consumer prices are fuelled by industrial producer prices which in July rose by 7.9% on the year, the biggest jump since April 2011.

Marić said that inflation was to be expected given monetary concessions on the global level and the amount of money released in the system which resulted in a drop in its price which then impacted inflation pressure.

He added that he isn't sure that the price hike on food and construction material can be entirely attributed to global trends and disruptions in the supply chain.

He warned there are very few prices that can be regulated as they are mostly regulated by the market and that market development and competitiveness are a must.

He recalled that when VAT was reduced on eggs, fresh meat, fish, fruit, and vegetables, tax policies had a limited impact because even after VAT was reduced the price of these products did not decrease significantly.

He mentioned the recurring rise in the debt by hospitals and that payment deadlines are now about 180 days for hospitals, 200 days for pharmacies and that the health insurance fund had transferred about HRK 5.9 billion to settle liabilities.

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ZAGREB, 27 July, 2021 - Finance Minister Zdravko Marić on Tuesday did not accept proposals for a lower VAT rate on beverages and to treat labour costs as a tax deduction, while a representative of restaurant and bar owners said they would have to fend for themselves the best way they can regarding future challenges.

"My message to all restaurant and bar owners in the country, notably those who run bars, is that a very demanding period is ahead of us and that they will have to seek new loans and funding, despite the fact that we had yet another constructive meeting with the finance minister today. We can hope that in a couple of years we will have better working conditions because now that is not the case and we have not come across any understanding in regard to our proposals," Jelena Tabak, who heads the NUU association of restaurateurs, said after the meeting.

Marić recalled that a lower VAT rate was already in place in the tourism sector for accommodation, food and for the serving of food and that beverages were the only products for which VAT had not been reduced.

Commenting on the proposal to exclude labour costs from the base amount for the calculation of the VAT rate in the hospitality sector, the minister said that neither Croatia's nor the EU's tax systems recognised such a measure.

"In terms of taxation, labour costs are indeed recognised costs but in systems in which they should be recognised - the income and profit tax systems. We cannot mix direct taxes with indirect taxes such as VAT," he explained.

Marić recalled the government's measures to help the business sector, from lower taxes to the cancellation of individual contributions, as well as expanding the scope of nontaxable income, which, he said, had resulted in a rise in employment and wages, as evidenced by statistical data.

He recalled the government's job-keeping measures and coverage of fixed costs in the hospitality sector, stressing that data on fiscalisation showed that the hospitality sector had solid results and that the real peak of the tourist season was yet to come.

Dražen Biljan of the bar owners' association of the NUU Zagreb branch said that they were not happy that their proposals were not accepted and that lowering VAT on drinks would not cost the state too much, around HRK 400 million. It would, however, mean a lot for restaurant and bar owners, he said.

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ZAGREB, 11 June 2021 - The World Bank and the Croatian Bank for Reconstruction and Development (HBOR) on Friday signed a Loan Agreement for the HEAL Croatia Project (Helping Enterprises Access Liquidity) in the amount of EUR 200 million intended as support to businesses hit by the corona crisis and the 2020 quakes.

A press release issued by the WB and HBOR reads that "the COVID-19 crisis has caused a sharp decline in the economic activity of Croatian businesses and has had a profound effect on jobs and livelihoods."

"The pandemic disrupted firms’ production and reduced the demand for their goods and services, while the financial sector tightened lending to companies, due to rising credit risk. The crisis also exacerbated Croatia’s regional disparities and reduced credit access for young firms and for firms owned and managed by women."

The HEAL Croatia scheme "will provide liquidity and financial restructuring to firms that have been hit by the COVID-19 pandemic and by the two devastating earthquakes of 2020 and will support an inclusive and resilient recovery. "

The HEAL project will increase access to finance to firms focused on export, both small and medium enterprises (firms employing fewer than 250 people) and mid-caps firms (employing from 250 to 3000 people), as well as for firms from less developed regions of Croatia, and firms owned or managed by women. It will also increase access for young enterprises (operating less than five years).

HBOR management board president Tamara Perko was quoted as saying that the Croatian development bank is pleased " that the World Bank has recognized the significance of financing entrepreneur groups whose importance has also been recognized in HBOR's five-year strategy."

Elisabetta Capannelli, the World Bank Country Manager for Croatia, was quoted as saying that the World Bank looked forward "to a smooth and quick implementation of the HEAL Croatia project which will help preserve jobs and support household livelihoods through direct support to approximately 150 firms employing around 25,000 people."

Finance Minister Zdravko Marić, who signed with the World Bank a contract on loan guarantee, said that "the loan being signed today represents a continuation of the significant support provided by the World Bank to the Republic of Croatia since the beginning of the crisis in 2020, which is reflected in operations worth a total of EUR 760 million (including HEAL)."

"With this project, we are contributing to the further recovery of Croatia’s private sector, following the existing measures of the Government of the Republic of Croatia adopted in the context of the COVID-19 pandemic, post-earthquake reconstruction and creating foundations for future sustainability and resilience."

The World Bank has been a partner to Croatia for over 27 years and during that period the bank has supported more than 50 projects, worth almost US$5 billion, and provided technical assistance to help strengthen institutions and support the design of policies and strategies.

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ZAGREB, 2 June, 2021 - The budget revision, proposed by the government today, keeps Croatia in a safe financial zone, Finance Minister Zdravko Marić said after the cabinet's meeting on Wednesday.

The proposed budget changes set the general government deficit at 3.8% of GDP, and the government believes that this increase still keeps Croatia in a safe zone in terms of economic and other activities as well as in terms of the opinion of credit rating agencies and the European Commission, he added.

The government is committed to reducing the public debt from 88.7% to 86.6% of GDP, this year, Marić said, announcing one more revision of this year's budget.

The proposed revision, adopted today, will probably be on the government's agenda next week.

The minister said that he was looking forward to a meeting with Zagreb's new mayor Tomislav Tomašević, and that he and his team would be at the disposal of the newly elected local authorities.

"As far as Zagreb is concerned, I am sure that the mayor and I will meet to discuss several things," he said, explaining that with regard to additional borrowing, laws were clear and applied equally to everybody.

Among the topics to be discussed with Tomašević is a limit on borrowing, he said in a comment on the topic of possible new borrowing, explaining that the amount needed to service debts and cover loan guarantees this year must not exceed 20% of last year's revenue.

With regard to the purchase of fighter jets for the army, Marić said that the government would be guided by pragmatic criteria only. Therefore, a certain amount could be paid as an advance this year, he added.

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ZAGREB, 25 May, 2021 - The Croatian Employers' Association (HUP) has proposed measures for maintaining liquidity and launching private investments which include retaining jobkeeping measures and covering a portion of fixed costs, ensuring favourable loans and prolonging loan maturity.

In expectation of COVID measures and lockdown of businesses being lifted, HUP addressed Finance Minister Zdravko Marić and underscored that maintaining liquidity is not only relevant during the lockdown period but should be extended for a longer period, and that recovery can only be possible if investments are boosted.

HUP proposes that jobkeeping measures be extended even after busines restrictions are lifted until such time that  all enterprises generate at least 90% of their pre-pandemic revenue in 2019. HUP believes that abolishing support measures for the economy should be gradual, depending on the epidemiological situation, but also on the circumstances in each individual sector so that Croatia is not faced with a wave of bankruptcies and layoffs.

HUP also calls for a portion of fixed costs to continue to be covered, taking account of the percentage revenue has decreased, and for facilitating access to loans for liquidity and working capital, including guarantee schemes for micro, small and medium-sized enterprises.

HUP advocates possibly transforming a portion of loans into grants and for the moratorium on loan maturities to be extended for existing loans, along with state guarantees, at least until the end of this year and longer if need be, based on transparent criteria.

HUP proposes additional support loans for exporters and enterprises investing in the 4.0 industry, and support for investments by large companies through increased support for EU co-funded projects.

It also recommends the possibility of deleveraging debts between companies to prevent a chain reaction, and for non-recoverable loans to be identified faster, as well as speeding up bankruptcy procedures, and introducing additional tax cuts.

"We believe that government subsidies to cover the disrupted economic activities due to the COVID crisis should continue until such time that enterprises can do business normally and save jobs without that support," HUP said.

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