Croatia joins the EU, is struck by desired economic woes

Croatia EU membershipJust two days after officially joining the EU, Croatia is proudly welcoming a dim economic future that includes increased public debt and growing unemployment.

“For ten years we have labored to get into the European Union,” said Jasna Bozhich, a professor of economics at the University of Zagreb. “For ten years, we looked enviously toward our neighbors and wished we could have the same level of out-of-control government spending.”

The EU made it clear that Croatia would not be admitted unless the nation could manage to spend a higher percentage of its GDP. Ivo Sanader, who was the prime minister from 2003 until 2009, responded by hiring thousands of civil servants for positions that were already filled. Deputy ministers worked long hours to set up a plan that would give each civil servant ten weeks of annual vacation and a yearly bonus equal to three months of salary.

“It was not easy getting our spending to grow to such heights,” Bozhich said. “Naturally, some legislators were opposed.”

In addition to developing an expensive public sector, the EU also required Croatia to loosen up its laws in order to allow banks to make risky investments without the burden of oversight.

“For that,” Bozhich said, “the Minister of Finance developed a scheme to do away with auditing altogether. It was a very ingenious and brave move. And it worked.”

Croatian banks lost nearly 5 billion euros in 2012, an amount that ultimately ensured membership in the EU.

While the benefits of membership will take many years to measure,  initial data show that unemployment in Croatia’s private sector has already risen by 2 percent, a figure that thrills Bozhich and other Croations.

“Imagine that,” she said, while accepting a glass of champagne from intoxicated and jubilant colleagues. “Two percent. That’s upwards of thirty thousand jobs. Lost. It’s good to be a part of Europe. We never thought we’d see the light of this day.”