Moscow balm and early elections

It was noted that, in some counties, the HDZ is increasing its fundraising activities and suddenly trying to strengthen the party's budget.

It is difficult to understand why Croatia took almost four years to answer the Russian invitation to join the South Stream gas pipeline project. Meanwhile, pragmatic Europe offered a hand to Moscow and let go of its old phobias while ensuring a stable supply of Russian gas.

Angela Merkel and Nicolas Sarkozy are both building a new relationship with Russia. Other members of the European Union (Slovenia, Hungary, Bulgaria ...) easily joined the construction of South Stream gas pipeline which brings  the Russian gas into the European market. Only Croatia is stuck in its old habit of making sure that its energy policy is not frowned upon by someone in Washington or Brussels, while failing to  realize what is happening in the neighbourhood.

Details of the meeting between Prime Minister Jadranka Kosor and Vladimir Putin  regarding the inclusion of Croatia in the South Stream have not been publicly disclosed yet. If Croatia gets only arm, is it feasible to construct it in a way that it arrives from Serbia - which would be profitable? Media reports say that Moscow does not exclude  the possibility of placing the main gas-line on Croatia's territory. This means that Croatia would not only gain the security of gas supply, but also the opportunity to collect transit fees. If this option is really considered, it would be interesting to consider the reactions from Hungary which has been preparing to host South Stream gas-line  for almost two years.

Whether we are talking about only one arm or the main streamline, Croatia would finally move away from the deadlock. Dr. Igor Dekanic, an expert on energy, also advocates the construction of LNG terminals because they would ease Croatia's dependence on Russian gas. In any case, Kosor  did not decide to take a stroll around Moscow for nothing. Indeed, the Prime Minister struck another foreign policy success, which may, like the agreement with Slovenia and renewed negotiations with the EU,  keep the balance amidst the increasingly grim national economy.

It seems that the HDZ party is aware that this will not last long.  It was noted that, in some counties, the HDZ has increased its fundraising activities aimed at strengthening the party budget.  This maneuver did not escape the watchful eye of the opposition. Some  politicians believe that this may be a sign  that the HDZ is starting to prepare for early elections. If the HDZ started to collect money at the beginning of the year, the elections could be in mid-autumn. Tourist season should be done by then and  the state budget will be in better shape. The opposition further estimates that Kosor will find it increasingly difficult to cope with the criticism concerning the status of the national economy. HDZ can benefit in prime Minister's personal popularity for some time, but since the situation is not improving at the national level, re-election chances for the ruling party will be slimmer than they are now.

The new situation in financial markets and the economic crisis in Greece are a strong alibi for the prime minister's avoidance  of major reforms.  Deeper reforms in public administration and the pension system, for example, requires extra money. State can not lay off the employees in the public sector without ensuring money for their severance pay. The cost of these reforms, as well as increased costs of pension, would deepen the fiscal deficit, which already threatens to explode.

This problem will became especially troublesome after the second round of privatization activates guarantees for shipbuilding. If the deficit is out of control, the state will undermine its own credit rating. Because of the Greek crisis and the economic situation in Portugal and Spain, financial markets have became nervous again. This is additional reason why Croatia needs to be very cautious when it comes to deficit increase.

Prime Minister would, with good preparation and additional engagement from deputy for the economy, be able to publicly respond to criticism from the opposition.  However, she should first address some of the issues that lack a proper alibi. For example, why delay those reforms that do not require any government spending but  create instant savings instead? Macro-economists say that a 10 percent reduction of the privileged pensions could save around 600 million kunas ... Reforms that require high costs and  reap benefits in a period of  few years are hard to start right now. On the other hand, after things get better,  reforms are usually forgotten.