Council Member: 40,000 Croatians Could Lose Jobs

Exporters, shippers, shipbuilders and tourist workers will be effected by the crisis most, says Mladen Vedris, an economic council member.

Mladen Vedris, a member of the Economic Council and head of the department for economic politics at the Faculty of Law, said in an interview for Javno.com, which sectors of the Croatian economy are the most vulnerable to the crisis, and in what direction the economic development strategy should go. He also commented the announcements by the Croatian Employer’s Association about reducing salaries and firing workers.

The Cabinet and premier Ivo Sander ignored the advice of the Economic Council about freezing the salaries of the state and public officials. What is the point and role of the council if their stances are obviously not accepted?

The economic council is an advice giving body, we can give advice, voice our opinion, but of course, the decision is made by those who have a political mandate and executive power, to recognize or not recognize a suggestion. However, you saw that we as a council have been for a deficit that is as small as possible, if possible zero. However, we were subject to the criticism that we were somehow agreeing with the stance of the cabinet. Later the Cabinet and unions came to another conclusion, but the council remained consistent, at their initial stances, which we consider to be better. However, politics is the art of the possible, and it is up to us to advise what the optimal solution is. In a political context, of course that is placed in a wider context of total relations and according to that, bring decisions. The decisions that are made now will be either confirmed or criticised as early as the first quarter in 2009. If economic growth allows the payment of those funds for salaries, of course it will be a confirmation, but if there are problems with financing, their it will be a sort of criticism. So, soon we will be the witnesses to either solution.

What consequences of the financial crisis can be felt in Croatia today?

All of us in Croatia were happy, and that cannot be turned into self-content, that we have not felt the first wave of the classic bank-financial crisis. We avoided that blow thanks to two facts. First, objectively, our banks were not exposed to the risks of such crediting, nor did they buy such packages of financial products on the global market. On the other hand, the cabinet’s proposal and confirmation by parliament about guaranteeing savings, which was done by more or less, all of Europe, it came at the right moment and calmed the related tensions. However, the bank crisis prompted the total world economic crisis or recession, depending on which part of the world you are looking at. So that facing that, with all of these deep tectonic changes that are being created in our region, that is a real challenge for Croatia and the issue of what can be done here.

What precisely must we prepare and what sectors of the Croatian economy will be most hit by the crisis?

Nobody has a crystal ball that can tell us what will happen. But, but if you ask me what will be hit first, that are exporters. When I watch the news about closing work places, longer yearly vacations, it gets cold around my heart. Because only the question in which wave we are and to what extent our companies and sectors are tied with those partners who are stopping economic activity at the moment. You saw what happened at this moment when the boom fell, to what extent the ship fares fell, and to what extent orders for the production of new ships fell. According to that, first shippers received a negative blow, then the shipbuilders, and now we are talking about exporters in a wider context, and of course, we have yet to see what the tourist season will be like.

Everyone stresses that it is necessary to urgently bring an economic strategy for Croatia. In which direction in this situation should that strategy go?

According to these points that we have determined are at crisis. During the last dozen years Croatia has always spent somewhere, we can say in dollars and euros, three billion more than it created. That is unsustainable. Croatia then has to make, as much as is possible, a balance in the financial crisis, and the capital and funds that it has should prompt creating.

Today we are talking about export, and tomorrow we will talk remaining more on the local market. The strategy is not a thick book that you can browse. A strategy means that you create a narrow circle of priorities and aims you want to achieve, and then with sense you persistently create.

What are those aims and priorities?

Two aim are undisputed. That is strengthening the competitiveness of exporters, because without that there is no life. Second, in the context of the local market, stimulate everyone, whoever has quality and can survive, who might not export today, but can appear as an exporter or substitute imports, which means creating. Stimulate creating, there no longer is life from speculations. Expecting to earn big on the basis of other people’s work via shares, is over. Which means, creative work in Croatia, more and more organized, more thoughtful, more successful, that is the only way out of the crisis, or better said recipe for an exit out of the crisis.

In the 2009 budget, the planned GDP growth is two percent. In your opinion, how much is it realistic to achieve?

When we look at outer signs for the whole world, that come from respectable addresses, in the last three or four months, every month there has been a revision of the estimates, and every time the revision has gone down. According to that, it is obvious that the Croatian rate of growth will on one hand maintain the success or failure of what we will do, but on the other hand it will be mostly conditional by what will happen outside. According to that, in Croatia in the current situation, every percentage that is above zero, means that we are not going into a minus, and will certainly be welcome. Now, will that be 1.5, 2 or 2.5 percent, a lot of that is open. Everything that is above zero growth is an acceptable solution.

The economic council reported from the last meeting that they will try to find room in the budget for savings, or reducing state expenditure and reducing the deficit. Where do you see savings in the budget?

We cannot see instead of certain departments or the cabinet their interaction, and see what can be reduced. We have remained consistent and said that up until the moment that the budget is formally passed in parliament, there is the possibility that the cabinet will once again consider opportunities, and see to what extent how certain departments have room or not for savings, that is not the competence of the council. However, it should not be forgotten that, whatever budget is brought next year, there were be one or two rebalances. According to that, they should start from some sort of realistic platform, and then adapt during the year.

The Croatian Employers Association has announced that they will fire workers and reduce salaries. What can we expect, how many workers will be fired, how much will salaries be reduced, and how do the employers justify their announcements at the Economic Council meetings?

That is what, for me, represents the greatest concern and responsibility of not only the business sector, but the state. As far as reducing salaries are concerned, how correct it will be, we cannot know. Everyone has announced that it will be in some proportion of reducing work hours, or work if they have it. In some proportion every company will weigh what it can do. As far as firing workers is concerned, what can be heard from some investigative and entrepreneur circles is that: people will not lose their jobs, but in the first round there will be between 20 to 40 thousand work positions that are in danger, especially in sectors that are directly exporters, or are partners to those exporting.