No More Joking Around, Croatia on the Verge of EDP
- by croatiaweek
- in Business
According to the latest Eurostat figures the Croatian budget deficit for 2012 has exceeded 5%, making it clear that the newest eu member will be entering the Extensive Deficit Procedure.
According to the Eurostat report published on October 21st, Croatia’s budget deficit for 2012 amounted to 16,35 billion Kuna (2.18 billion Euros), meaning that the country has exceeded the European Commission’s limit of 3%. In other words, it is just a question of time now before Croatia enters into the monitoring system of Extensive Deficit Procedure, reports SEE.
Unlike the IMF’s gfs method used to calculate the budget deficit, also applied by the State Statistics Institute (dzs) – according to which Croatia’s 2012 budgetary deficit amounted to 3%, putting the country barely within the margin – Eurostat’s esa95 method also factors in the transactions between the State and State-owned companies as well as transactions between municipalities and municipal companies, bringing the deficit to the level of 5%. And as pm Milanović said himself when commenting on the findings, ‘There can be no more joking around and no more public spending without eu approval’. For what follows next is the European Commission’s report on the state of Croatian finances in November, which will lead to ec recommending measures for the first time, sometime in December, which will serve as guidelines for the Croatian Government and its own programme of measures, due out by the start of Q2 2014.
The country which enters edp is given a period of three or, depending on the gravity of the situation, six months to comply with the EC guidelines, after which an inspection is carried out to determine if the county has abided by the guidelines, at which time sanctions can be put in place in case of non-compliance, such as denial of access to eu cohesion funds and punitive deposits in the amount of 0.2% of the country’s gdp.
What Eurostat also showed is that Croatia’s public debt amounts to 183.27 billion Kuna (23 Billion Euros), or 55.5 % of the country’s gdp, which is within the tolerance zone of 60%; however, with a marked growth tendency – 50% over the last four years – things are actually far worse than they look prima facie. In any case, the State will now be forced to engage in budgetary cuts, too long in waiting, only this time with a benefit of alleviated political responsibility in the form of acting under threat of eu sanctions. Strange thing, but the politicians always seem to find someone with whom to share the burden of their own incapacity.