Croat voters offered greater or lesser state role

The two main parties in Croatia's November 25 general election share similar economic policy goals, but neither seems to offer a clear, detailed path to economic prosperity.
Analysts attending a three-day annual economic conference said the ruling conservative HDZ prefers the free market while the Social Democrats (SDP) want more state involvement in economy as a way to boost productivity and reduce external risks.
"Croatia has severe structural imbalances and it is difficult to address them by mere market forces. The SDP's approach implies an active role of the state but offers too few practical details," said Deloitte analyst Zarko Primorac.
Croatia wants to join the EU during the next government's mandate, but it first needs to push through painful structural reforms including cutting state subsidies, a high foreign debt and the trade deficit which make the economy vulnerable to external shocks.
The SDP wants to use fiscal policies to help ailing industrial sectors and boost economic activity, while the HDZ favours a balanced budget, no tax reform and a reduced state presence.
"The only way to reverse negative trends is to boost production. The state should not refrain from using its tools to help it happen," the SDP's top economic expert and prime ministerial candidate Ljubo Jurcic told the conference. Croatia has enjoyed solid growth in recent years, expected this year at some 6 percent, but driven mainly by state investments and lending-based household consumption. Jurcic said it was not sustainable.
"I believe that after two years of different economic policies we can have growth of more than seven percent, but based on industrial production and exports," he said. He said an SDP government would not finance spending, but pave the way for higher employment and productivity through lower taxation for businesses and incentives to those who invest in modern technologies. "We want to tax those who speculate on the capital market and exempt those who reinvest into developing business", he said.
HDZ's economic strategist Martina Dalic said the HDZ wants to cut state spending, lower foreign debt, accelerate reforms, EU membership talks and privatisation and boost the investment climate.