ZAGREB, 22 April, 2021 - The general government generated a consolidated deficit of HRK 27.5 billion, or 7.4% of GDP in 2020, with the consolidated general government debt also increasing, according to a report on which the national statistical office released on Thursday.

The deficit thus ended a three-year streak of surplus.

For comparison's sake in 2019 the government generated a consolidated government surplus of HRK 1.2 billion or 0.3% of GDP while in 2018 it amounted to HRK 863 million or 0.2% of GDP and in 2017, the surplus was HRK 2.8 billion or 0.8% of GDP.

The general government budget deficit occurred in 2020 mostly due to the repercussions of the COVID-19 pandemic for the national economy, which required the government's support measures to offset the impact.

The consolidated government debt in 2020 reached HRK 329.7 billion or 88.7% of GDP after that debt had gradually decreased for several years, the State Bureau of Statistics (DZS) said in the report. 

At the end of 2019 the general government debt amounted to HRK 292.9 billion, which accounted for 72.8% of GDP. In 2018 it was HRK 286.3 billion or 74.3% of GDP and in 2017 it was HRK 285.1 billion or 77.6% of GDP.

The general government debt increased by HRK 36.8 billion in 2020 or 12.6% year on year with HRK 32.8 billion being net loans and the remainder attributed to depreciation of the kuna currency exchange rate against the euro, DZS says in the report.

RBA: Results better than expected

Commenting on the latest DZS report, Raiffeisenbank Bank Austria (RBA) analysts underscored that the budget gap of HRK 27.5 billion is better than had been expected.

They also attributed the noticeable deterioration in fiscal metrics to the consequences of the crisis caused by the COVID-19 pandemic which resulted in a double-digit contraction in budget revenue while at the same time generating an increase in general government spending.

The total consolidated government revenue in 2020 amounted to HRK 178.5 billion, which is a decrease of HRK 12.5 billion or 6.5% while at the same time expenditure amounted to HRK 205.9 billion, which is HRK 11.3 billion or 8.6% more y-o-y.

(€1 = HRK 7.567595)

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''Our problem is that no government has gathered enough courage to define the profession of lobbying,'' the owner of one of the largest lobbying companies in Croatia tells Viktor Vresnik from Novac (Jutarnji) when touching on the effects of the recent RBA case and lobbying in Croatia.

That is quite clearly why we don't have the legal framework to pull lobbying out of the grey zone into which it has fallen today, here in Croatia and elsewhere, and because that is the case, the owner of one of the largest lobbying companies in the country agreed to speak about the complex topic informally only.

''Lobbying in Croatia is only registered when some type of scandal breaks out, and that automatically casts a shadow over the whole profession,'' he says. There's no doubt that the advertisement by which Raiffeisenbank (RBA) sought a person to ''put pressure on the Constitutional Court and other courts in Croatia" falls into a scandalous category. RBA will probably resolve this by dismissing the "author" of the tender, but the tremendous damage to the profession has already been done and will continue to happen until this grey area is properly regulated by law.

Today, Croatia has the Law on the Prevention of Conflict of Interest, but this law, which is certainly necessary, is, at least in the opinion of the majority of the interlocutors contacted, used far too little, and it is too broad to properly regulate lobbying in Croatia as an actual profession.

Why, for example, asks Novac's interlocutor, was a list of lobbyists not published anywhere in January, when Croatia took over the presidency of the EU Council, as these people had requested meetings with ministers, who reportedly occupied a significant part of the capacities of the higher quality Zagreb hotels?

Why aren't the topics they want to discuss or the companies they represent published? That is why, he says, Croatia has already been called out by the European Parliament, and the objections have also come from the European Commission itself.

The EU is not like the US, which treats lobbyists extremely strictly. Brussels is much softer and more loose, leaving most of this type of regulation to every single member state of the European Union. However, Croatia has a lack of definition here, too.

Although lobbyists' business exists in the domestic register of activities and although the Croatian lobbyists working in Brussels are duly registered in the register of "advocates" and have ID cards that allow them to enter Parliament and engage in discussions with MPs, the register, which is publicly available via the Croatian Lobbyists Association, is still considered an unofficial document, and just an internal list of members of the association.

Zeljko Ivancevic, one of the Croatian lobbyists who registered in Brussels shortly after Croatia gained independence and one of the few who didn't ask Novac not to quote him, is rather dissatisfied with the way in which the interests of Croatian lobbyists are represented by their professional association. He claims that they should have defined the profession of lobbying in Croatia properly when the time for that was right.

The current approach to lobbying in Croatia, Ivancevic believes, inevitably casts a shadow on the profession whose foundations lie in the serious preparation of expert analysis and in the collection of sound arguments that can be presented directly or indirectly to decision makers. This is by no means persuading someone to do something, or indeed not do something, purely and solely on the basis of some sort of long-standing private friendship.

Ivancevic considers the RBA case to have been a gross mistake. In the practice of the European Union and its institutions, there is no possibility of lobbying or direct communication with the court system, except for litigants.

The Society of Croatian Lobbyists attributes responsibility for the poor perception of the profession among the general public primarily to politics. Several governments have come and gone, they say, and all of them have failed to address the issues surrounding lobbying in Croatia. The draft Law on the Advocacy of Interest was submitted, but that came to nothing. Back in December 2016, however, the Ministry of Justice published its "Analysis for the regulation of the legal lobbying framework", which was intended to serve as a template for parliamentary debate, but there was no debate on it at all in the end.

The immediate reason for this analysis was the fall of Tihomir Oreskovic's government and the forced departure of Tomislav Karamarko from HDZ's leadership. As the scandal subsided, and as Drimia, a company owned by Karamarko's now ex wife, was found to have broken off its partnership with Peritus Counseling on January the 31st, 2015, just months before Anna and Tomislav Karamarko's marriage ended. The story then sank into the background. The Croatian Society of Lobbyists then stated that Josip Petrovic and his company Peritus, then called as advocates for MOL's interests in Croatia, were not on the list of registered members. Today - they are.

The proposal of the Law on Public Advocacy, which was submitted by the Croatian Lobbyists Association for discussion way back in 2013, clearly defined to Zoran Milanovic's government just who in Croatia can engage in the advocacy (lobbying) business, and how they can do so. It also defines who can't.

The advocate, under this proposal, cannot be under the age of 18, they cannot be a government official, a civil servant in a decision-maker's office or a judicial official, a former state or judicial official if less than two years have elapsed since their term expired, they must not be a former civil servant if less than one year has elapsed since the date of termination of their activities in civil service, it also can't be a person who has been convicted of a criminal offense under the jurisdiction of USKOK until their rehabilitation period is over, not can it be any person associated with someone who has the power to make political decisions.

What does it mean when it says it can't be a person associated with someone who has the power to make political decisions?

The bill on lobbying in Croatia is clear and very detailed here: ''a related person is the spouse of an official, a managerial officer or another holder of a public authority, his or her blood relatives in a direct line, an adopter or an adoptee, relatives to the second degree, a relative of to the first instance, and other persons who may reasonably be regarded as having an interest in an official, a managerial officer or another holder of a public authority by other grounds and circumstances,''

In a broader sense, lobbying is an unofficial act for someone's benefit, that is, an attempt to influence decisions by coaxing or covert pressure. It may also refer to public activities (such as demonstrations) or public business activities of various institutions (non-governmental organisations, consulting entities, various associations). In a narrow sense, lobbying can be defined as an activity that tries to persuade someone in a governing structure, usually an elected member of government, to uphold laws or rules that give a community, organisation or industry some advantage over others - it was explained.

In European regulation, the Council of Europe (not the Council of the European Union now presided over by Croatia) means lobbying means "a coordinated effort to influence policy formulations and the decision-making process with a view to obtaining a specific outcome from the government, those in power, or elected representatives."

The definition of lobbying in both the voluntary Register of lobbyists of the European Commission (Transparency Register) and of the European Parliament are also very similar.

America approaches lobbying virtually like any other business, their law states: a lobbyist is someone who wants to influence the structures of government on behalf of a third party. In doing so, lobbyists must not bribe senators and congressmen with money or gifts, offer them privileged access to their client's services, and they may not threaten them.

By joining the European Union, Croatia joined a bloc of eighteen other countries that didn't regulate lobbying in any way, but left it to "self-regulation" within their own respective associations. The oldest European law governing, among other things, lobbying, are the German Rules of Business in the Bundestag (1951).

In addition to the statutory register of lobbyists, Slovenia has included the regulation in the Anti-Corruption Act. Montenegro and Serbia's lobbying laws, though both of these European countries are outside the EU, are also strong, and resistance to their introduction was strong because the regulation didn't suit particular interest groups accustomed to working in the shadows.

With such a poor level of definition, work in the shadows has again become a very regular way of influencing politics, as can be seen in the recent, scandalous RBA case.

Make sure to follow our dedicated politics page for more.

ZAGREB, January 23, 2020 - Michael Mueller, the president of the management board of the Raiffeisen Bank (RBA), resigned on Wednesday in the wake of the negative perception in public regarding a tender to procure the services of a PR agency, the bank has reported.

I am aware of the strong negative perception generated of Raiffeisen Bank and its management and I stress that the said document in no way reflects the intention of the bank's management. I have decided to resign in order to protect the bank's reputation, Mueller said.

The press release notes that Andreas Gschwenter is Chief Operating & Information Officer at Raiffeisen Bank International AG and Chairman of Raiffeisen Bank Zrt has accepted Mueller's resignation.

Following approval by the Croatian National Bank (HNB), Liana Keserić will be acting president of the management board at RBA, the press release notes.

Mueller's resignation comes after it was disclosed the RBA was seeking a PR agency that would exert pressure on the Croatian Constitutional Court over the case of the Swiss franc-pegged loans.

The Index news portal on Sunday reported that RBA was seeking PR agency for crisis communication regarding Swiss franc-denominated loans and that one of its tasks includes "exerting pressure on the Constitutional Court and other courts in Croatia."

RBA explained that it had advertised the tender to engage a PR agency with the aim of the bank's stance being equally represented in the case CHF-pegged loans.

"The task of the agency was solely intended as a way to make the other side of the case gain more publicity, since it has not had much of a reach so far. In all activities, including this tender, we have sought legitimate procedures as our solutions, that is, communication activities which would reach their target audience through the media," RBA said.

However, the tender came across negative reactions and the Franak association on Monday reacted sharply to the news of the tender. The SNAGA party and the Franak association on Tuesday asked the Office of the Chief State Prosecutor to investigate an attempt by Raiffeisen Bank (RBA) to hire a PR agency to put pressure on courts in a case in which bank contracts on loans pegged to the Swiss franc were nullified.

The HNB on Monday reported that it was unpleasantly surprised by that commercial lender's advertisement for a PR agency and that it would urgently conduct an inspection of RBA and take the necessary steps.

More news about banks can be found in the Business section.

The Croatian finals of the RBA competition brought together seven innovative startups.

As Bernard Ivezic/Poslovni Dnevnik writes on the 1st of September, 2019, the fastest growing Croatian startup, Electrocoin, has been in talks of an offer with largest cooperative bank in Austria and one of the largest banks in Southeast Europe, Raiffeisen Bank (RBA), to jointly launch a "cryptocurrency".

The successful Croatian startup presented its service, known as PayCek, the first Croatian payment processor for cryptocurrencies at the Croatian finals of the Elevator Lab Challenge, organised for the first time in Zagreb by RBA and Startit.

Vedran Vukelić of Electrocoin says that with PayCek, which has attracted more than 40 businesses in just three months, they now want to go one step further and make it a tool that will bring the market a new form of cash, the so-called, cash 2.0, thus replacing the need to carry paper kuna and coins.

“We have five years of experience in the crypto world, with an average of 30 million euros in annual revenue, 5,000 active users in more than 30 countries, we work with Croatian Post, Greyp, the Red Cross, leading POS players and now we want to introduce an e-wallet that would allow you to have kuna in electronic form on your mobile phone as opposed to carrying them in a wallet,'' said Vukelić.

He added that they need RBA because, although they will use crypto technologies, they must have a deposit in the bank for every kuna they issue to their PayCek e-wallet. Instead of operating their own bank and needing very costly licenses and complex regulatory approvals, Vukelić points out, they decided to look for a partner that is already part of that world and of its core business. Electrocoin grew 932 times to a massive 206.9 million kuna from 2015 to 2017, thanks to the cryptocurrency exchange service. Last year, according to Fina, it slowed its growth down to 207.7 million kuna.

"In order to issue a crypto kuna or eHRK and allow it to be paid everywhere, we need a bank. This means that users will not need a bank account to pay for eHRK, which will significantly simplify payments, and will also allow for some new services, such as having children receive pocket money directly on their mobile phones,'' says Vukelić, adding that they want to do this, as their previous services have been done, in collaboration with domestic regulators.

Seven startups gathered in the Croatian finals of the Elevator Lab Challenge in Zagreb. Nevenka Rangelov of Startit says she is very pleased with it all, given that RBA has never organised such competitions in Croatia before.

Make sure to follow our dedicated Made in Croatia and business pages for much more on Croatian innovation.