EN Official Journal of the European Union C 112/68

Opinion of the European Economic and Social Committee on ‘Croatia's Application for EU membership’

(2004/C 112/20)

On 15 July 2003, the European Economic and Social Committee decided to draw up an own-initiative opinion under Rule 29 of its Rules of Procedure on Croatia's application for EU membership.

The Section for External Relations, which was responsible for preparing the Committee's work on this subject, adopted its opinion on 9 March 2004. The rapporteur was Mr Rudolf Strasser.

At its 407th plenary session, held on 31 March and 1 April 2004 (meeting of 31 March), the European Economic and Social Committee adopted the following opinion, with 98 votes in favour and three abstentions:

1. Introduction

1.1 In its relations with the Western Balkan states, the EU gears its policy towards strengthening democracy in these states and promoting reconciliation and cooperation. Since 1991 the EU has been providing financial aid, under various programmes, which, in the case of Croatia, has amounted to a total of c. EUR 500 m. for the period up to and including 2002. In 1999 the EU proposed the establishment of a Stabilisation and Association Process in respect of the Western Balkan states.

1.2 At the Zagreb Summit on 24 November 2000, the European Union held out to the Balkan States the prospect of EU membership and an appropriate programme of support measures. This prospect was conditional upon the Balkan States fulfilling the ‘Copenhagen Criteria’ and meeting the obligations set out under the Treaty on European Union. The Western Balkan states declared their readiness to accept the obligations imposed by the EU and to use the Stabilisation and Association Process (SAP) and, in particular, the Stability and Association Agreements (SAA), following their signature, as instruments for preparing the ground for EU accession.

1.3 On 21 February 2003 the Croatian government lodged its application for membership of the EU. The Council of Ministers decided to call upon the European Commission to proceed in accordance with Article 49 of the Treaty establishing the European Community and to submit its views on this application to the Council.

2. General background

2.1 Croatia declared its independence from Yugoslavia on 25 June 1991. The ensuing war with Serbia ended only in 1995 with the signing of the Dayton Peace Agreement. The fighting resulted not only in severe losses amongst the civil population and harmful social consequences but also caused major damage to large parts of the country and led to a huge fall in GNP.

2.2 Between 1990 and 1993 real GDP slumped by 36 % (1). Industrial production, above all, suffered as a result of the war. Not only has Croatia had to tackle its conversion from a socialist planned economy to an effective market economy, but it has also had to carry out extensive restructuring in many areas of its economy as a consequence of severing its links with Yugoslavia and, above all, as a result of the war.

2.3 Croatia has a total surface area of 56,542 km2 and a population of some 4.5 million. According to Croatia's 2001 population census, 7.47 % of the population belongs to an ethnic minority. Serbs form the largest ethnic minority (4.5 % of the population); the other ethnic minorities are Bosnians, Italians, Hungarians, Albanians, Slovenians, Roma, etc.

2.4 In the period extending from the end of the war with Serbia up to the death of the Croatian President, Mr Tudjman (in 1999) or up to the parliamentary elections in January 2000, the prevailing influence was exercised by the nationalistic HDZ Party. The formation of a coalition government (centre-left coalition) and the election of Stjepan Mesic as President of Croatia in 2000 provided the political basis for the necessary reforms. Following the parliament elections in Croatia on 23 November 2003, the HDZ, which now no longer includes extreme nationalist forces amongst its membership, topped the poll and was entrusted with the formation of a government. The EESC welcomes the fact that the new Croatian government is also expressly adhering to an integrationalist and reformist course and is resolutely pursuing the goal of EU membership, which is supported by a clear majority of the Croatian population.

2.5 The macro-economic indicators have improved considerably, particularly in the period since 2000. There has been strong economic growth (2001: +4.1 %; 2002 + 5.2 % and, up to the third quarter of 2003: +3.5 %). The rate of inflation was brought down from 7.4 % in 2000 to 2.3 % in 2002; by December 2003 the figure had reached 2.2 %. The main reasons for this trend are: a high level of domestic demand, exchange rate stability, trade liberalisation measures, moderate wage increases, increased production and more competition (2). The rate of unemployment, on the other hand, has remained very high (approximately 15 %). In 2003 the balance of trade deficit rose to a new record high of $7.125 billion and there has also been a further increase in the level of government debt.

2.6 Although the unemployment figure has once again fallen slightly, the high level of unemployment of c. 15 % (3) represents one of the major social and political problems facing Croatia. In the EESC's view, an issue which prompts particular criticism is the fact that the level of unemployment is as high as 40 % in individual regions of Croatia. In this context, it should be borne in mind that Croatia has an unemployment rate of barely 50 %, which is very low when measured against the EU figure of over 60 %. In this context, the EESC draws attention to the fact that Croatia has a large shadow economy. Curbing the level of the shadow economy, inter alia, by introducing general conditions which are business-friendly, will be one of the key challenges facing the Croatian government.

2.7 Croatia's aggregate public debt has been criticised by the European Commission, the IMF and the World Bank. Despite Croatia's very high tax ratio (latest figure: 48.4 %), the country's level of external debt, expressed as a percentage of GDP, jumped from 44.8 % in 1998 to 74.3 % in 2003 (4). One of the main reasons for this sharp increase was also the considerable post-war need for investment in infrastructure and public installations. The EESC does, however, regard the high level of private debt, brought about by a marked expansion of consumption, as representing a further problem.

2.8 A World Bank study (5) has criticised the fact that in Croatia expenditure on public administration, which amounted to 11.2 % of GDP, was substantially higher than in the acceding states, where the average figure was 7.2 %. Similar observations may be made in the case of transfer payments.

3. Democracy and the rule of law

3.1 In its annual report for 2003 on the Stabilisation and Association Process, the European Commission points out that: — the democratic institutions are working well; the political dialogue between the government and the opposition is, however, often arduous because internal problems frequently eclipse the international agenda; — the parliament is exercising its powers without hindrance and the opposition is able to play its role to the full in the work of the parliament; — it has been possible to speed up legislative work. The EESC welcomes the progress made in the above field as this is a key prerequisite for Croatia's participation in the process of European integration. It is in Croatia's interest to tackle, as soon as possible, the outstanding shortcomings standing in the way of the achievement of a fully viable democracy and hampering the rule of law.

3.2 In its annual report (6), the Commission draws attention to the fields in which considerable efforts have still to be made. In its appraisal of the situation in the fields of the administration of justice, enforcement of the law and the rule of law, the Commission criticises the following aspects: — the way in which the judiciary operates (the Commission highlights problems such as procedural delays which are jeopardising the rule of law, a shortage of qualified staff, and a backlog of documents); — the way in which constitutional rules are observed in the execution of sentences; — shortcomings in the measures to combat corruption; — the unsatisfactory way in which asylum applications are dealt with; — lack of certainty as regards the dispensation of justice.

3.3 At the end of 2002, the Croatian government presented a Green Paper on the reform on the judiciary. Some initial important steps along the road to reform have been taken by setting up a Judicial Academy and by handing over tasks to notaries and judicial officers. The EESC hopes that further essential reform measures will be rigorously implemented.

3.4 The shortage of qualified staff and the lack of adequate technical equipment still constitute a major problem at the present time. In the EESC's view, the delays in court proceedings and the consequent backlog of documents is resulting is a lack of legal certainty and consequently also impeding the necessary reforms.

3.5 Croatia is similar to a number of the acceding states in that it has a long tradition of maintaining a land register. As the register has not been updated for several decades, it is frequently very difficult to establish real ownership of property. This represents an impediment to the necessary privatisations. The EESC believes that the setting-up of a modern, effective land register is a vital requirement, above all also in the context of preparing for possible accession to the EU. One important step forward has been the establishment of a valuer's office.

3.6 The level of cooperation between Croatia and the International War Crimes Tribunal for the Former Yugoslavia also poses a very serious political problem. As a result of the inadequate level of cooperation up to now, EU Member States have not been prepared to ratify the Stability and Association Agreement. The EESC takes the view that it would be very disadvantageous for Croatia if Commission recommendations on this politically very sensitive issue were in reality not acted upon. The EESC hopes that the Croatian government will give the necessary support to applications for extradition from the Tribunal in The Hague.

3.7 The question of the return of refugees and expelled persons is a matter of major political importance to Croatia and undoubtedly represents an intractable problem, which involves some 250,000. Problems arise in connection with the rebuilding of property which has been destroyed, the reassignment of ownership of property, the lack of accommodation and shortage of job opportunities. Under the Dayton Peace Agreement, Croatia entered into a series of commitments with regard to the return of refugees. The EESC recognises that the necessary fulfilment of these commitments imposes a considerable burden on Croatia but expects that this problem will be resolved as soon as possible.

3.8 In December 2002 the Croatian parliament adopted a constitutional act to safeguard the rights of minorities. This act is designed to provide minorities with appropriate representation not only in elected bodies but also in the administration of justice and other parts of the State administrative apparatus. The EESC points out that, as is the case in other legal areas, what is of decisive importance is, in the final analysis, how the laws are implemented and administered. The EESC assumes that in future, in the case of elections, for example, the remaining discrimination against the Roma will be removed. The EESC welcomes the efforts made recently in this field.

3.9 In its own-initiative opinion on promoting the involvement of civil society organisations in South-East Europe (7), the EESC stated that: ‘Independent, free and strong media are among the most important prerequisites for a healthy and stable democracy, with a public well-informed enough to play an active and important role in the governance of their country’.

3.10 The EESC recognises the efforts which Croatia has made up to now in order to make the media more independent and to enable them to have greater freedom. The EESC welcomes the fact that Croatia has a broad spectrum of independent print media which is able to reflect the diversity of opinion in the country and the diversity of its cultural and linguistic minorities. The EESC hopes that when the reform, which has been decided upon, of the state radio and telecommunications entity is implemented, steps will be taken fully to safeguard the independence of these key media and also to comply with the need to ensure the diversity of opinion and population diversity.

4. Market economy and structural reforms

4.1 In its annual report, the Commission highlights the fact that the switch to a market economy has already made further progress in Croatia than is the case in other Western Balkan states. The Commission does, however, point out that the privatisation process started to falter in 2002. The World Bank, for its part, notes in its report that the privatisation process is not yet by any means completed and that progress made with economic reconstruction is also unsatisfactory. In the course of 2003, the Croatian Privatisation Fund (HFP) did indeed carry out further privatisations in a number of areas, such as the banking sector, but not to the requisite extent. It is, in the EESC's view, important that the new government presses ahead - prudently - with the requisite privatisation process, particularly in the following sectors: industry, tourism and agriculture. Use should also be made of the possibilities provided by public-private partnerships.

4.1.1 The EESC takes the view that it is also necessary for account to be taken, when carrying out privatisations, of the interests of the employees directly concerned. In order to avoid damaging social consequences as far as possible, supporting labour-market measures, e.g. in the form of measures to promote retraining, should be introduced. In this context, the EESC draws attention to the fact that recommendations of the World Bank and the IMF focusing on liberalisation, privatisation and deregulation must also take account of the social dimension.

4.2 In the context of government debt, too, the Croatian State has been widely criticised for continuing to pay significant levels of aid to loss-making state-owned enterprises. Between 1996 and 2000 the number of employees in state-owned enterprises fell by 27 %, whereas the corresponding figure for privatised enterprises was 14 %. Employment in private-sector enterprises, on the other hand, increased by 50 % (8). In the view of the Croatian social partners, the fact that too few new manufacturing enterprises, in particular SMEs, are being established, also poses an employment problem. In the EESC's view, improvements in training and further training and investments in technical equipment for educational establishments should be seen as an important first step towards tackling the employment issue.

4.3 Industry in Croatia currently accounts for just over 23 % of GDP and provides employment for c. 300,000 persons (i.e. about 25 % of the total labour force) (9). Many enterprises are loss-making and some are heavily in dept. As a result of a shortage of capital, many enterprises continue to employ obsolete technology, as a result of which their products are not always sufficiently competitive in comparison with production at international level. With a view to making the Croatian economy more competitive, the EESC underscores the need for the country to devote more resources to R & D (2001: 1.09 % of GNP) (10) and also to provide incentives for the establishment of new enterprises, in particular SMEs, whilst removing administrative obstacles which stand in the way of this requirement.

4.4 Croatia has an efficient pharmaceutical and chemical industry. The situation in the textile industry is difficult. Heavy industry in Croatia, in particular ship-building, continues to be essentially in the hands of state-run enterprises and is heavily in deficit.

4.5 Tourism is of particular importance to the Croatian economy as it accounts for over 20 % of GDP and provides almost 6 % of the total number of jobs. Tourism also brings in about on third of the country's total foreign exchange revenue. The EESC highlights the problem that a very high percentage of the tourist enterprises continue to be state-owned. In the field of tourism, in particular, forging ahead with privatisation could result in more effective use being made of the available potential. It would also be desirable to open the market to foreign investment in this sector.

4.6 Following the resolution of the banking crisis in 1998, a number of state-owned banks were sold off to foreign investors, thereby bringing greater security and stability to the banking sector. Productivity and the range of services provided were considerably improved. This is, in the EESC's view, a key prerequisite for the successful introduction of the necessary structural measures in the Croatian economy. The EESC highlights the fact that the necessary investment is being hampered by the cost of loans, which continues to be excessively high.

4.7 The State administration is called upon to provide support for the implementation of the vitally necessary structural reforms and the improvement of Croatia's economic competitiveness. The EESC is of the opinion that the public administration, as currently structured in Croatia, is not efficient enough to enable it to do full justice to the tasks and requirements which have been set. The EESC assumes that the various supporting programmes, such as SIGMA (11), will make a helpful contribution towards implementing the necessary reforms. It is of crucial importance that the planned decentralisation leads to the optimal allocation of tasks between central bodies and local authorities.

4.8 Croatia has a comparatively well developed social security system. A reform of the pension system was carried out in 2001 with a view to reducing the burden on the state budget, on the one hand, and stimulating economic development, on the other hand. This reform was endorsed by the majority of the Croatian population. Reform of the labour market, with the view, inter alia, of achieving greater flexibility, should go hand-in-hand with the introduction of corresponding social protection measures and measures to promote safety underpinned by an effective system of jurisdiction in labour matters.

4.9 Much also needs to be done in the field of agriculture. Agriculture in Croatia consists predominantly of smallholdings with an average size of 5 ha. In its report, the World Bank noted that 30 % of agricultural land continues to be owned by the state and that, in the case of 40 % of agricultural land, ownership has not been resolved and would take a further 15 years to resolve. The agricultural sector in Croatia is currently uncompetitive. Agriculture, which employs approximately 8 % of the labour force in Croatia, accounts for a relatively high percentage of the country's GDP (9 %). One of the consequences of Croatia's low level of competitiveness is that the relatively efficient Croatian food industry has to import raw materials.

4.10 Three-quarters of the agricultural land in Croatia is managed by the many small farms, the remainder continues to be managed by a small number of large agrarian combines. A lot of productive agricultural land can still only be used to a limited extent because of war damage (e.g. the laying of landmines). Whilst the small privately-owned farms had already attained the 1990 level of production once again by 1998, the large agrarian combines, which remain in state ownership, are unable to cope with the new economic conditions.

4.11 Ongoing uncertainty over the ownership of agriculture holdings in many cases greatly impedes the necessary structural reforms in the agricultural sector in Croatia. The same problems arise in connection with the procurement of loans for modernising farms. Because of the high risks involved, banks are not keen to make funding available for investments in agriculture.

4.12 A new support programme for agriculture came into effect in 2003. The EESC hopes that the attendant reforms will, on the one hand, make agriculture in Croatia more competitive and, on the other hand, facilitate moves to draw nearer to the EU. In the EESC's view, it is essential, in the course of the modernisation of the agricultural sector in Croatia, not only to make the necessary improvements to training and advisory services but also to establish without delay an effective, politically independent, system of representation of interests.

5. Implementation of the Stabilisation and Association Agreement (SAA) and use of support programmes

5.1 Implementation of the SAA has a decisive role to play in preparing Croatia for EU membership. The ratification process by the Community and the Member States has not yet been completed. An Interim Agreement has been introduced in the meantime as a transitional measure (see point 3.6).

5.2 In October 2001 the Croatian government adopted an action plan for implementing the Agreement. A series of measures have already been put into effect. The aim is for Croatia to be ready for EU membership by the end of 2006. In order to enable these ambitious goals to be achieved, a ‘coordinator for European integration issues’ was appointed in all the various government authorities.

5.3 In December 2002 a government programme was adopted for 2003 in respect of Croatia's integration into the EU. The programme's priorities were as follows: — economic adjustment; — alignment of Croatian law on EU law; — making the administration more efficient; — a strategy for informing the public in Croatia; and — the adjustment of legal provisions to comply with the obligations under the SAA. According to information received from the Croatian authorities, more than 109 legislative measures in the above fields were introduced by the end of 2003. In January 2004 the second integration programme for conforming with the existing body of EU law was adopted. The requisite implementing regulations are being adopted in 2004. The EESC recognises the efforts made by Croatia but is aware that there are difficulties in the way of implementing measures in a number of fields (e.g. harmonisation measures to come into line with EUROSTAT criteria) brought about by the lack of administrative capacity.

5.4 The CARDS support programmes for Croatia have a vital role to play in the implementation of the SAA. These programmes will undoubtedly make a key contribution to the processes of modernisation and democratisation and towards the successful implementation of the necessary environmental measures. The EESC assumes that, if the European Commission endorses Croatia's application for EU membership, the support programmes set up for the acceding states (ISPA, SAPARD, Phare, TAIEX, etc.) will also be made available to Croatia.

5.5 If the Croatian economy is to successfully cope with the conditions applying in the EU's internal market, it is essential that the necessary reforms, liberalisation measures and adjustments to comply with EU law receive the support of civil society. Key prerequisites in this context are that the Croatian population is kept adequately informed of the importance and the impact of Croatia's integration into the EU and that representative civil society organisations are involved in the political decision-making processes.

6. Regional problems

6.1 There are, in some cases, very considerable disparities in levels of economic development and prosperity between individual urban conurbations and rural areas in Croatia. Furthermore, a considerable number of both smaller and larger areas were particularly badly affected by the war, which has very greatly hampered their economic development (this was particularly the case with regard to, for example, the regions of Slavonia and Lika-Senj).

6.2 In February 2002 a fund was set up to provide assistance to disadvantaged areas with the aim of supporting, above all, areas which suffered particularly badly from the effects of the war, areas affected by depopulation and areas suffering from other disadvantages, such as individual islands and upland areas.

6.3 In its Annual Report for 2003, the European Commission criticised, on the one hand, the fact that no decision had yet been taken on the criteria for allocating funding and, on the other hand, the lack of clear provisions defining the responsibilities for the processing of applications for funding. The EESC urges that rapid solutions be found to the outstanding issues. This is, in the EESC's view, a key prerequisite which has to be met before appropriate use can be made of the various EU programmes, such as INTERREG.

7. Environmental issues

7.1 In its report, the World Bank describes the situation as regards the natural environment in Croatia as ‘good’, when compared with the situation in other central European states. Major investments are, however, still required in the fields of the supply of drinking water and the disposal of sewage and refuse, in order to comply with EU standards.

7.2 Because of the importance of coastal areas as regards tourism and in the light of international obligations to keep the Mediterranean clean, sewage purification in these areas is almost on a par with the level in the EU. In the other areas, however, major investments still have to be made in the fields of sewage collection and purification. A similar situation applies in the case of the collection and disposal of refuse, in particular hazardous waste. The EESC notes that, in its efforts to improve its legal provisions in this field, Croatia is broadly following EU directives and has already made progress accordingly.

7.3 Air quality in Croatia has improved over the last decade; this can be attributed in part to the declining level of industrial production linked to the effects of the war and economic difficulties. In urban areas poor air quality continues to be a major problem. Once the expected economic upturn gets under way, measures will have to be taken to cut emissions in both the transport sector and the energy-generating sector.

7.4 The relatively large area covered by protected zones (approximately 10 %) matches the high level of bio-diversity and the large number of ecosystems and unique landscapes. Some of these features have been placed under the protection of UNESCO. In spite of the abovementioned protective measures, pressure on bio-diversity is increasing. The existing protective measures and conservation areas are unable to meet the demands placed upon them.

7.5 The EESC highlights the fact that, in line with the situation in the majority of the acceding states, there is a considerable need for investment in Croatia in order to comply with the EU environmental standards. It is, in the EESC's view, essential that adequate support be provided to Croatia to back up its efforts to improve the situation.

8. International cooperation and relations with neighbouring states

8.1 A key prerequisite for Croatia's successful participation in the process of European integration is that it should fulfil the obligations which it entered into under the Dayton and Paris Peace Agreements and the obligations attendant upon its membership (since 1996) of the Council of Europe. The EESC notes that the Croatian government has expressly committed itself to meeting these obligations but that the necessary rigour is, however, still lacking in some fields.

8.2 If the inhabitants of adjacent countries are to live peacefully side by side, good relations between neighbouring countries are an essential requirement. The EESC notes that economic cooperation between Croatia and its direct neighbours has been more positive than political relations between Croatia and individual, neighbouring countries. There is, in the EESC's view, inter alia, an urgent need to find a rapid solution to the unresolved issue of the maritime border between Slovenia and Croatia. This problem is being further exacerbated by the decision of the Croatian parliament to unilaterally extend its maritime rights by establishing a ‘Protected Ecological and Fishing Zone’ (PEFZ) (12) in the Adriatic. In this context, the EESC highlights the need to comply with the obligations under international maritime law.

8.3 Croatia's accession to the WTO in 2000 represented an important step on the road towards the internalisation of the Croatian economy.

8.4 The Interim Agreement (signed on 29 October 2001) under the SAA came into force at the beginning of 2002. This agreement introduced extensive trade concessions. Croatia has been a member of the Central European Free Trade Agreement (CEFTA) since 1 March 2003. Croatia has a total of 35 free trade partners (including the EU Member States). 90 % of Croatia's external trade is at present already subject to preferential treatment and, after the transitional period provided for under the SAA, more than two-thirds of Croatia's foreign trade will be exempt from customs duty. In 2003 the value of goods exported by Croatia was US$5.65 billion, whilst in the same year, it imported goods worth US$12.77 billion; it therefore had a balance of trade deficit of US$7.12 billion.

9. Organised civil society

9.1 Organised civil society has an important role to play both in Croatia's conversion to a market economy and in its EU accession process. There are more than 20,000 NGOs in Croatia. The Freedom of Assembly and Freedom of Association Act came into force on 1 January 2002. This law introduced more liberal provisions in respect of freedom of association and the supervision of the activities of NGOs.

9.2 In its opinion on civil society in South-East Europe, the EESC highlighted the following requirements as key prerequisites for ensuring stability and prosperity, namely the need: — for civil society organisations to become strong and for participatory democracy to become part of the culture of the countries concerned; — for civil society organisations to be autonomous bodies within a participatory democracy; there is, however, still little overall understanding of the need for this measure; — to improve the social dialogue; — for a broadly-based civil dialogue to take place, with a view, inter alia, to promoting greater awareness of the environment. In its opinion, the EESC expressly welcomed the statement made by the Croatian authorities to the effect that the development of civil society was a matter of top priority for the government.

9.3 The former Croatian government drew up a draft bill, providing for the establishment of a ‘forum’, which would enable civil society organisations (NGOs) to discuss issues and draw up opinions on matters of interest to these organisations. The aim of the proposed forum is to underpin the civil dialogue. On 16 October 2003 the ‘National Foundation for the Promotion of Civil Society’ was established. This body fulfils the roles of the proposed forum. The representatives of NGOs are able to exert due influence in the governing body of the Foundation. This measure, together with the financial support provided for the work of NGOs, are seen as positive developments by the EESC. The EESC also welcomes the fact that NGOs are able to participate in the work of the working parties established by the Economic and Social Council; it hopes that this collaboration can be further extended.

9.4 Croatia set up its second Economic and Social Council in 1999. This is a tripartite body which has a total of 15 members. Alongside representatives of the government, employers' organisations and trade unions are also represented. Institutional representatives of the employers' side are drawn from a single association (the Union of Croatian Employers); the institutional representatives of workers are drawn from five trade union associations (one delegate per association). In line with the principle of rotation, a new chairman of the Council is appointed at regular intervals. The work of the Council is carried out in seven committees; the Council takes its decisions at plenary sessions, which are generally held every three months. The administrative tasks are carried out by an office specially set up for the purpose by the government.

9.5 As is similarly the case in various EU Member States which have their own Economic and Social Council, the Croatian Economic and Social Council has, inter alia, the task of addressing fundamental issues relating to economic and social policy, labour market policy, the budget and privatisation.

9.6 The Croatian Economic and Social Council undoubtedly has an important role to play in the social dialogue. The EESC regards the existence of an effective Economic and Social Council as a key prerequisite for the proper implementation of the reform measures due to be carried out; such a Council enables the respective professional groups concerned also to play a role in this context. It is equally important to promote an autonomous social dialogue between the parties involved in collective bargaining.

9.7 Representative bodies are still in the process of being established in Croatia. Not all occupational groups have their own representative bodies.

9.8 Trade union membership was virtually obligatory prior to 1990. Following the economic changeover, trade unions in the individual republics which succeeded the Republic of Yugoslavia, developed along very different lines. Compulsory trade union membership was abolished everywhere and the trade union organisations were completely restructured. Croatia has a large number of individual trade unions and five trade union associations which are, by virtue of their strength, also represented on the Croatian Economic and Social Council.

9.9 Because of the fragmentation of trade unions into five national associations, the interests of workers are not always adequately looked after, e.g. in the Economic and Social Council. Efforts are therefore being made to establish an umbrella organisation for the individual trade union associations. It would, in the EESC's view, be deplorable if, because of this situation, the Croatian trade unions were not to be in a position fully to carry out the role which they have been given under the new system of labour relations.

9.10 The bodies representing employers are the Croatian Economic Chamber and the Union of Croatian Employers. The Economic Chamber is divided into trade and professional and regional groups. Its most important task is to provide support for business both inside and outside Croatia, for example by organising trade fairs and, above all, by providing further training for its members. Membership of the Economic Chamber is compulsory for all business enterprises registered in Croatia.

9.11 Up to 1996 the Economic Chamber was responsible for representing the employers in negotiating collective agreements. This task has now been taken over by the Union of Croatian Employers, an umbrella body representing twenty-three occupational associations and based on the principle of voluntary membership. It is clear that the latter body represents the interests of only part of the overall number of Croatian enterprises. SMEs also have their own association but this body, too, represents only part of the enterprises concerned. It is, in the EESC's view, essential for the employers' organisations to find solutions which will ensure that the interests of all enterprises are defended in a representative way both on the Economic and Social Council and vis-à-vis the government.

9.12 There is an existing legal basis for the separate and independent representation of the interests of agriculture and forestry but it has, up to now, not been acted upon. The interests of farmers are to be represented in a separate section of the Economic Chamber. The EESC shares the view expressed in the report from the World Bank that the interests of farmers are not adequately represented, which is seen as a considerable drawback in the context of preparing Croatia for the adoption of the CAP. The EESC hopes that the Croatian Farmers' Union, which has been operating as an association for a number of years, will be called upon to serve as an interlocutor, will be involved in appraisal procedures and may soon become established as a forceful, independent body representing the interests of Croatian farmers.

10. Summary and recommendations

10.1 Croatia declared itself independent from Yugoslavia on 25 June 1991. There were many victims amongst the civil population as a result of the ensuing war with Serbia, which also devastated large parts of the country and, above all, damaged, to an enormous extent, Croatia's economic development.

10.2 In the last few years there have been considerable political and economic changes in Croatia. The democratisation process has made considerable progress. The macro-economic indicators have shown a tremendous improvement, particularly since 2000. In this context, it should be borne in mind that Croatia has to cope with not only its conversion from the old system to an effective market economy but, above all, with the consequences of the war.

10.3 Over the last few years, economic development in Croatia has been characterised by a welcome high level of growth and the stabilisation of prices. In contrast to this situation, however, the level of unemployment, particularly in rural areas, continues to constitute the major, unresolved social problem; the balance of trade deficit has also shot up, as has the level of government debt.

10.4 The EESC highlights the role played by the autonomous social dialogue in promoting the reform process and points out that, in line with its remit, the Economic and Social Council should, in future, too, continue to be taken seriously by the government.

10.5 In individual areas of the economy, such as the banking sector, Croatia has achieved considerable success in its privatisation process. From an overall standpoint, however, Croatia's privatisation process is being pursued less rigorously than is the case in the acceding states. This is serving to impede private investment just as much, as for example, the question of unresolved ownership of property. The EESC hopes that the new government will not only resolutely press ahead with privatisation but will also remove other outstanding obstacles to private investment.

10.6 If the requisite number of new jobs are to be created in Croatia, considerable importance should be attached not only to providing support for the establishment of new enterprises, particularly SMEs, but also to improving training and further training.

10.7 At the Zagreb Summit on 24 November 2000, the EU held out to the Western Balkan states the prospect of accession to the EU and the introduction of support programmes. This prospect was conditional upon fulfilment of the ‘Copenhagen Criteria’ and the obligations deriving from the EU Treaty. Croatia was the first of the Western Balkan states to submit its application for EU membership, which was presented on 21 February 2003. The EESC regards this decision as a positive development as it indicates that Croatia has opted to participate in the process of European integration.

10.8 The EESC recognises the enormous efforts made by Croatia to meet the prerequisites for EU membership. The action programme adopted by the Croatian Government with a view to implementing the Stability and Association Agreement has an important role to play in this context, as does also the programme adopted by the government at the end of 2002 with a view to Croatia's integration into the EU.

10.9 The objectives which have been set out are undoubtedly very ambitious. If the conditions for EU membership are to be met, there is an urgent need to carry out a comprehensive reform process. It is of decisive importance in this context not just to introduce the requisite legislative measures, which were decided upon in 2003, but also to fulfil, in good time, the administrative prerequisites for ensuring that these measures are effectively applied.

10.10 In the EESC's view, it is also of key importance to the success of the project that the necessary reforms, liberalisation measures and adjustments to comply with EU law receive the support of the people. This, in turn, is dependant upon the public being adequately informed of the importance and the impact of EU membership. The EESC therefore recommends that organised civil society as a whole – not just a number of individual occupational associations – be involved in the necessary decision-making processes. These organisations must also be in a position to provide their members with factually well-founded information.

10.11 The EESC joins the European Commission in expressing its concern over the ongoing unresolved problems in the fields of the administration of justice, measures to combat corruption, the processing of applications for asylum and, in particular, unresolved problems in connection with the International War Crimes Tribunal for the Former Yugoslavia in The Hague. The EESC highlights the fact that the resolution of these problems will be of quite critical importance when it comes to assessing whether the Copenhagen Criteria can be regarded as having been met.

10.12 The EESC recognises the express intention of the Croatian Government fully to meet the obligations set out under the Dayton and Paris Peace Agreements. In this context carrying out the task of repatriating the large number of refugees will pose a considerable challenge.

10.13 In the EESC's view, normalising Croatia's bilateral relations with its direct neighbours is a very essential aspect of Croatia's preparations for EU membership.

10.14 The establishment of strong civil society organisations and an active participatory democracy are also key prerequisites for the achievement of stability and prosperity. The EESC therefore regards it as a positive development that the institutional prerequisites for the social dialogue and the civil dialogue have either been put in place or are in the process of being put in place. A factor of decisive importance in this context is that all occupational groups should be in a position to bring an influence to bear through the medium of representative bodies which are truly representative and well organised.

Brussels, 31 March 2004. The President of the European Economic and Social Committee Roger BRIESCH

(1) World Bank Report No. 25435 HR.

(2) It should be noted that Croatia's per capital GDP is only about one third of the corresponding figure for Slovenia.

(3) Figure based on the ILO method of calculation. The corresponding figure issued by the Croatian National Statistical Office is, however, 22.5 %.

(4) European Economy, Occasional Papers, No. 5, January 2004.

(5) World Bank Report No. 25434-HR.

(6) COM(2003) 139 final of 26.3.2003.

(7) REX 123 – OJ No. C 208 of 3.9.2003, page 82.

(8) World Bank Report, p. 87 et seq.

(9) Croatian National Statistical Office.

(10) See the replies to the questionnaire drawn up by the European Commission.

(11) Support for Improvement in Governance and Management in Central and Eastern European countries (established as a joint venture between the OECD and the EU).

(12) This footnote is not applicable to the English version.