Opposition set to win Croatian elections

Monday 05 December 2011 12.50
Rising unemployment a key issue in the election
Rising unemployment a key issue in the election

Croatia has voted in an election likely to hand power to the centre-left opposition on a mandate to overhaul the country's flagging economy before it joins the European Union in 2013.

Voters will almost certainly punish the ruling HDZ - Croatia's dominant party since independence in 1991 - for a string of corruption scandals and rising unemployment.

Polls suggest power will pass to an opposition bloc known as Kukuriku and led by 45-year-old former diplomat Zoran Milanovic of the Social Democrats.

The next government will have to act fast to trim state spending, create jobs and avert a potential credit rating downgrade.

Mr Milanovic has told Croats they will have to work "more, harder, longer" to turn the economy around before the country joins the EU in July 2013.

Croatia broke away from socialist Yugoslavia in a 1991-95 war, and has seen its economy boom over the past decade on the back of foreign borrowing and waves of tourism.

But growth ground to a halt when the global financial crisis hit in 2009.

Unemployment stood at 17.4% in October and thousands of employees work without pay.

Lack of liquidity has paralysed many local businesses and overall foreign debt has surpassed 100% of gross domestic product.

"The two things we expect from the new government are to draft a budget that shows fiscal consolidation, otherwise we are threatened with a credit rating cut, and to make a resolute start to the necessary reforms," said Davor Majetic of the national employers' association.

Mr Milanovic said this week that the state budget for 2012 would be in place by the end of March and should reflect "how serious we are" about turning the economy around and averting a credit downgrade.

He said he expects the credit rating agencies to give Croatia a "grace period of three months at most."

After voting, Mr Milanovic told reporters: "We expect victory, like anybody competing for the trust of the citizens."

In power for the past eight years, Prime Minister Jadranka Kosor's HDZ has been mired in corruption scandals since its former leader and prime minister, Ivo Sanader, stepped down in 2009. Mr Sanader is now standing trial.

A number of other senior HDZ officials have been arrested or questioned over alleged slush funds in the past year, hurting the party's standing with voters.