COMMISSION STAFF WORKING DOCUMENT Croatia 2010 Progress Report    accompanying the  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL  Enlargement Strategy and Main Challenges 2010-2011
Date: 2010-11-09
Institutions: European Commission
Subjects: North Macedonia, accession to the European Union, enlargement of the Union, pre-accession strategy, report

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EUROPEAN COMMISSION 

Brussels, 9.11.2010 
SEC(2010) 1326 final 

COMMISSION STAFF WORKING DOCUMENT 

Croatia 2010 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2010-2011 

{COM(2010) 660 final} 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

4.6. 

4.7. 

4.8. 

4.9. 

Introduction .................................................................................................................. 4 

Preface.......................................................................................................................... 4 

Context ......................................................................................................................... 4 

Relations between the EU and Croatia......................................................................... 5 

Political criteria ............................................................................................................ 6 

Democracy and the rule of law .................................................................................... 6 

Human rights and the protection of minorities .......................................................... 10 

Regional issues and international obligations ............................................................ 15 

Economic criteria ....................................................................................................... 17 

The existence of a functioning market economy ....................................................... 17 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 24 

Ability to assume the obligations of membership...................................................... 26 

Chapter 1: Free movement of goods .......................................................................... 26 

Chapter 2: Freedom of movement for workers .......................................................... 28 

Chapter 3: Right of establishment and freedom to provide services ......................... 28 

Chapter 4: Free movement of capital ......................................................................... 29 

Chapter 5: Public procurement................................................................................... 30 

Chapter 6: Company law............................................................................................ 31 

Chapter 7: Intellectual property law........................................................................... 32 

Chapter 8: Competition Policy................................................................................... 33 

Chapter 9: Financial Services..................................................................................... 34 

4.10.  Chapter 10: Information society and media ............................................................... 35 

4.11.  Chapter 11: Agriculture and rural development......................................................... 36 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 36 

4.13.  Chapter 13: Fisheries.................................................................................................. 37 

4.14.  Chapter 14: Transport policy ..................................................................................... 38 

4.15.  Chapter 15: Energy .................................................................................................... 39 

4.16.  Chapter 16: Taxation.................................................................................................. 40 

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4.17.  Chapter 17: Economic and Monetary Policy ............................................................. 41 

4.18.  Chapter 18: Statistics.................................................................................................. 41 

4.19.  Chapter 19: Social Policy and employment ............................................................... 42 

4.20.  Chapter 20: Enterprise and industrial policy.............................................................. 44 

4.21.  Chapter 21: Trans European Networks ...................................................................... 45 

4.22.  Chapter 22: Regional policy and coordination of structural instruments .................. 45 

4.23.  Chapter 23: Judiciary and fundamental rights ........................................................... 46 

4.24.  Chapter 24: Justice, freedom and security ................................................................. 54 

4.25.  Chapter 25: Science and research .............................................................................. 58 

4.26.  Chapter 26: Education and culture............................................................................. 58 

4.27.  Chapter 27: Environment ........................................................................................... 59 

4.28.  Chapter 28: Consumer and health protection............................................................. 60 

4.29.  Chapter 29: Customs Union ....................................................................................... 62 

4.30.  Chapter 30: External relations.................................................................................... 62 

4.31.  Chapter 31: Foreign, Security and Defence Policy.................................................... 63 

4.32.  Chapter 32: Financial Control.................................................................................... 64 

4.33.  Chapter 33: Financial and budgetary provisions........................................................ 65 

Statistical Annex ...................................................................................................................... 67 

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COMMISSION STAFF WORKING DOCUMENT 

2010 Progress Report 

1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and Parliament on 
progress made by the countries of the Western Balkans region. 

This report on progress made by Croatia on preparing for EU membership largely follows the 
same structure as in previous years. The report: 

–  briefly describes relations between Croatia and the Union; 

–  analyses the situation in Croatia in terms of the political criteria for membership; 

–  analyses the situation in Croatia on the basis of the economic criteria for membership; 

–  reviews  Croatia’s  capacity  to  assume  the  obligations  of  membership,  that  is  the  acquis 

expressed in the Treaties, the secondary legislation and the policies of the Union. 

This report covers the period from early October 2009 to the end of September 2010. Progress 
is measured on the basis of decisions taken, legislation adopted and measures implemented. 
As  a  rule,  legislation  or  measures  which  are  being  prepared  or  awaiting  parliamentary 
approval have not been taken into account. This approach ensures equal treatment across all 
reports and permits an objective assessment. 

The report is based on information gathered and analysed by the Commission. Many sources 
have  been  used,  including  contributions  from  the  government  of  Croatia,  the  EU  Member 
States,  European  Parliament  reports1  and  information  from  various  international  and  non-
governmental organisations. 

The  Commission  has  drawn  detailed  conclusions  regarding  Croatia  in  its  separate 
communication on enlargement2, based on the technical analysis contained in this report. 

1.2. 

Context 

The  June  2004  European  Council  granted  the  status  of  candidate  country  to  Croatia. 
Accession  negotiations  with  Croatia  were  opened  in  October  2005.  The  Stabilisation  and 
Association Agreement between Croatia and the EU was signed in October 2001 and entered 
into force in February 2005. 

1 
2 

The rapporteur for Croatia is Mr Hannes Swoboda.  
Enlargement Strategy and Main Challenges 2010-2011 (COM(2010) 660 of 9.11.2010). 

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1.3. 

Relations between the EU and Croatia 

Croatia is participating in the Stabilisation and Association Process. 

Accession negotiations with Croatia have continued and are now entering their final phase. 
Negotiations have been provisionally closed on 25 out of 35 chapters and remain to be closed 
on  competition;  agriculture;  fisheries;  regional  policy;  judiciary  and  fundamental  rights; 
justice,  freedom,  security;  environment;  foreign,  security  and  defence  policy;  budget;  and 
'other issues'. 3  

In December 2009, based on the Commission’s recommendation, a working group was set up 
to draft the Treaty of Accession with Croatia. Work is progressing well.  

The  political  and  economic  dialogue  between  the  EU  and  Croatia  has  continued.  Political 
dialogue  meetings  were  held  in  Brussels  in  March  2010  at  ministerial  level.  Economic 
dialogue took place in a bilateral meeting with the Commission and Croatian senior officials 
in  June  2010.  Moreover,  the  multilateral  economic  dialogue  between  the  Commission,  EU 
Member States and Candidate Countries in the context of the pre-accession fiscal surveillance 
continued,  including  a  meeting  at  Ministerial  level  in  May  in  Brussels.  These  meetings 
focused on the main challenges posed to Croatia by the Copenhagen political and economic 
criteria  and  reviewed  the  progress  made  towards  fulfilling  the  Accession  Partnership 
priorities. 

Implementation  of  the  Stabilisation  and  Association  Agreement  (SAA)  has  been  mixed. 
Full  liberalisation  of  short-term  capital  movements,  which  Croatia  postponed  in  2009 
invoking the safeguard clause in Article 60(4), was achieved on 1 July 2010. With regard to 
State  aid,  the  tendering  procedure  for  shipyards  in  difficulty  was  completed  in  June  2010. 
However, Croatia adopted safeguard measures on some types of semi-hard cheese and cheese 
supplements,  in  breach  of  WTO  procedures.  The  measures  on  cheese  supplements  were 
revoked  in  November  2009,  whereas  those  on  hard  cheeses  were  confirmed  and  expired  in 
January 2010. Certain tax provisions on coffee and coffee-based products have to be reviewed 
and amended. Croatia should also further liberalise its agricultural sector, in accordance with 
Article 29, to pave the way for integration into the EU internal market upon accession.  

The  EU  is  providing  guidance  to  the  authorities  on  reform  priorities  under  the  Accession 
Partnership.  Progress  on  these  reform  priorities  is  encouraged  and  monitored  by  the  SAA 
bodies. The SAA Council met in March 2010 and the SAA Committee in December 2009. Six 
sectoral  sub-committee  meetings  have  been  held  since  November  2009.  Based  on  the 
Accession  Partnership,  Croatia  adopted  its  national  programme  for  EU  accession  in  early 
2010. 

Financial  assistance  has  been  provided  under  the  Instrument  for  Pre-accession  Assistance 
(IPA) since 2007. The 2010 IPA programmes totalled €154 million. This assistance is focused 

3 

Negotiations have been provisionally closed on the following chapters: science and research; education 
and  culture;  enterprise  and  industrial  policy;  external  relations;  economic  and  monetary  policy; 
intellectual property law; information society; trans-European networks; customs union; company law; 
statistics; free movement of workers; financial services; energy; consumer and health protection; right 
of  establishment  and  freedom  to  provide  services;  social  policy  and  employment;  free  movement  of 
goods; public procurement; taxation; food safety, veterinary and phytosanitary policy; financial control; 
institutions; free movement of capital; and transport) 

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on  institution-building  and  preparing  for  implementation  of  the  EU’s  common  agricultural 
policy  and  cohesion  policy.  In  addition,  Croatia  continued  to  benefit  from  regional  and 
horizontal  programmes,  including  an  IPA  crisis  response  package  created  in  2008.  The 
country  has  taken  significant  steps  to  address  weaknesses  identified  by  the  Commission  in 
Croatia’s management of pre-accession aid. These measures are meant to prepare the country 
for the next phase  of  decentralisation  of  management  powers, namely the waiver of the EU 
Delegation’s  ex  ante  controls  for  IPA  components  I  to  IV.  However,  a  track  record  of 
improved implementation is needed.  

EU  financial  support  has  been  provided  for  development  of  civil  society  under  the  Civil 
Society  Facility.  In  addition,  a  €16  million  contribution  under  the  cross-border  cooperation 
programmes with Italy, Slovenia, Hungary, Serbia, Montenegro and Bosnia and Herzegovina, 
combined with participation in European Regional Development Fund (ERDF) programmes, 
will  promote  dialogue  with  local  and  regional  authorities.  Croatia’s  participation  in  an 
increasing number of EU programmes (13) is also a valuable opportunity to put civil society 
dialogue into action.  

'Competitiveness  and 

Innovation  Framework  Programme' 

Croatia  participates  in  the  following  EU  Programmes:  'Seventh  Research  Framework 
Programme'; 
(including 
'Entrepreneurship  and  Innovation  Programme',  'Information  Communication  Technologies 
Policy Support Programme' and 'Intelligent Energy Europe Programme'); 'Progress'; 'Culture'; 
'Europe  for  Citizens';  'Fiscalis  2013';  'Customs  2013';  'Interoperable  Delivery  of  European 
eGovernment  Services  to  public  Administrations  Business  and  Citizens'  (IDABC);  'Civil 
Protection  Financial  Instrument';  'MEDIA  2007';  'Community  action  in  the  field  of  health'; 
'Marco Polo II'; and 'Civil Protection Mechanism'.  

2. 

POLITICAL CRITERIA 

This  section  examines  the  progress  made  by  Croatia  towards  meeting  the  Copenhagen 
political  criteria,  which  require  stability  of  institutions  guaranteeing  democracy,  the  rule  of 
law,  human  rights  and  respect  for  and  protection  of  minorities.  It  also  monitors  regional 
cooperation,  good neighbourly  relations with enlargement countries and Member States and 
compliance with international obligations, such as cooperation with the International Criminal 
Tribunal for the former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law 

Parliament 

Parliament  functioned  in  accordance  with  its  constitutional  role.  However,  the  capacity  of 
parliament to scrutinise the legislative process needs enhancing. It adopted amendments to the 
Constitution necessary for progress in the accession negotiations.  

The  Presidential  elections  went  smoothly  and  complied  with  OSCE  standards.  However, 
efforts are still necessary to address outstanding issues such as consolidating and harmonising 
the legal framework, reforming the election administration and updating the voter register.  

Government 

The government continued to function effectively, including after the Croatian Social Liberal 
Party (HSLS) left the ruling coalition in July. A number of cabinet reshuffles took place.  

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Public administration  

Limited progress can be reported with public administration reform, which is a key Accession 
Partnership  priority.  The  legal  basis  for  building  a  modern  and  professional  civil  service  is 
still incomplete. The Law on salaries of local and regional self-government units has not been 
adopted. A unified approach to salaries throughout the county has not yet been introduced. A 
civil service registry still has not been put in place.  

The revised General Administrative Procedures Act (GAPA) entered into force. Its aims are 
to  support  establishment  of  service-oriented  and  professional  administrative  practices  and 
develop an administrative system based on simplified and transparent procedures. However, 
implementation of the GAPA is at an early stage and there have been delays in harmonising 
the various sectoral legal acts related to it. 

The Law on administrative disputes was adopted and is due to enter into force on 1 January 
2012.  Closer  coordination  between  the  Ministry  of  Public  Administration  (MoPA)  and  the 
Ministry of Justice will be needed to ensure efficient implementation of the legal framework.  

As  regards  the  civil  service,  a  human  resources  development  strategy  (2010-2013)  and  its 
associated action plan were adopted. The strategy envisages new methods for recruiting and 
retaining  a  sufficient  number  of  qualified  civil  servants  in  the  public  administration. 
Preparation  of  the  reform  of  the  remuneration  system  in  the  public  sector,  including  in 
agencies  and  institutions,  has  started.  To  identify  inefficiencies,  a  detailed  analysis  of  the 
functions  of  the  public  agencies  is  being  prepared.  However,  the  human  resources  strategy 
covers  only  civil  servants  and  not  all  state  officials  at  both  central  and  regional  levels,  thus 
limiting  the  impact  of  the  reforms.  Significant  further  efforts  in  terms  of  adoption  and 
implementation of underlying legal acts are required to establish a merit-based promotion and 
reward  mechanism,  to  accelerate  depoliticisation,  decrease  employee  turnover  and  attract 
qualified personnel. 

The  capacity  of  public  administration  at  central,  regional  and  local  levels  to  manage 
decentralisation reforms has still to be significantly strengthened. A decentralisation strategy 
remains  to  be  developed.  The  role  of  the  Local  Democracy  Academy  in  training  local  and 
regional government officials is to be further strengthened. 

The  MoPA,  along  with  staff  needed  for  EU  accession,  were  exempt  from  the  government 
Decision halting recruitment of new civil servants because of the economic crisis. However, 
the  administrative  capacity  of  the  MoPA  needs  to  be  further  improved  so  that  it  can 
implement  efficiently  the  complex  tasks  related  to  public  administration  reform.  Although 
new staff have been recruited in the MoPA and across the entire administration to prepare for 
EU accession, considerable structural problems of turnover and retention remain. 

The role and effectiveness of the People's Ombudsman is being increased. However staffing is 
still insufficient. Greater attention need to be paid to the Ombudsman's recommendations to 
further enhance his role as an institutional counterweight defending the rights of citizens and 
combating maladministration. 

Continuous  training  throughout  the  State  administration  was  provided  by  the  Civil  Service 
Training Centre of the MoPA. However, enhanced capacity to fulfil its key role in improving 
the professional knowledge, skills and performance of civil servants is required.  

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Overall,  limited  progress  can  be  reported  on  the  public  administration  reform.  In  order  to 
achieve  tangible  results,  stronger  political  commitment  and  closer  coordination  between  the 
key stakeholders at central, regional and local levels are required. Considerable further efforts 
are needed to finalise the legal framework and to implement it efficiently across the board. 

Judicial system  

Implementation  of  judicial  reform  has  continued,  although  the  main  expected  results  of  the 
reform process are yet to be seen. The Ministry of Justice underwent a major reorganisation to 
make it more efficient. 

Amendments  to  the  Constitution  along  with  a  package  of  related  legislation  strengthening 
judicial independence have been adopted. As a result, the appointment procedure to the State 
Judicial Council (SJC) has been improved and it is now the SJC and no longer the Ministry of 
Justice  which  appoints  Presidents  of  courts.  The  President  of  the  Supreme  Court  will  have 
greater  control  over  court  management,  the  five-year  probation  period  for  judges  has  been 
abolished and the Judicial Academy has been made independent of the Ministry of Justice and 
seen an increase in its staffing. A new selection procedure and improved criteria for selecting 
judges and prosecutors have also been introduced, including the establishment of a school for 
judicial officials.  

However,  the  new  system  has  yet  to  be  tested  in  practice.  The  same  applies  to  transitional 
criteria applicable until the first graduates from the school are appointed to judicial positions 
in 2013. Some criteria remain unclear and shortcomings remain in the functioning of both the 
SJC  and  the  State  Prosecutorial  Council  (SPC).  Overall,  it  is  important  that  these  bodies 
demonstrate independence and accountability, especially when performing their key functions 
in  the  area  of  appointments,  discipline  and  career  management,  so  that  effective  self 
regulation of the judicial profession is assured.  

Judicial efficiency has improved with the backlog of cases before the courts further reduced 
by 10%, including good progress on reducing the number of cases older than three years. The 
legal basis for a new system of administrative justice was introduced. However, the backlog 
of  cases  has  been  reduced  unevenly  across  the  various  courts  and  overall  remains  high. 
Problems with enforcement of court rulings continue to hamper the efficient working of the 
judicial system. The handling of administrative cases continues to pose particular challenges. 
The  infrastructure  and  equipment  of  courts,  including  case  management  systems,  remains 
underdeveloped.  

Croatia  continued  to  try  war  crimes  with  approximately  two  dozen  trials  on-going  in 
2009/2010.  A  more  balanced  approach  to  trials  has  continued.  More  cases  involving  Croat 
perpetrators,  including  members  of  the  Croatian  armed  forces,  were  pursued.  The  State 
Prosecutor continued reviewing potentially questionable in absentia verdicts from the 1990s. . 
Measures  have  been  taken  to  protect  witnesses.  There  have  been  some  attempts  to  remedy 
misapplication of the Amnesty Law in cases which could be considered war crimes.  

However,  impunity  for  war  crimes  remains  a  problem,  especially  where  the  victims  were 
ethnic Serbs or the alleged perpetrators were members of the Croatian security forces. Many 
hundreds  of  cases  remain  to  be  investigated  and  prosecuted,  despite  recent  action  by  the 
police and prosecutors. Problems persist in certain localities. Insufficient use is being made of 
the specialised war  crime  courts,  although an increased willingness to use this  possibility is 
evident  recently.  Where  convictions  are  obtained,  sentences  in  war  crimes  cases  are,  in 

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general,  considerably  lighter  than  those  imposed  for  the  equivalent  underlying  crimes  not 
classified as war crimes. Work on reviewing questionable in absentia verdicts from the 1990s 
should continue.  

Overall,  the  reform  of  the  judiciary  has  continued,  but  significant  challenges  remain,  in 
particular application of objective and transparent criteria for the appointment of judges and 
prosecutors,  reduction  of  the  case  backlog,  the  excessive  length  of  proceedings  and 
enforcement of court decisions. 

(See Chapter 23 - Judiciary and fundamental rights) 

Anti-corruption policy  

There  has  been  good  progress  in  the  fight  against  corruption.  Implementation  of  the  anti-
corruption  strategy  and  the  related  action  plan  has  continued.  A  specific  anti-corruption 
programme for State-owned companies was adopted. Overall coordination of anti-corruption 
efforts has improved. The legal framework to combat corruption has been further improved. 
However,  the  anti-corruption  sector  is  understaffed  and  further  coordination  and  pro-active 
follow-up  of  implementation  issues  are  needed.  Legislation  on  prevention  remains  under-
developed.  

The Office for the Fight against Corruption and Organised Crime (USKOK) continued to be 
active  and  issued  indictments  in  some  important  cases.  The  overall  number  of  cases  being 
handled  by  USKOK  has  increased,  despite  the  lack  of  additional  resources.  USKOK  has 
begun  to  investigate  possible  high-level  corruption  involving  senior  political  figures.  Other 
medium and high-level cases are under investigation  and  prosecution, often involving state-
owned companies. The number of court verdicts has increased. The first high level cases are 
before the courts. The National Police Office for the Fight against Corruption and Organised 
Crime (PNUSKOK) was reinforced. 

However,  corruption  is  still  prevalent  in  many  areas.  The  recently  upgraded  legal  and 
administrative structures have yet to be fully tested in practice, particularly the courts’ ability 
to handle the increased number and complexity of cases. The administrative capacity of State 
bodies  involved  in  the  fight  against  corruption  still  needs  improvement.  The  increasing 
number of cases has highlighted some deficiencies in PNUSKOK’s and USKOK’s capacity to 
deal  with  sophisticated  financial  crimes.  A  culture  of  political  accountability  for  the 
corruption cases which are coming to light is lacking.  

There has been limited progress in the prevention of corruption. The office of the commission 
for the prevention of conflicts of interest has been restructured to give the commission further 
independence  from  Parliament.  Legal  provisions  have  been  introduced  to  depoliticise 
appointments to supervisory boards of state-owned companies. However, these measures are 
not  yet  operational.  There  has  been  limited  progress  in  preventing  conflicts  of  interest  and 
legal sanctions remain weak. There has been no improvement in application of the legislation 
on  access  to  information.  Shortcomings  remain  in  the  financing  of  political  activities  and 
election  campaigns,  particularly  regarding  transparency  and  independent  oversight.  There  is 
insufficient scrutiny of and transparency in the execution of public procurement contracts. 

Overall, good progress has been achieved in the fight against corruption, which is receiving 
greater  attention  than  in  the  past.  However,  corruption  remains  prevalent  in  many  areas.  A 
track  record  of  effective  investigation,  prosecution  and  court  rulings  remains  to  be 

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established,  especially  for  high  level  corruption.  Preventive  measures  such  as  improved 
transparency in public spending need to be strengthened.  

(See Chapter 23 - Judiciary and fundamental rights) 

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law 

As for ratification of human rights instruments, Croatia ratified the European Convention 
on the exercise of children’s rights. 

The  ECtHR  delivered  24  judgments  on  violated  rights  guaranteed  by  the  European 
Convention  on  Human  Rights  (ECHR)  concerning  Croatia.  A  total  of  912  new  applications 
were made to the ECtHR since October 2009. In September 2010, 1,437 cases against Croatia 
were pending before the European Court of Human Rights (ECtHR). The Court continued 
to find violations regarding the right to a fair trial and length of proceedings under Article 6 of 
the Convention. It has also examined the length of enforcement proceedings. The ECtHR has 
found violations of Article 13 in cases of a lack of an effective remedy. Such cases involved 
local courts failing to issue verdicts following previous judgments on violations of the right to 
a fair hearing and length of proceedings at the higher courts. The ECtHR concluded that the 
remedies provided in the domestic legal system in the form of recourse to the higher courts 
were not effective in those cases. 

The  ECtHR  has  also  found  violations  of  Article  6  relating  to  access  to  court  in  cases  of 
conflict of jurisdiction between municipal and administrative courts. The Court warned about 
the  excessively  formalistic  approach  taken  by  the  administrative  courts  with  regard  to  the 
applicant’s human rights. 

As regards promotion and enforcement of human rights the government continued to take 
various measures to raise public awareness of human rights issues. However, enforcement of 
rights  continues  to  be  compromised  by  the  persisting  shortcomings  in  administration  of 
justice, especially the length of proceedings. 

Civil and political rights 

With regard to prevention of torture and ill-treatment and the fight against impunity, the 
Ombudsman  continued  to  receive  numerous  complaints  about  police  treatment  of  citizens, 
including excessive use of force. Transparent procedures for establishing police responsibility 
and regulating police activities are still not in place.  

As  regards  impunity,  many  war  crimes  are  still  unprosecuted,  in  particular  those  where  the 
victims  are  ethnic  Serbs.  The  issue  of  double  citizenship  in  the  region  continues  to  create 
conditions  for  impunity.  The  amendment  to  the  Agreement  on  mutual  enforcement  of 
sentences between Croatia and Bosnia and Herzegovina is a significant step towards reducing 
impunity: the convicted person’s agreement is no longer necessary for a sentence delivered in 
one country to be executed in the other. Extradition agreements were signed with both Serbia 
and with Montenegro to allow extradition of their citizens who are indicted for certain serious 
crimes. These agreements are a significant contribution towards reducing impunity within the 
region. Their impact could be further increased in due course by extending such agreements to 
war crimes. 

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As  regards  access  to  justice,  a  new  Law  on  Administrative  Court  disputes  provides  for 
introduction, with effect from January 2013, of four first-instance courts with full jurisdiction 
for  the  purposes  of  Article  6  of  the  European  Convention  on  Human  Rights  plus  a  Higher 
Administrative  Court.  The  Law  on  legal  aid  has  been  implemented  with  mixed  results. 
Measures  have  been  taken  to  simplify  the  procedure  and  to  increase  the  fees  for  lawyers  to 
take on legal aid cases. However, procedures remain complicated and the overall level of aid 
provided is low.  

With regard to the prison system, legislation foreseeing a new system of probation from 2012 
was adopted. However, Croatian prisons remain overcrowded and provide inadequate health 
protection.  

Freedom  of  expression,  including  freedom  and  pluralism  of  the  media,  is  provided  for  in 
Croatian law and is generally respected. However, editors and journalists continue to report 
undue  political  pressure.  There  has  been  limited  progress  with  investigating  threats  against 
journalists working on cases of corruption and organised crime, with the notable exception of 
one  prominent  murder  case.  Problems  with  the  independence  of  local  media  remain.  The 
public  broadcaster  HRT  continues  to  face  serious  managerial  difficulties  following  several 
unsuccessful attempts by the HRT Programme Council to elect a new director of HRT. This is 
affecting HRT’s functioning. 

With regard to freedom of assembly and association, the overall situation is satisfactory. 

Civil  society  organisations  (CSOs)  continue  to  play  a  prominent  role  in  promoting  and 
protecting  human  rights,  democracy  and  minorities.  The  code  for  consulting  the  public  in 
decision-making  and  the relevant  by-laws and implementing procedures  have been adopted. 
However, this has not led to significant changes, as CSOs tend to remain excluded from the 
policy-making process. Their participation in the legislative process is mostly non-obligatory 
and the new system for including the public remains vague. With a few notable exceptions, 
the  analytical  and  financial  capacities  of  CSOs  for  monitoring  political  developments  and 
government  decisions  remain  weak.  The  Ministry  of  Public  Administration  retains  control 
over  the  registration  and  internal  governance  of  foundations.  Efforts  remain  to  be  done  to 
ensure the independence and sustainability of CSOs.  

There have been no particular problems with exercising the freedom of religion. 

Overall, civil and political rights continue to be generally well respected in Croatia. However, 
shortcomings  remain  with  impunity  for  war  crimes,  access  to  justice  and  freedom  of 
expression.  

Economic and social rights 

There  has  been  some  progress  with  women’s  rights  and  gender  equality.  The  institutional 
mechanisms for gender equality at central and local government levels have been established. 
The  Ombudsperson  for  Gender  Equality  continued  implementing  the  Gender  Equality  Act. 
The capacity of the office is currently being strengthened.  

The  legislative  framework  to  combat  family  violence  has  improved.  The  Act  on  protection 
against  domestic  violence  is  being  implemented.  In  general,  the  police  continued  to  act 
appropriately in cases of family violence. There have been slight improvements in the work of 
social welfare centres. However, there has been an increase in the number of cases registered, 

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including  the  number  of  women  killed  as  a  result  of  family  violence.  Victims  of  family 
violence do not have sufficient access to information on their rights and entitlements.  

The position of women on the labour market has not changed significantly. There has been a 
slight  decrease  in  the  percentage  of  unemployed  women.  However,  unemployment  amongst 
women remains high and there are still persistent gender wage differences. Widespread use is 
still  made  of  fixed-term  contracts  for  women  on  the  labour  market.  Women  continue  to  be 
under-represented in economic and political decision-making bodies. (See Chapter 19 - Social 
policy and employment) 

There  has  been  limited  progress  with  children’s  rights.  The  Ombudsman  for  Children 
became  more  active  in  promoting  and  protecting  children’s  rights,  dealing  with  2,217  new 
cases  in  2009,  predominantly  on  family  violence  and  violence  against  children.  Cases  of 
violence  in  educational  institutions  continue  to  occur  and  are  not  properly  addressed  by  the 
relevant authorities. Shortcomings in the judicial and social welfare systems, combined with 
the lack of programmes for prevention of violence, are continuing to have a negative impact 
on  exercising  children’s  rights.  The  Ombudsperson  for  Children  lacks  appropriate  office 
space and staff to carry out its mandate. There was only a marginal budget increase in 2010. 

There has been some progress on advancing the social inclusion of socially vulnerable groups 
and/or  persons  with  disabilities.  The  capacity  of  the  Office  of  the  Ombudsman  for  Persons 
with  Disabilities  is  being  strengthened  but  needs  to  continue,  notably  in  view  of  extending 
representation  in  the  regions.  There  is,  however,  a  lack  of  information  on  social  welfare, 
health  care  and  pension  insurance  rights  and  entitlements.  Criteria  for  establishment  of 
entitlements  are  not  equally  applied  and  legislation  regulating  specific  rights  is  fragmented. 
The  transition  from  institutional  care  to  community-based  care  services  has  progressed 
slowly.  

Public  awareness  of  the  rights  of  persons  with  disabilities  remains  low,  especially  in  rural 
areas,  and  there  are  not  enough  campaigns  against  prejudice  and  stereotypes.  Regulations 
ensuring physical access for persons with disabilities have been passed.  

Children  with  developmental  difficulties  remain  generally  excluded  from  educational 
institutions.  There  is  insufficient  support  in  the  form  of  access,  transport  and  teaching 
assistants.  Persons  with  disabilities  still  face  discrimination  in  the  labour  market.  The 
Professional  Rehabilitation  and  Employment  Act  sets  minimum  quotas  for  employment  of 
persons  with  disabilities.  However,  the  quotas  set  are  not  met  by  the  public  sector.  Persons 
with  disabilities  are  even  more  marginalised  in  the  private  sector  where  employers  lack 
information,  in  particular  on  existing  incentives  (See  Chapter  19  –  Social  policy  and 
employment).  

People with mental health problems generally remain in psychiatric institutions which are not 
professionally  regulated  or  adequately  equipped.  There  is  insufficient  assistance  to  allow  a 
greater number of patients to stay with their families or live independently.  

With  regard  to  labour  and  trade  unions  rights,  the  climate  for  social  dialogue  has 
deteriorated  as  a  result  of  the  economic  crisis.  (See  Chapter  19  —  Social  policy  and 
employment)  Trade  union  organisations  have  temporarily  suspended  their  work  in  the 
Economic and Social Council. Labour and trade union rights are still adversely affected by a 
weak labour inspectorate and poorly functioning judiciary.  

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Implementation of the new Anti-Discrimination Law has begun. Some steps have been taken 
to  raise  public  awareness  of  the  law.  However,  knowledge  of  its  scope  is  limited  among 
authorities  and  citizens  and  only  a  small  number  of  discrimination  complaints  reach  court. 
The People's Ombudsman still faces resource constraints to fulfil all new functions envisaged 
by the law.  

There  has  been  some  progress  with  implementation  of  hate  crime  legislation.  Awareness 
raising measures have been carried out and some cases initiated. However, there has been no 
conviction for the criminal offence of instigation of racial or other hate crimes. LGBT people 
have faced threats and attacks, with limited follow-up by the authorities.  

Property  rights  are  generally  safeguarded.  However,  some  cases  of  delayed  repossessions 
and problems with compensation for use of private property taken under the war legislation 
from the 1990s persist.  

Overall,  legal  protection  for  economic  and  social  rights  is  largely  guaranteed.  However, 
implementation  of  women’s  and  children’s  rights  and  protection  against  all  forms  of 
discrimination requires further attention.  

Respect for and protection of minorities, cultural rights 

There  has  been  some  progress  with  respect  for  and  protection  of  minorities,  cultural 
rights. High-level public expressions of commitment to the rights of minorities, reaffirming 
their place in Croatian society, have continued. A more positive focus on minority issues can 
be reported in a context of improved relations in the region, particularly between Croatia and 
Serbia. The revised Constitution now explicitly lists all 22 national minorities. Provisions of 
the  constitutional  law  on  the  rights  of  national  minorities  on  minority  representation  in 
parliament were strengthened. Training has been provided for the media and the police with 
the  aim  of  improving  the  portrayal  of  minorities  and  raising  awareness  of  the  relevant 
legislation  respectively.  The  Roma  minority  has  continued  to  receive  attention,  with 
improvements  in  pre-school  education  in  particular.  The  level  of  funding  available  for 
minority organisations has only been marginally reduced, despite the austerity measures. 

However, many problems remain for minorities. Croatia needs to continue to foster a spirit of 
tolerance towards the Serb minority in particular and to take appropriate measures to protect 
those  still  potentially  exposed  to  threats  or  acts  of  discrimination,  hostility  or  violence. 
Minorities  continue  to  face  particular  difficulties  in  the  area  of  employment,  in  terms  of 
under-representation in the State administration, the judiciary and the police and in the wider 
public  sector.  There  has  been  no  improvement  in  the  level  of  employment  of  minorities  in 
bodies covered by the Constitutional Law on the rights of national minorities. Monitoring of 
implementation of recruitment plans for national minorities has been weak. Legal provisions 
and programmes need to be implemented with more determination and adequate monitoring 
ensured,  especially  in  the  case  of  employment.  The  Roma  minority  still  faces  particularly 
difficult living conditions. Challenges also remain in the areas of education, social protection, 
health care, employment and access to personal documents. 

Despite  increased  financial  support,  the  councils  for  national  minorities  are  not  sufficiently 
recognised  as  advisory  bodies  by  the  majority  of  local  authorities.  They  remain  financially 
dependent on the local authorities, affecting their independence and influence. The statutes of 
certain local self-government bodies have not been aligned with the Constitutional Law. Little 
progress has been made with production and/or broadcasting of programmes for minorities in 

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their  own  language  by  public  radio  and  TV  stations,  as  envisaged  under  the  Constitutional 
Law.  With  regard  to  cultural  rights,  the  education  provisions  of  the  Constitutional  Law  and 
other  laws  relevant  to  minorities  are  generally  continuing  to  be  implemented  satisfactorily. 
Negative stereotyping of national minorities in the media has decreased. The broadcasting of 
anti-minority slogans on national television during a football match highlighted the lack of a 
reflex to condemn such attitudes. 

With  regard  to  the  Serb  minority,  there  have  been  fewer  reports  of  ethnically  motivated 
attacks. However, cases of vandalism against monuments for war victims have been reported 
in 2010. Police investigations into such incidents have improved, although few cases end in 
prosecution. Many cases remain unreported for lack of confidence in the authorities. Members 
of the Serb minority, both returnees and those who remained in Croatia during the war, face 
difficulties gaining access to employment, especially in the war-affected areas. Discrimination 
continues, particularly in the public sector at local level.  

As for the Roma minority, improvements in education, particularly in pre-school education 
have  been  made.  Some  infrastructure  improvements  to  Roma  settlements  have  continued. 
Problems  remain,  however,  with  participation  by  the  Roma  community  in  the  education 
system, even when specific programmes are available. Segregation persists in some schools. 
Progress  towards  ensuring  Roma  children  complete  primary  and  secondary  education  has 
been modest.  

Access to adequate housing, social protection and health care remain persisting problems for 
Roma.  Unemployment  remains  extremely  high,  despite  measures  such  as  adult  vocational 
training  for  young  Roma  women.  The  living  conditions  of  Roma  communities  in  some 
suburban  areas  need  to  be  improved  by  providing  adequate  housing  and  infrastructure. 
Coordination  between  Roma  groups  remains  limited,  as  does  their  expertise  for  effective 
implementation of measures in their favour. Many Roma still face the problem of unresolved 
status  (residence  and  citizenship)  which  creates  difficulties  when  it  comes  to  provision  of 
services, notably access to education, health care and free legal aid.  

There has been some progress on the various outstanding issues regarding refugees. Refugees 
continued  to  return  to  Croatia,  with  the  Croatian  authorities  having  now  registered  over 
132,600  returnees  in  total  belonging  to  the  Serb  minority,  which  corresponds  to 
approximately  half  of  those  who  fled  the  country  up  until  1995.  Some  progress  was  made 
with  regard  to  housing  issues.  The  government  met  its  self-imposed  2008  benchmark  of 
providing  1,400  housing  units  to  former  occupancy  and  tenancy  rights  holders,  partially  by 
transferring cases to reconstruction programmes. A revised action plan has been adopted for 
faster  implementation  of  the  2009  target  of  providing  2,070  accommodation  units,  with  the 
aim of full implementation in 2011. Administrative monitoring has been improved, including 
with  the  involvement  of  the  United  National  High  Commissioner  for  Refugees.  A  purchase 
option under favourable conditions for housing care beneficiaries outside the areas of special 
state  concern  has  been  introduced.  Progress  was  made  with  reconstructing  damaged  houses 
and  with  processing  the  substantial  backlog  of  appeals  against  rejected  applications  for 
reconstruction  assistance.  Some  900  houses  were  included  in  the  2009/2010  programme. 
Implementation  of  the  decision  on  validating  pension  rights  has  continued.  Monitoring  to 
address inconsistencies in implementation between different regional offices has improved. 

However, many problems remain for refugees and returnees. Lack of housing remains a key 
obstacle  to  sustainable  return.  Progress  towards  meeting  the  2009  benchmark  has  been 
delayed with implementation at around 31%. Moreover, 2-3,000 applications not covered by 

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the action plans have yet to be fully processed and housing units made available to returning 
refugees.  Sufficient  budgetary  funding  should  be  made  available  accordingly.  Some  6,000 
appeals  for  housing  reconstruction  are  still  pending.  The  current  rejection  rate  of 
convalidation applications is still high at 44%. A more consistent approach by regional offices 
is  required.  Efforts  to  create  the  economic  and  social  conditions  necessary  for  sustainable 
returns of refugees need to be stepped up. 

Overall,  the  position  of  minorities  in  Croatia  is  continuing  to  improve.  However,  many 
problems remain for the Serb and Roma minorities. Some progress was made on outstanding 
refugee  return  issues,  but  efforts  to  provide  housing  and  ensure  the  sustainability  of  returns 
need to be accelerated. 

(See Chapter 23 - Judiciary and fundamental rights) 

2.3. 

Regional issues and international obligations 

Compliance with the Dayton/Paris and Erdut Peace Agreements has been ensured, overall. 

Croatia  continues  to  cooperate  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia  (ICTY).This  is  a  key  Accession  Partnership  priority.  Problems  with  access  to 
important  documents  remain.  The  special  task  force  set  up  by  the  government  needs  to 
continue its work to locate or determine the fate of missing artillery documents requested by 
the Office of the ICTY Prosecutor. 

The Supreme Court confirmed the verdict in the Ademi/Norac war crimes case, the first ICTY 
trial  transferred  to  Croatia.  However,  it  reduced  Norac’s  prison  sentence,  taking  his  war 
record as a mitigating factor, despite another separate conviction for war crimes. 

Croatia’s policy regarding the International Criminal Court (ICC) is aligned with the EU 
Common Positions on the integrity of the Rome Statute and related EU guiding principles.  

Fresh  impetus  was  given  to  the  Sarajevo  Declaration  process  following  the  ministerial 
meeting in Belgrade in March 2010. This brought together Bosnia and Herzegovina, Croatia, 
Montenegro and Serbia which agreed to work together to clarify refugee statistics. They also 
committed themselves to work towards solutions to a number of outstanding issues by the end 
of the year. However, there are a number of difficult issues, in particular that of occupancy 
and  tenancy  rights,  which  still  need  to  be  tackled  with  the  objective  of  finding  mutually 
acceptable  solutions.  The  Sarajevo  Process  was  initially  launched  through  the  Sarajevo 
Declaration  of  January  31,  2005.  Bosnia  and  Herzegovina,  Croatia,  Montenegro  and  Serbia 
cooperate  within  this  process  to  find  solutions  for  refugees  and  other  persons  which  were 
displaced as a result of the armed conflicts in ex-Yugoslavia 1991 - 1995. 

In August 2010, a total of 14,631 persons were still missing as a result of the conflicts in the 
region. Of these 10,402 cases were related to the conflict in Bosnia and Herzegovina; 2,392 
cases to the conflict in Croatia and 1,837 cases to the conflict in Kosovo according to figures 
provided  by  the  International  Committee  of  the  Red  Cross  (ICRC).  The  process  for  solving 
these cases has been very slow. Only 110 cases per year have been solved in the past three 
years in Croatia. Solving the remaining cases within a reasonable time limit is essential for the 
reconciliation process. In Croatia, exhumations at known gravesites are still to take place. The 
number of unidentified cases remains high. More efforts need to be made in matters related to 
DNA  analysis.  The  Commission  on  Missing  Persons  –  a  bilateral  forum  set-up  between 

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Belgrade  and  Zagreb  to  deal  with  the  issue  –  meets  only  irregularly.  The  fate  of  1,024 
Croatian citizens who are still missing from the 1991-1995 conflict remains to be ascertained. 

Regional  cooperation  and  good  neighbourly  relations  form  an  essential  part  of  Croatia's 
process of moving towards the European Union. Croatia continued to participate actively in 
regional  initiatives,  including  the  South-East  European  Cooperation  Process  (SEECP),  the 
Regional Cooperation Council (RCC), the Central European Free Trade Agreement (CEFTA), 
the  Energy  Community  Treaty  and  the  European  Common  Aviation  Area  Agreement 
(ECAAA).  The  newly-elected  Croatian  President  has  been  taking  a  pro-active  approach  to 
regional cooperation. He also participated, with his counterparts from Serbia and Montenegro 
and  the  Chair  of  the  Presidency  of  Bosnia  and  Herzegovina  in  the  summit  of  the  Igman 
initiative,  held  in  Sarajevo  in  May.  This  year  marked  the  10th  anniversary  of  the  initiative, 
involving more than 140 NGOs from the region and aimed at promoting and facilitating local 
and  regional  cooperation.  Croatia  participated  in  the  EU-Western  Balkans  High-Level 
Meeting in Sarajevo on 2 June 2010. 

Bilateral  relations  with  other  enlargement  countries  and  neighbouring  EU  Member 
States  are  continuing  to  develop.  Progress  has  been  made  towards  settlement  of  the  border 
disputes, which is a key Accession Partnership priority. Croatia has contributed to progress in 
tackling  organised  crime  in  the  region,  inter  alia  through  amendments  to  its  constitution 
allowing extradition of its nationals.  

Croatia  continues  to  have  good  relations  with  Albania  and  the  former  Yugoslav  Republic  of 
Macedonia.  

Bilateral relations with Bosnia and Herzegovina remain stable and contacts have intensified. 
The  Croatian  President  visited  Bosnia  and  Herzegovina  three  times.  A  joint  session  of  the 
Bosnia  and  Herzegovina  Council  of  Ministers  and  the  government  of  Croatia  was  held  in 
June.  Croatia  and  Bosnia  and  Herzegovina  signed  an  amendment  to  the  Agreement  on  the 
mutual enforcement of court decisions in criminal matters in February. The aim was to close 
the impunity gap and prevent citizens holding dual citizenship evade justice in one country by 
seeking the protection of the other. A bilateral agreement on police cooperation was signed in 
September.  Some  progress  was  made  on  border  issues  with  the  Inter-state  Cooperation 
Council  meeting  in  July  for  the  first  time  in  several  years.  However,  there  has  been  no 
progress on ratification of the 2005 Agreement on demarcation of the land and river borders, 
the Pelješac bridge project and the Agreement on use of the Port of Ploče. Other unresolved 
issues  include  property  and  refugee  return  and  the  lack  of  ratification  by  Bosnia  and 
Herzegovina of the agreement on dual citizenship.  

Croatia continues to have good relations with Montenegro. A bilateral extradition agreement 
was signed in September, enabling the two countries to extradite their nationals to each other 
for criminal proceedings or enforcement of prison sentences in cases of organised crime and 
corruption. A political agreement with Montenegro on joint submission of the Prevlaka border 
delimitation  issue  to  the  International  Court  of  Justice  has  not  yet  been  followed  up  by  a 
formal  agreement  on  the  terms  of  the  submission.  Nevertheless,  the  temporary  border 
arrangement, settled by the 2002 Protocol, is continuing to function smoothly. 

Relations with Serbia have gained new impetus with the taking of office of the new Croatian 
President.  There  have  been  a  number  of  meetings  of  the  two  Presidents  and  other  senior 
officials.  A  Serbian  parliamentary  delegation  visited  Zagreb  in  February  2010  and  a  return 
visit was made by the Croatian parliament in June 2010. The Croatian President visited Serbia 

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in  July  2010.  Croatia  and  Serbia  signed  agreements  on  military  cooperation  and  on  inland 
water navigation. A Police Cooperation Agreement entered into force in May 2010. Croatia 
and  Serbia  signed  an  extradition  agreement  in  June,  enabling  the  two  countries  to  extradite 
their  nationals  to  each  other  for  criminal  proceedings  or  enforcement  of  prison  sentences  in 
cases of organised crime and corruption. The Inter-State Border Commission set up to delimit 
the border met again in April after seven years of inactivity. In December 2009, the Serbian 
government lodged a counter-suit against Croatia before the International Court of Justice on 
genocide allegations. The issue of missing persons is still problematic. 

Diplomatic relations were officially established with Kosovo4 and embassies were opened in 
Pristina and Zagreb respectively. 

Croatia continues to have good relations with Hungary and Italy. 

Relations with Slovenia have improved significantly, in particular following the signing of the 
Arbitration  Agreement  on  the  border  in  November  2009.  Both  parliaments  have  ratified  the 
agreement.  Contacts  at  the  highest  level  have  been  on-going  aimed  at  resolving  other  open 
issues. Concerning the Ljubljanska Banka/SFRY Succession Agreement (guarantee of foreign 
currency  deposits),  Croatia  agreed  to  continue  negotiations  on  the  issue  at  the  Bank  of 
International Settlements in Basel. 

Relations with Turkey intensified as a result of the establishment of regular tripartite meetings 
between Croatia, Turkey and Bosnia and Herzegovina, the first of which was held in January 
2010. 

Overall, Croatia is continuing to cooperate with the ICTY, although problems with access to 
important  documents  remain.  Croatia  is  continuing  to  participate  actively  in  regional 
cooperation.  Relations  with  neighbouring  countries  have  improved,  although  outstanding 
issues  remain,  in  particular  settlement  of  border  disputes,  property  issues  and  returns  of 
refugees.  

3. 

ECONOMIC CRITERIA 

In examining the economic developments in Croatia, the Commission’s approach was guided 
by the conclusions of the European Council in Copenhagen in June 1993, which stated that 
membership  of  the  Union  requires  the  existence  of  a  functioning  market  economy  and  the 
capacity to cope with competitive pressure and market forces within the Union. 

3.1. 

The existence of a functioning market economy 

Economic policy essentials 

Croatia  is  participating  in  the  EU  pre-accession  fiscal  surveillance  procedure.  The  Pre-
accession Economic Programme (PEP) for 2010-2012, submitted in January 2010, presented a 
sufficiently comprehensive and consistent macroeconomic and fiscal framework for economic 
policies. In April 2010, in response to the continuing recession, the government launched the 
'Economic  Recovery  Programme'  consisting  of  some  fiscal  measures  and  comprehensive 
structural  reforms  to  be  implemented  over  ten  years.  Broad  political  consensus  on  the 

4 

Under UNSCR 1244/1999 

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fundamentals of a market economy was maintained. Overall, consensus on the fundamentals 
of  a  market  economy  was  maintained,  but  efforts  need  to  be  intensified  to  implement  the 
necessary structural reforms. 

Macroeconomic stability 

The global financial and economic crisis hit the Croatian economy most severely in the first 
quarter  of  2009,  when  real  GDP  dropped  6.7%  year-on-year.  For  2009  as  a  whole,  GDP 
declined  5.8%  compared  to  2.4%  annual  growth  in  2008.  GDP-per-capita  in  current  prices 
rose to 43.2% of the EU-27 average in 2009 from 42.5% a year before. Private consumption 
fell sharply (from 0.8% growth in 2008 to a drop by 8.5% in 2009) and investments fell even 
more  (from  8.2%  growth  in  2008  to  a  drop  by  11.8%  in  2009).  In  comparison,  the 
deceleration of public consumption was relatively mild (from 1.9% growth in 2008 to 0.2% in 
2009). As economies contracted worldwide, exports from Croatia suffered a sharp contraction 
(from 1.7% growth in 2008 down to -16.2% in 2009). The decline in imports was even more 
pronounced (from 3.6% growth in 2008 to a drop by 20.7% in 2009). As a consequence, the 
contribution  of  net  exports  to  growth  turned  positive  which  offset  much  of  the  negative 
contribution from domestic demand. The decline in economic activity eased in the course of 
2009, but output was still contracting in the first half of 2010. Real GDP is estimated to have 
been 2.5% lower year-on-year in both the first and second quarters of 2010. Similarly to GDP, 
the  downward  trend  in  industrial  production  started  to  flatten  out  in  mid-2009  following  a 
10% decline in the preceding twelve months. In August 2010 industrial production was only 
0.7%  lower  year-on-year.  Overall,  economic  recovery  had  not  yet  taken  hold  by  mid-2010 
although  the  rate  at  which  the  economy  was  contracting  had  receded  over  the  preceding 
twelve months. 

The government launched the Economic Recovery Programme in April 2010 when incoming 
data  showed  that  the  economy  was  not  yet  recovering  from  the  recession  and  fiscal  trends 
were more unfavourable than expected. Apart from some fiscal measures, the programme is a 
package of structural reforms which seek to address the structural weaknesses of the economy 
and aim to create an environment encouraging sustainable economic growth. It encompasses 
basically  all  existing  strategy  papers  and  development  documents  and  provides  a  new  basis 
for economic policy in the country. The programme includes 131 measures in ten areas to be 
implemented over ten years.  Among other  things, it aims at  reducing the  number of  public-
sector employees, privatising state-owned enterprises and cutting non-tax revenue, but it also 
includes  a  vast  number  of  measures  in  other  fields  such  as  labour  market  policy,  education 
and  science  policy,  social  security,  export  and  investment  promotion,  government  asset 
management,  environmental  protection,  etc.  Overall,  the  contribution  which  the  Economic 
Recovery Programme makes to improving the economy’s growth potential and international 
competitiveness will depend on its effective implementation. 

The current account deficit narrowed to 5.4% of GDP in 2009 from 9.2% in 2008. This was 
driven by an improving balance of trade in goods. Since the recession led to a stronger decline 
in imports than in exports of goods, the trade deficit in goods fell from 22.8% of GDP in 2008 
to 16.3% in 2009. The trade surplus for services (mainly tourism and transport) declined from 
14.7% of GDP in 2008 to 12.5% in 2009. The deficit in the income balance increased slightly, 
from  3.3%  of  GDP  in  2008  to  3.9%  in  2009.  Like in 2008,  this mainly reflects higher  debt 
servicing costs in an environment of tighter external financing constraints and lower foreign 
revenues. In the first half of 2010, the current account deficit continued to narrow as imports 
of goods and services decreased by 6.6% year-on-year while exports increased by 6.2%. The 
recent turnaround  in  exports reflects  the recovery in  major  export  markets. In  the  12-month 

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period to the end of June 2010 the current account deficit amounted to 3.1% of GDP. Overall, 
the  current  account  deficit  has  been  narrowing  in  the  recession  mainly  as  a  result  of  lower 
demand for imported goods, but recently also thanks to rising exports.  

Net capital inflows receded in 2009 and the first half of 2010 as a corollary of the declining 
current account deficit. Excluding changes in international reserves, they fell from 11.7% of 
GDP in 2008 to 9.2% in 2009. In the 12-month period to the end of June 2010 they amounted 
to  3.7%  of  GDP.  This  decline  is  to  a  large  extent  accounted  for  by  a  sharp  fall  in  inward 
foreign direct investments (FDI), but borrowing abroad has also decreased, particularly in the 
first  half  of  2010.  Inward  FDI  almost  halved in absolute  terms  and,  as  a  share  of  GDP,  fell 
from 8.8% in 2008 to 4.7% in 2009. Outward FDI remained stable at 2.0% of GDP over the 
same  period.  While  net  FDI  flows  covered  74%  of  the  current  account  deficit  in  2008,  this 
figure  fell  to  49%  in  2009.  The  structure  of  FDI  remained  unchanged,  i.e.  dominated  by 
equity investments, including some recapitalisations in the banking sector. In the first half of 
2010,  FDI  inflows  declined  by  32.0%  year-on-year.  The  total  stock  of  FDI  stood  at  €24.4 
billion (around 54% of GDP) at the end of March 2010. Overall, in the context of a declining 
current  account  deficit,  sufficient  external  financing  was  secured  despite  lower  net  capital 
inflows.  

The  heavy  external  debt  burden  continued  to  increase  in  2009.  The  stock  of  external  debt 
went up  by €4 billion to €43.1 billion (excluding round-tripping transactions), equivalent to 
95.0%  of  GDP  compared  with  82.6%  at  the  end  of  2008.  The  rise  in  external  indebtedness 
was  mainly  driven  by  corporate  borrowing,  but  the  central  government  also  increased  its 
foreign debt by around €1 billion. The fact that  the  non-tradable  sector  accounts  for  around 
40%  of  gross  foreign  debt  remains  a  cause  for  particular  concern.  Overall,  the  high  and 
growing level of external debt and the relatively large exposure of the non-tradable sector to 
currency risks remain key external vulnerabilities of the Croatian economy. 

The average annual unemployment rate was 9.1% in 2009. The quarterly data from the labour 
force  survey  show  that  the  unemployment  rate started  rising  in  the  last  quarter  of  2009  and 
reached 12.4% in the second quarter of 2010, up from 8.7% in the third quarter of 2009. Data 
on the number of people registered as unemployed confirm this change of trend. This measure 
of the unemployment rate rose from 13.2% in 2008 to 14.9% in 2009 and stood at 16.4% in 
August 2010. Total employment was 4.8% lower year-on-year in the second quarter of 2010 
according  to  the  labour  force  survey.  The  Croatian  labour  market  continues  to  suffer  from 
major structural weaknesses, such as low employment and participation rates along with high 
rates of youth and long-term unemployment. The employment and participation rates declined 
to 56.6% and 62.4%, respectively, while the youth unemployment rate increased to 25.1% in 
2009. The effective retirement age remained low and significant labour supply disincentives 
persisted,  including  generous  early  retirement  rules  and  the  predominance  of  categorical 
social  welfare  benefits.  Employment  has  been  negatively  affected  by  Croatia's  limited 
progress on improving incentives structures and the combination of flexibility and security in 
the labour market. As a result, labour turnover remained low, suggesting limited re-allocation 
of labour resources. Wage movements reflected the weakening of the labour market. Average 
gross  wages  still  increased  by  3.0%  from  2008  to  2009,  but  then  recorded  a  year-on-year 
decline of 0.6% in the first half of 2010. In real terms, average gross wages increased by 0.6% 
in  2009,  but  fell  by  1.3%  year-on-year  in  the  first  half  of  2010.  Overall,  the  labour  market 
situation  deteriorated  significantly  as  a  result  of  the  recession.  Major  structural  weaknesses 
persist in the labour market. 

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Monetary policy continued to be oriented towards a tightly managed kuna/euro exchange rate 
with little variability, but without a formal peg to the euro. This monetary policy framework 
anchors  inflation  expectations  and  reduces  exchange  rate-related  credit  risks  in  a  highly 
euroised  economy.  Under  the  recessionary  conditions  of  2009,  with  intermittent  upward 
pressure  on  the  kuna,  it  allowed  a  slight  easing  of  monetary  policy.  The  central  bank 
expanded  domestic  kuna  liquidity  in  line  with  available  foreign  exchange  resources.  It 
released significant foreign exchange liquidity to the domestic banking system by removing 
the  12%  annual  credit  growth  limit  and  by  relaxing  reserve  and  liquidity  requirements.  The 
central  bank  intervened  in  the  foreign  exchange  market  on  six  occasions  between  October 
2009  and  July  2010  to  counter  appreciation  pressures  on  the  kuna,  purchasing  a  total  of 
around  €869  million.  Overall  foreign  exchange  operations  in  2009  increased  gross 
international  reserves  by  13.8%  to  €10.4  billion  at  the  end  of  2009.  Their  rise  continued  in 
2010, reaching €11.4 billion at the end of August which is equivalent to around seven months 
of  imports  of  goods  and  services.  The  average  daily  exchange  rate  fluctuated  within  a 
relatively  narrow  range  between  7.19  and  7.33  kuna  per  euro. Overall, the central bank has 
adopted  an  accommodative  monetary  policy  stance  during  the  recession,  while  maintaining 
exchange rate and financial stability. 

The growth rate for domestic monetary and credit aggregates fell sharply in 2009. Growth of 
domestic credit to the private sector decreased from 10.5% in 2008 to -0.6% in 2009. Lending 
to private households was significantly lower (-2.9%) whereas lending to the corporate sector 
still  increased  (2.0%).  These  diverging  trends  continued  in  the  first  seven  months  of  2010. 
While loans to  households  remained stagnant, corporate loans showed a  mild recovery with 
an annual increase of 5.4% at the end of July. Almost half of the recent increase in corporate 
loans was related to the government's programme to stimulate corporate financing through the 
State Development Bank (HBOR). Lending to the government sector has increased markedly. 
Overall,  credit  growth  to  private  households  has  fallen  to  close  to  zero,  lending  to  the 
corporate  sector  has  shown  signs  of  recovery,  and  the  structure  of  credit  has  continued 
shifting towards government financing. 

Average annual inflation fell sharply from 5.8% in 2008 to 2.2% in 2009. The disinflationary 
process was primarily driven by the growing slack in the use of resources transmitted to price- 
and  wage-setting.  Additional  reasons  were  the  collapse  in  oil  prices  between  mid-2008  and 
the  second  quarter  of  2009  and  the  worldwide  decline  in  food  prices.  The  slowdown  in 
inflation  in  2009  was  mitigated  by  significant  increases  in  the  regulated  prices  for  gas, 
tobacco  products  and  medical  services.  Core  inflation,  as  defined  by  the  central  bank, 
declined  from  5.7%  in  2008  to  2.8%  in  2009.  Notwithstanding  a  rebound  in  energy  prices, 
disinflation has continued in 2010. The July readings of overall consumer price inflation and 
core  inflation  stood  at,  respectively,  1.0%  and  -1.4%  year-on-year.  Overall,  inflation  has 
practically vanished in the context of the prolonged recession. 

Public finances continued to be under pressure from weaker-than-expected economic activity 
in  the  final  months  of  2009  even  after  three  budget  revisions  earlier  in  the  year.  Although 
current  spending  was  cut  at  short  notice,  the  target  for  the  2009  general  government  fiscal 
deficit was missed by a wide margin (-4.1% of GDP compared with -3.4% in the third budget 
revision). Revenues continued to fall short of government projections in the first half of 2010 
as the recession dragged on for longer than expected, forcing the government to increase its 
borrowing programme. The 2010 budget adopted in December 2009 had projected a general 
government fiscal deficit equivalent to 3.3% of GDP, but it soon became clear that the deficit 
would  rise  rather  than  fall  compared  with  2009.  In  addition  to  the  prolonged  recession,  a 
number  of  fiscal  measures  adopted  in  the  first  half  of  2010  were  projected  to  have  the  net 

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effect of widening the deficit somewhat. On the revenue side, the 2% special crisis levy was 
lifted  and  tax  rates  were  lowered,  partly  offset  by  the  abolishment  of  numerous  tax 
exemptions.  On  the  expenditure  side,  several  benefits  were  reduced  (including  privileged 
pensions and supplementary health insurance benefits paid from the budget). In view of the 
worsening fiscal outlook, a budget revision was adopted at the end of August, this time based 
on  the  assumption  of  a  1.6%  decline  in  real  GDP  in  2010.  The  revised  budget  lowered 
projected  revenues  of  general  government  by  4.5%  of  GDP  and  increased  expenditures  by 
0.3% of GDP compared with the original budget. The projection for the general government 
deficit was raised by 1.9 percentage points to 5.2% of GDP. As part of the budget revision, 
excise taxes on tobacco and petrol were raised, increasing annual revenues by 0.15% of GDP. 
Furthermore,  it  was  decided  that  total  budget  expenditures  in  2011  and  2012  would  not 
exceed  the  revised  expenditure  level  for  2010.  According  to  the  latest  data  submitted  by 
Croatia in September 2010, the stock of general government consolidated gross debt increased 
significantly from 29.3% of GDP at the end of 2008 to 35.4% at the end of 2009 and 37.0% in 
mid-2010.  When  outstanding  state  guarantees  and  the  debt  of  the  State  Development  Bank 
(HBOR)  are  included,  the  level  of  public  debt  amounted  to  53.5%  of  GDP  in  mid-2010. 
Overall, the authorities made limited efforts to contain the continuing rise of the fiscal deficit. 
Weaknesses remain in budget planning, posing a risk that budget outcomes will continue to 
diverge  significantly  from  budget  projections.  Ensuring  medium-term  fiscal  sustainability 
remains a key challenge. 

Limited  progress  has  been  made  on  rationalisation  of  public  spending,  which  is  a  key 
Accession Partnership priority. Some further health reform measures have been adopted as a 
major  step  towards  addressing  the  sector’s  financial  difficulties.  These  include  streamlining 
the hospital network and the supplementary health insurance system. No specific action has 
been taken so far to achieve better targeting of social support, but this is now planned under 
the  Economic  Recovery  Programme.  Some  mandatory benefits have been reduced, but they 
still account for the large majority of social spending. A first step has been made on reforming 
the pension system with the adoption of a law on privileged pension reduction. Overall, apart 
from  some  key  measures  to  reform  health  care,  little  progress  has  been  made  towards 
increasing the efficiency of public spending.  

Implementation  of  a  comprehensive  treasury  reform  strategy  has  continued  with  a  view  to 
further  improving  expenditure  management  and  budget  control  systems  following  the  entry 
into force of the 2008 Budget Law which has improved the legal basis for strategic and multi-
annual  budget  planning.  Progress  continued  on  enhancing  the  institutional  and  analytical 
capacity for setting up medium-term macroeconomic and fiscal frameworks. However, further 
progress  on  streamlining  procedures  is  needed  to  link  the  policy  priorities  set  to  the  budget 
planning  process  more  effectively.  The  fiscal  notification  was  submitted  in  April  2010,  but 
little progress was made towards bringing this reporting more in line with ESA95 standards. 
Fiscal  transparency  remains  a  concern,  due  to  the  non-inclusion  in  the  general  government 
accounts  of  some  quasi-fiscal  operations  (the  State  Development  Bank  and  the  Motorway 
Company) and a large number of municipalities. Overall, analytical and institutional capacity 
on public finance has continued to improve, but strategy-based budget planning needs to be 
strengthened further.  

Overall, the short-term macroeconomic policy response has, by and large, been appropriate to 
address  the  domestic  consequences  of  the  global  economic  and  financial  crisis.  Within  the 
constraints  ensuing  from  the  high  degree  of  euroisation,  monetary  policy  succeeded  in 
preserving  exchange  rate  and  financial  stability  while  alleviating  liquidity  pressures.  Fiscal 
policy  has,  to  a  limited  extent,  tried  to  contain  the  negative  budgetary  consequences  of  the 

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recession.  To  achieve  medium-term  fiscal  sustainability,  key  challenges  remaining  are  to 
improve  the  budgetary  process  and  discipline  and  to  enhance  the  efficiency  of  public 
spending.  

Interplay of market forces 

Privatisation of assets held under the State Privatisation Fund made only limited progress. As 
regards the shipbuilding sector which generates revenues equivalent to about 2.5% of GDP, a 
restructuring  and  privatisation  is  ongoing  (see  also  Chapter  8).  The  only  significant 
privatisation executed in the reporting period was the sale of a food-processing enterprise. A 
number  of  calls  for  tenders  have  not  been  successful,  partly  due  to  lack  of  interest  among 
potential investors and, in some cases, rather unrealistic sale conditions. The portfolio of the 
Privatisation Fund still comprised 768 companies, with the state keeping a majority holding in 
79 of them. The overall size of the Fund’s portfolio has remained virtually unchanged. Since 
the remaining holdings of the Fund consist predominantly of highly indebted and loss-making 
companies,  finding  strategic  partners  is  a  lengthy  process,  requiring  several  stages  prior  to 
declaring  bankruptcy  or  liquidation.  However,  adoption  of  the  Economic  Recovery 
Programme  and  the  transfer  of  all  the  state’s  minority  share-holdings  (below  25%)  to  the 
Privatisation Fund should help to speed up the privatisation process. Also, some initial steps 
have been taken to restructure the Fund into a new Property Management Agency that would 
combine  and  ensure  better  management  of  all  state  property.  The  private  sector’s  share  of 
employment  has  remained  at  around  70%  and  its  share  of  GDP  is  also  estimated  at  around 
70%.  Overall,  very  limited  progress  has  been  made  towards  reducing  the  large  role  of  the 
state in the economy. 

Market entry and exit 

Company  registration  procedures  were  further  simplified  in  November  2009.  Nevertheless, 
preliminary data indicate that the number of newly registered companies declined by 14% in 
2009  year-on-year  and  the  number  of  active  businesses  remained  practically  unchanged 
compared  with  a  12%  growth  rate  in  the  preceding  year.  The  regulatory  impact  assessment 
authority came into  operation in late 2009 and a set of measures to improve the investment 
climate  have  been  adopted  as  part  of  the  Economic  Recovery  Programme.  The  investment 
climate,  however,  still  suffers  from  difficulties  in  obtaining  necessary  licences,  building 
permits and other authorisations. In addition, a large number of para-fiscal taxes at national 
and  local  levels  still  burden  entrepreneurs  although  some  of  them  have  been  reduced  in 
tourism, forestry and the cultural heritage sector. The business environment also continues to 
suffer from inefficiencies in the public administration. Foreign direct investment is held back 
by the various shortcomings in the business environment. Overall, further progress has been 
made  on  simplifying  company  registration,  but  the  investment  climate  continued  to  suffer 
from  a  heavy  regulatory  burden  and  numerous  para-fiscal  taxes.  Improving  the  business 
environment remains a key Accession Partnership priority.  

Legal system 

Further  progress  was  made  in  speeding  up  court  procedures.  However,  the  length  of 
proceedings  before  the  courts  remains  generally  excessive  and  problems  persist  with 
enforcement of court decisions. The weaknesses of the judicial system continue to undermine 
effective  enforcement  of  creditor  and  property  rights.  Land  registration  has  improved,  but 
remains incomplete in parts of the country. Investors still suffer from lengthy procedures to 
register property. Corruption is being tackled more vigourosuly but still affects the business 

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environment.  Overall,  the  judicial  system  has  been  improved  although  the  enforcement  of 
property  rights  is  still  weak.  The  business  environment  is  also  affected  negatively  by  other 
remaining inefficiencies. 

Financial sector development 

The  financial  sector  continued  to  be  dominated  by  banks  which  held  around  77%  of  total 
assets of financial intermediaries in 2009. The banking sector is almost completely privatised 
with  91%  foreign  ownership  in  terms  of  net  assets.  Out  of  32  banks  (down  from  33  in  the 
previous  year  following  the  merger  between  two  banks),  two  remained  state-owned.  The 
market  share  of  the  four  largest  banks  remained  at  around  65%  by  March  2010.  Market 
concentration  has  remained  at  a  moderate  level  and  has  generally  not  hindered  market 
competition.  

Banking  sector  assets  continued  to  grow,  but  at  a  slower  pace,  and  the  structure  of  assets 
changed considerably. This is due to a reduction of banks’ foreign assets and reserves with the 
central  bank,  as  a  result  of  regulatory  changes.  Lending  to  the  private  sector  slowed, 
particularly to households, reflecting lower demand and higher risk awareness on the part of 
banks in the context of the global financial crisis. However, lending to the government sector 
increased strongly, more than offsetting the overall decline in lending to the private sector and 
resulting in 2.3% growth in total bank lending over 2009. In terms of GDP, total bank lending 
rose from 72.1% at the end of 2008 to 75.8% at the end of 2009. In the first seven months of 
2010, total bank lending increased by 4.7% although lending to households remained almost 
stagnant.  Overall,  the  largely  private  and  foreign-owned  banking  sector  remained  the 
dominant  part  of  the  financial  sector  as  a  whole,  with  a  moderate  degree  of  market 
concentration.  

The  banking  sector  remained  well  capitalised  as  a  result  of  previous  prudential  and 
supervisory  measures  to  address  potential  macro-financial  vulnerabilities.  The  capital 
adequacy  ratio  increased  from  15.9%  in  mid-2009  to  19.2%  in  mid-2010.  This  was  partly 
caused by the adoption of Basel II standards regarding the calculation of the capital adequacy 
ratio  and  partly  a  consequence  of  the  relative  shift  in  lending  from  the  private  to  the 
government  sector.  The  profitability  of  banks  declined  in  parallel  with  business  conditions 
and pre-tax income was 20% lower year-on-year in the first half of 2010. The share of non-
performing loans increased significantly from 4.9% at the end of 2008 to 7.8% by the end of 
2009  and  9.5%  in  mid-2010.  At  the  same  time,  the  banking  system  continued  to  face 
considerable interest- and currency-related credit risks as the majority of loans are based on 
variable interest rates and denominated in (or indexed to) foreign currencies, predominantly 
the  euro.  Developments  affecting  the  stability  of  the  financial  sector  have  been  kept  under 
close  watch  by  the  central  bank,  which  enhanced  its  institutional  and  analytical  capacity  to 
produce  assessments  of  the  stability  of  the  sector.  Overall,  the  banking  sector  remained 
relatively resilient to shocks, but significant risks are posed by largely un-hedged liabilities of 
the non-financial private sector.  

The share of non-banking financial sector assets in total financial sector assets declined from 
26%  at  the  end  of  2008  to  23%  at  the  end  of  2009.  This  was  largely  due  to  the  poor 
performance  of  investment  funds  which  suffered  significant  share  price  falls  and  cash 
withdrawals in the context of the global financial crisis. At the same time, leasing companies 
and the insurance sector gained in both absolute and relative terms. After losing almost 70% 
in 2008, the stock market index recovered by 16% in 2009. Over the first nine months of 2010 
the index has declined by about 4%. Market capitalisation of shares listed on the Zagreb stock 

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exchange  totalled  53%  of  GDP  at  the  end  of  2009  compared  with  over  100%  before  the 
financial crisis. Market capitalisation of all listed bonds rose from 10% of GDP to 11% in the 
course  of  2009,  as  a  result  of  a  slight  increase  in  bond  prices  and  some  new  bond  issues. 
Overall, notwithstanding the growth of some market segments, financial intermediation by the 
non-banking sector remained relatively modest. The stock market has only partially recovered 
from the sharp losses during the financial crisis.  

3.2. 

The  capacity  to  cope  with  competitive  pressure  and  market  forces  within  the 
Union 

Existence of a functioning market economy 

The  policy  response  to  the  global  economic  and  financial  crisis  has,  by  and  large,  been 
appropriate.  A  prudent  response  by  the  monetary  authorities  and  efforts,  albeit  limited,  to 
contain  the  fiscal  deficit  have  helped  to  anchor  the  expectations  of  economic  operators  and 
supported market mechanisms. The country has a functioning market economy. 

Endowment with human and physical capital 

Educational reforms have continued under the 2005-2010 development plan for the education 
system. Further steps were taken to improve the quality of education at all levels, including in 
the  form  of  training  of  teachers.  Additional  efforts  have  been  made  to  develop  a  national 
qualifications framework. Higher education has been further aligned with the principles of the 
Bologna process, although tertiary education generally continues to suffer from inefficiencies, 
poor governance and lack of funding. Further progress has been made towards developing a 
knowledge-based  economy.  The  ICT  infrastructure  is  relatively  well  developed,  with  high 
internet and broadband penetration rates. 

The government continued to implement labour market policies on the basis of the National 
Employment Promotion Plan. Measures include training and employment subsidies for young 
people  without  work  experience,  the  long-term  unemployed,  older  persons  and  vulnerable 
groups.  On  top  of  this,  a  set  of  measures  were  adopted  under  the  Economic  Recovery 
Programme  to  make  the  labour  market  more  dynamic.  Some  of  these  have  already  been 
implemented  by  May/June  2010,  for  example  the  introduction  of  a  system  of  volunteering, 
apprenticeships,  work  practice  and  internships.  However,  structural  problems  persisted,  as 
indicated  by  the  high  rate  of  youth  unemployment  and  low  employment  and  participation 
rates. Overall, in spite of various policy measures, structural weaknesses in the labour market 
remain major challenges. 

Investment declined sharply in 2009 and in the first half of 2010, mainly due to a slowdown 
of construction activity. As a share of GDP, investment fell from 27.6% in 2008 to 24.7% in 
2009.  The  decline  in  investments  in  processing  and  manufacturing  industry  has  harmed  the 
prospects for faster technological change, a more diversified production structure and higher 
export  potential.  Public  investments  slowed  down  a  little,  but  remained  significant,  in 
particular in the motorway network. The largest share of cumulative FDI inflows is accounted 
for by the financial sector (37%), followed by manufacturing (25%) and wholesale and retail 
trade  (16%).  The  long-standing  shortage  of  greenfield  FDI  remains.  Overall,  investment 
declined  in  the  context  of  the  recession  and  continued  to  concentrate  on  transport 
infrastructure and the services sector.  

Sector and enterprise structure 

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Restructuring the shipyards in difficulty is a key Accession Partnership priority. The tendering 
procedure  for  the  yards  was  completed  in  May  2010.  Implementation  of  the  National 
Restructuring  Programme  (NRP)  for  the  steel  sector  has  been  disrupted  by  the  global 
economic  crisis.  Therefore,  the  NRP,  as  well  as  individual  business  plans,  will  have  to  be 
revised  (see  Chapter  8).  Very  limited  progress  has  been  made  with  restructuring  the  large 
loss-making railway company and privatising subsidiaries. Only two out of eight subsidiaries 
were privatised and one underwent bankruptcy procedures. The railways continue to receive 
high  levels  of  budget  support.  Overall,  although  the  tendering  of  the  shipyards  for 
privatisation  has  proceeded,  considerable  further  work  will  have  to  be  done  by  the  state  to 
restructure  or  liquidate  the  yards  that  are  no  longer  viable.  Sustained  efforts  are  required  to 
complete the restructuring of the steel industry and railways to ensure their long-term viability 
and competitiveness.  

The  telecommunications  industry  was  further  liberalised.  The  Croatian  Telecommunications 
Agency continued activities aimed at stimulating competition by improving market access to 
new  service-providers.  This  led  to  further  price  reductions  and  to  a  larger  choice  of  tariff 
packages for customers. Liberalisation of the energy sector continued gradually and network 
rules  for  gas  transport  and  distribution  have  been  enacted.  However,  gas  and  electricity 
markets  remain  dominated  by  single  suppliers,  preventing  effective  competition.  The 
restructuring of the large electricity company has not advanced. Overall, despite further legal 
and  regulatory  adjustments,  competition  in  network  industries  remains  constrained  by 
dominant incumbent suppliers. 

The already large services sector increased its share of total gross value added from 65.0% in 
2008  to  66.0%  in  2009,  the  share  of  industry  fell  from  20.2%  to  19.1%,  the  share  of 
construction decreased slightly from 8.3% to 8.0%, and the share of agriculture, forestry and 
fishing  increased  from  6.4%  to  6.7%.  While  the  share  of  construction  in  total  employment 
remained practically unchanged at just below 9%, the share of industry declined from 21.6% 
to 20%. Agriculture’s share of employment increased slightly from 13.6% to 14.1%.  

In  2009,  small  and  medium-sized  enterprises  (SME)  accounted  for  around  40%  of  the 
corporate sector’s total assets, 66% of total employment and 46% of total investment. SMEs 
generated 55.7% of GDP5 and more than 42% of total exports. Except for investment where 
the share declined from 65%, those indicators remained virtually unchanged compared with 
the previous year. In order to support the SME sector, the government adopted an operational 
plan  for  2010  and  a  set  of  measures  under  the  Economic  Recovery  Programme.  The  State 
Development Bank (HBOR) was further strengthened financially to increase lending to SMEs 
on more favourable terms. Still, the sector continued to suffer from a cumbersome regulatory 
framework  and  inefficiencies  in  public  administration.  Access  to  longer-term  financing 
remained  difficult,  particularly  for  newly  established  businesses.  Overall,  while  the  SME 
sector  continued  to  benefit  from  significant  government  support,  its  share  in  the  overall 
economy has not increased.  

State influence on competitiveness 

The  role  of  the  Competition  Agency  in  monitoring  and  controlling  state  aid  has  been 
strengthened.  Administrative  capacity  and  enforcement  of  competition  policy  continue  to 
improve. Public subsidies remained unchanged at the high level of 2.4% of GDP in 2009 and 

5 

Measured according to the Croatian definition of SMEs, this share is 44%, unchanged from last year. 

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a  large  share  still  went  to  loss-making  companies.  Although  horizontal  aid  has  increased 
relative  to  sector-specific  aid,  it  still  accounts  for  only  a  small  share  of  total  subsidies. 
Overall, state intervention in the enterprise sector remained substantial.  

Economic integration with the EU 

Croatia is an open economy with total trade in goods and services accounting for around 75% 
of  GDP  in  2009.  This  ratio  declined  significantly  from  92%  in  2008  due  to  the  worldwide 
contraction of trade. Apart from exports of machinery and transport equipment (mainly ships), 
tourism remained the biggest source of export revenue, generating 14% of GDP in 2009. The 
EU  has  continued  to  be  Croatia’s  largest  trading  partner.  Its  share  of  total  Croatian  exports 
and imports remained at around 60% and 63% respectively. CEFTA countries accounted for 
10.5% of all Croatian trade in 2009, but this share decreased to 9.7% in the first seven months 
of 2010. Over this period, CEFTA countries generated 5% of total imports into Croatia and 
18%  of  all  exports  from  Croatia.  Around  95%  of  FDI  inflows  originate  from  EU  Member 
States. Overall, integration with the EU in the areas of trade and investment remained high.  

The  average  nominal  effective  exchange  rate  for  the  kuna  was  2.7%  lower  in  2009  than  in 
2008 mainly due to a significant fall in the average exchange rate between the kuna and the 
US  dollar.  However,  since  inflation  was  higher  in  Croatia  than  among  its  main  trading 
partners, the nominal depreciation was not turned into a noticeable, if any, improvement in the 
international  competitiveness  of  the  Croatian  economy.  In  annual  average  terms,  the  kuna’s 
real  effective  exchange  rate  was  0.5%  lower  year-on-year  when  using  consumer  prices  as 
deflator  and  2.8%  higher  when  using  producer  prices.  Unit  labour  costs  suggest  a  slight 
depreciation of the kuna in real effective terms in 2009. Overall, standard indicators point to 
no significant change in Croatia’s international price competitiveness. 

4. 

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 

This section examines Croatia’s ability to assume the obligations of membership – that is, the 
acquis as expressed in the Treaties, the secondary legislation and the policies of the Union. It 
also  analyses  Croatia’s  administrative  capacity  to  implement  the  acquis.  The  analysis  is 
structured in accordance with the list of 33 acquis chapters. In each sector, the Commission's 
assessment  covers  progress  achieved  during  the  reporting  period,  and  summarises  the 
country's overall level of preparations. 

4.1. 

Chapter 1: Free movement of goods 

Good progress can be reported towards alignment on general principles. Croatia has almost 
completed  implementation  of  its  action  plan  for  compliance  with  Articles  34  to  36  of  the 
Treaty on the Functioning of the European Union (TFEU).  

In the area of horizontal measures, good progress can be reported. Adoption of a revised Act 
on  technical  requirements  for  products  and  on  conformity  assessment  further  aligned  the 
Croatian legislation with the acquis. Further improvements are necessary to align the Croatian 
legal framework fully with the new horizontal acquis.  

As  regards  standardisation,  good  progress  can  also  be  reported.  The  Croatian  Standards 
Institute (HZN) has transposed nearly all European standards (ENs). The HZN became a full 
member  of  the  European  Committee  for  Standardisation  (CEN)  and  of  the  European 
Committee for Electrotechnical Standardisation (CENELEC) in January 2010.  

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In the field of conformity assessment, no further developments can be reported. 

Good  progress  has  been  made  in  the  area  of  accreditation.  The  Croatian  Accreditation 
Agency  (HAA)  has  so  far  accredited  a  total  of  193  conformity  assessment  bodies.  In  April 
2010,  HAA  became  a  signatory  to  the  European  Cooperation  for  Accreditation  Multilateral 
Agreements (EA MLA) in the eight main fields.  

Alignment with the acquis in the area of metrology is advanced. Collaboration has been set up 
between  the  State  Office  for  Metrology  and  the  new  National  Metrology  Institute  (NMI). 
Transferring responsibility for scientific metrology to the NMI remains the main outstanding 
issue in this field.  

Regarding market surveillance, there has been further progress with the State Inspectorate’s 
administrative  capacity  and  enforcement  measures.  Activities  on  market  surveillance  have 
intensified. An e-register system is compulsory for inspectors. Training has been provided to 
inspectors. Alignment in the field of market surveillance is well advanced. However, further 
measures are still needed to fulfil all the market surveillance requirements of the acquis. 

Overall,  as  regards  horizontal  measures,  basic  structures  for  harmonisation  with  EU 
legislation are in place.  

There has been good progress in relation to the old approach product legislation, with the 
adoption of a number of regulations. As regards medicinal products, Croatia has continued to 
transpose the acquis. It has adopted implementing legislation establishing the procedures and 
criteria  on  price-setting,  inclusion  of  medicinal  products  in  the  reimbursement  lists  and 
marketing authorisation. These ordinances, which entered into force in January 2010, provide 
for  alignment  with  the  procedural  obligations  imposed  by  the  acquis.  Further  efforts  are 
needed  to  achieve  full  alignment  and  implementation  of  the  legislation  (in  particular  in  the 
fields of textiles, footwear, pre-packaging and aerosol dispensers) and proper implementation 
and to ensure the necessary administrative capacity.  

Alignment  with  the  new  and  global  approach  product  legislation  is  well  on  track. 
Regulations  have  been  adopted  in  many  areas.  However,  further  efforts  are  still  needed, 
particularly on toy safety, machinery, recreational craft, non-automatic weighing instruments 
and eco-design requirements for energy-using products.  

Some progress has been achieved on procedural measures, for which alignment is advanced. 
The Regulation on notification procedures in the field of standards, technical regulations and 
regulations on information society services was revised. This further transposed key elements 
of the acquis. A central contact point has been established within the Ministry of Economy, 
Labour and Entrepreneurship to facilitate cooperation between the ministry and other central 
State departments and operators. Alignment of procedural measures is advanced, but further 
efforts are still needed to transpose fully the acquis governing acquisition and possession of 
weapons.  

Conclusion 

Good  progress  has  been  made  in  the  field  of  free  movement  of  goods.  Alignment  with  the 
acquis in this chapter is well advanced. However, further efforts are necessary, particularly on 
conformity assessment, metrology and specific legislation on product safety. Croatia needs to 

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complete alignment with the acquis and to strengthen its capacity in order to ensure effective 
implementation and enforcement of the acquis upon accession.  

4.2. 

Chapter 2: Freedom of movement for workers 

Croatia largely fulfils the acquis requirements on access to the labour market.  

Continued  good  progress  can  be  reported  towards  future  participation  in  the  EURES 
(European  Employment  Services)  network.  As  regards  services  related  to  mobility  and  free 
movement of labour, the organisational structure of the Croatian Employment Service (CES) 
is  being  adjusted  and  administrative  capacity  strengthened.  Various  training  activities  – 
including  on  language  skills  –  for  EURES  advisers  have  been  organised.  The  CES  is  also 
intensifying  the  activities  of  its  Migrant  Information  Centre.  In  this  area,  Croatia  is  well  on 
track.  

Good progress has continued in the area of coordination of social security systems. Further 
efforts  have  been  made  to  strengthen  the  administrative  capacity  to  apply  the acquis  in  this 
field. An interinstitutional working group has been established Croatia is participating as an 
observer in the preparations for the EESSI project (on electronic exchanges of data under the 
new EU regulations) and has nominated a coordinator. Training is systematically provided to 
staff from the State administration. Preparations in this area are well on track. 

Preparations are being made for introduction of the European health insurance card upon 
accession. 

Conclusion 

Good  progress  has  been  made  on  this  chapter.  Additional  efforts  are  needed  to  strengthen 
administrative capacity, in particular with regard to coordination of social security systems. 

4.3. 

Chapter 3: Right of establishment and freedom to provide services 

Limited  progress  can  be  reported  on  the  right  of  establishment,  as  Croatia’s  legislation  is 
largely  already  aligned  with  the  acquis.  However,  several  restrictions  to  the  right  of 
establishment, such as authorisation systems and the one-office-rule are still in place.  

There  has  been  little  progress  on  freedom  to  provide  cross-border  services.  Progress  has 
been  made  on  implementation  of  the  Services  Directive.  In  October,  an  action  plan  for 
implementation  of  the  directive  was  adopted.  Further  work  is  needed  to  complete  the 
exhaustive screening of national legislation in time. Sectoral legislation to complete alignment 
with the Services Directive remains to be adopted. More administrative resources need to be 
allocated  to  this  task.  Two  additional  staff  were  employed  in  the  Chamber  of  Commerce  to 
work on establishing the Point of Single Contact foreseen in the Services Directive. Work on 
administrative  cooperation  has  been 
to  continue.  Progress  on 
implementation  of  the  Services  Directive  needs  to  be  intensified.  Croatian  legislation  still 
contains rules contrary to Article 56 of the TFEU. 

initiated  and  needs 

Further  progress  has  been  made  in  the  field  of  postal  services,  where  alignment  of  the 
legislation with the acquis is well advanced. Implementing legislation regulating provision of 
universal postal services was adopted. In January 2010, Croatia further reduced its price limits 
and narrowed down the scope of the reserved area to items of correspondence (not more than 

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50 g), in line with the requirements of the Second Postal Directive. However, full alignment 
with the acquis (the Third Postal Directive) has not yet been achieved. 

To develop Croatia’s postal policy further and provide legal certainty, it is important to ensure 
coherence  in  the  regulatory  practice  of  the  competent  authorities.  The  Croatian  Post,  the 
designated  universal  service-provider,  adopted  a  business  plan,  based  on  its  strategic 
framework, aimed at preparing for full liberalisation of the market. The number of staff in the 
Postal  Services  Department  of  the  independently  financed  Croatian  Post  and  Electronic 
Communications  Agency  (HAKOM)  and  their  professional  qualifications  are  appropriate. 
Thanks to the interconnection between the Postal Services Department, the Legal Department 
and  the  Department  for  User  Protection  in  HAKOM,  the  administrative  capacity  is 
satisfactory. However, additional training is necessary, in particular on separation of accounts.  

Good  progress  has  been  made  on  mutual  recognition  of  professional  qualifications.  The 
Act  on  regulated  professions  and  recognition  of  foreign  professional  qualifications  was 
adopted  in  October  2009.  Amendments  to  the  Legal  Profession  Act  and  the  Ordinance  on 
conditions to engage in activities not relating to direct exposure to dangerous chemicals were 
adopted, removing most of the remaining inconsistencies with the acquis in those areas. Good 
progress was made on the work on curricula for nurses. Professional and academic titles in the 
dental  profession  have  been  aligned  with  the  acquis.  However,  further  action  is  required  to 
align  the  minimum  training  requirements  for  the  remaining  medical  professions  with  the 
acquis. Amendments to the Midwifery Act and remaining adjustments to the Legal Profession 
Act  have  yet  to  be  adopted.  A  national  coordinator  for  the  approximation  with  the 
professional  qualifications  directive  has  been  nominated  and  the  Agency  for  Science  and 
Education was appointed as the national contact point. 

Conclusion 

Progress has been made, in particular on mutual recognition of professional qualifications and 
on  postal  services.  Overall  alignment  with  the  acquis  is  satisfactory.  Increased  efforts  are 
required to complete alignment, in particular in the area of mutual recognition of professional 
qualifications, and to transpose the Services Directive. Further work is also needed to set up 
the  Point  of  Single  Contact.  Work  on  improving  administrative  capacity  needs  to  be 
continued.  

4.4. 

Chapter 4: Free movement of capital 

Further progress has been made on free movement of capital, where Croatia’s legislation is 
largely already aligned with the acquis. Restrictions remain on acquisition of agricultural land 
and  land  in  protected  nature  reserves  by  EU  nationals,  on  deposit  transactions  by  residents 
abroad and on special government rights.  

Croatia  has  abolished  provisions  of  the  Foreign  Exchange  Transactions  Act  regulating 
protective measures by the Croatian National Bank with effect from Croatia’s accession to the 
EU. On 1 January 2010, Croatia liberalised transfers abroad, ranging from gifts and grants to 
transactions  with  derivatives,  use  of  loans  from  abroad  via  accounts  abroad,  payments  and 
collection  in  foreign  cash,  taking  cash  into  or  out  of  the  country,  transfers  of  materialised 
securities  into  or  out  of  the  country  and  transactions  on  foreign  exchange  markets  abroad. 
Granting of short-term financial loans to residents was fully liberalised on 1 July 2010. The 
amendments to the Act on housing savings and State investment for housing savings removed 
the  remaining  discriminatory  provision  concerning  use  of  assets  in  building  societies.  With 

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effect  from  Croatia’s  accession  to  the  EU,  any  physical  person  resident  in  Croatia  will  be 
allowed  to  be  a  building  society  depositor  (and,  consequently,  recipient  of  a  housing  loan). 
Croatia has further postponed liberalisation of  deposit  transactions by residents abroad until 
January 2011.  

As  regards  the  special  government  rights  in  privatised  companies,  Croatia  has  revoked  the 
Law on privatisation of HEP (the State electricity company), including the provision allowing 
the State to retain 51% ownership of the company. However, the ‘golden shares’ which the 
government still retains in some privatised companies also need to be abolished by the date of 
accession.  

Substantial progress can be reported as regards payment systems. The new Payment Systems 
Act and implementing legislation have been adopted. This legislation transposes the Payment 
Services Directive into Croatia’s national legislation. The act will come into force in January 
2011, with the exception of the provisions regulating the functioning of the Croatian payment 
system as an EU Member State, which will apply with effect from Croatia’s accession to the 
EU.  

Some progress can be reported on anti-money-laundering (AML) measures. The new Act on 
organisation of games of chance and other AML-related implementing legislation entered into 
force.  Cooperation  between  the  Croatian  Financial  Intelligence  Unit  (FIU)  and  reporting 
entities  on  supervision  activities  is  now  supported  by  detailed  statistics.  Joint  training 
activities  have  been  held  with  the  reporting  entities.  Supervision  and  monitoring  of  anti-
money-laundering obligations have been tightened up, but more needs to be done, especially 
outside  the  banking  sector.  Inter-agency  cooperation  has  improved,  but  also  still  requires 
further strengthening. 

Conclusion 

Further progress has been made as regards the acquis on payment services, liberalisation of 
capital  movements  and  anti-money-laundering.  Overall,  alignment  is  advanced.  Continued 
efforts  are  needed  to  complete  liberalisation  of  capital  movements  and  to  consolidate  the 
enforcement of the AML legislation. 

4.5. 

Chapter 5: Public procurement 

There has been good progress as regards general principles. Under the Public Procurement 
Act (PPA), the relevant implementing legislation was adopted, largely aligning the Croatian 
legal framework with the acquis. Apart from Act on Maritime Domain and Seaports, all the 
necessary sector regulating acts have been adopted.  

With  regard  to  administrative  capacity,  the  Department  for  the  Public  Procurement  System 
(DPPS)  in  the  Ministry  of  Economic  Affairs,  Labour  and  Entrepreneurship  (MELE)  has 
considerably  improved  inter-institutional  coordination.  This  has  ensured  more  efficient 
implementation of public procurement policy. The Strategy for the Development of the Public 
Procurement System is still being implemented successfully, based on an updated action plan. 
Transparent  and  timely  exchanges  of  information  and  data  with  all  registered  procurement 
entities are ensured. Enforcement of the PPA is monitored by the DPPS to fight irregularities 
and  prevent  corruption.  In  July  MELE  signed  with  USKOK  a  co-operation  agreement  on 
exchange of information and training. 

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Good progress has been made on award of public contracts. Since 1 January 2010, at least 
one person who has completed a new specialist training programme and passed an exam on 
procurement  must  be  involved  in  each  procurement  procedure  exceeding  a  set  value.  An 
intensive  training  programme  covering  public  administration  at  central  and  local  levels  is 
under  way.  It  is  also  open  to  economic  operators  and  NGOs.  However,  the  capacity  of  the 
contracting  entities  to  apply  the  public  procurement  legislation  correctly,  efficiently  and 
transparently needs to be further enhanced.  

The capacity of the Ministry of Finance has been improved by developing and applying the 
relevant methods and regulating the definitions of concessions, calculations of contract value, 
fiscal impact and risk assessment. The Ministry of Finance continued to provide support to all 
concession donors. The concession registry is functioning well. The process of improving the 
overall  performance  of  the  Agency  on  Public-Private  Partnership  (APPP)  continued. 
Implementing  legislation  and  guidelines  have  been  drafted  for  supervising,  monitoring  and 
facilitating evaluation, contracting and implementation of PPP projects.  

The  Central  Public  Procurement  Office  (CPPO)  was  established  as  a  government  office 
carrying out procurement tasks for central State bodies. The head of the office was appointed 
and recruitment of staff started. The CPPO published the notice launching the first centralised 
public procurement procedure. However, further efforts need to be made to achieve efficient 
operation of the CPPO.  

Progress can be reported in the remedies system. The new Act on the State Commission for 
the  Supervision  of  Public  Procurement  Procedures  came  into  force  in  February  2010.  The 
State  Commission  (SC)  considerably  improved  its  capacity  to  manage  remedies  on 
concessions and PPPs. However, the effectiveness of the remedies system is still hampered by 
the long delays in judicial review, by the Administrative Court, of decisions taken by the SC.  

Conclusion 

Good  progress  can  be  reported,  in  particular  on  improving  the  capacity  of  the  main 
stakeholders  to  coordinate  and  implement  public  procurement  policy.  The  political 
commitment to the reforms needs to be maintained. The capacity to apply the implementing 
legislation and the methods and tools efficiently still needs to be further enhanced at all levels 
of the procurement system, including amongst economic operators. 

4.6. 

Chapter 6: Company law 

There has been some progress in company law. Croatia’s legislation is largely in line with the 
acquis. The Companies Act was amended to align the Croatian legislation with the Directives 
on mergers and divisions and on shareholders’ rights. However, some inconsistencies remain 
in alignment with the Directive on shareholders’  rights. The  Amendments  to  the instruction 
on electronic communication between the Court Register and companies with limited liability 
(Ltd)  allow  on-line  applications  (‘e-register’).  Relevant  departments  within  the  Ministry  of 
Justice remain understaffed.  

There has been some progress in the field of corporate accounting. The legislation is largely 
in line with the acquis.  

The  Croatian  Financial  Reporting  Standards  Board  updated  the  rules,  in  line  with  the  latest 
International  Financial  Reporting  Standards  (IFRS).  It  continued  to  publish  the  translated 

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versions  of  the  International  Accounting  Standards,  IFSR  and  interpretations  of  the 
International Financial Reporting Interpretations Committee (IFRIC). 

There  has  been  some  progress  in  the  field  of  auditing.  The  rules  of  procedure  for 
implementing  the  Audit  Act  were  adopted.  Further  steps  have  been  taken  to  ensure  the  full 
functionality of the Audit Public Oversight Committee (APOC), as work on implementation 
of  the  Accounting  Action  Plan  continued.  The  APOC  signed  a  cooperation  agreement  with 
the  Croatian  Chamber  of  Auditors  to  exchange  data  on  the  audit  profession  and  on  quality 
the  Quality  Assurance 
assurance.  The  Public  Oversight  Implementation  Plan  and 
Implementation Plan were adopted. The Department for Financial Reporting in the Ministry 
of Finance, which is providing technical support to APOC, hired a third employee. Its overall 
resources have yet to be allocated. 

The  Quality  Assurance  Team  (QAT)  is  understaffed  due  to  budgetary  constraints  on  the 
Chamber  of  Auditors,  undermining  the  audit  oversight  system  as  a  whole.  The  QAT  has 
initiated on-the-spot visits to audit entities. Targeted full inspections are expected to start in 
2011.  

Conclusion 

Overall, some progress can be reported in this chapter. Alignment with the acquis is on track. 
Further efforts are needed in the area of auditing to ensure that the new legal provisions are 
implemented and strengthen the administrative capacity.  

4.7. 

Chapter 7: Intellectual property law 

Croatia  already  largely  fulfils  the  acquis  requirements  in  the  field  of  copyright  and 
neighbouring  rights  and  industrial  property  rights.  However,  public  and  government 
awareness of intellectual property right (IPR) protection remains low.  

Good progress can be reported in the field of enforcement. The revised National Strategy for 
the  Development  of  the  Intellectual  Property  System  for  the  period  2010-2012  and  the 
relevant action plan were adopted in April. Important work has been done to formalise inter-
agency  cooperation  on  both  strategic  activities  and  operational  enforcement.  Croatia  is 
continuing its work to develop enforcement statistics and the risk-analysis approach further. 
The Ministry of the Interior, the Ministry of Science, Education and Sports and the Croatian 
Academic  and  Research  Network  concluded  a  cooperation  agreement  on  prevention  and 
settlement of computer incidents and other forms of computer crime. 

However, violations of intellectual property are a growing concern for the health and safety of 
consumers.  Public  awareness  of  those  topics  remains  low.  Involvement  of  organised  crime 
groups  in  IPR  violations  is  increasing.  Measures  are  therefore  required  to  strengthen  the 
capacity of the police and prosecutors. The State Intellectual Property Office (SIPO) has good 
administrative capacity. However, the resources of the Board of Appeal, providing the right to 
appeal against first-instance decisions by the SIPO, need to be improved to prevent delays.  

Conclusion 

Alignment  with  the acquis has reached a very  high level  and progress can be reported with 
enforcement. Overall awareness of intellectual property rights remains to be strengthened, in 
particular with regard to the health and safety of consumers and the involvement of organised 
crime groups. 

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4.8. 

Chapter 8: Competition Policy 

Significant  progress  can  be  reported  in  the  field  of  antitrust,  including  mergers.  The  new 
Competition Act adopted in June 2009 entered into force on 1 October 2010, empowering the 
Croatian Competition Agency (CCA) to impose fines and to conduct a leniency programme, 
thereby  strengthening  the  agency’s  deterrent  effect  and  enforcement  policy,  in  particular 
against  cartels.  To  protect  the  rights  of  defence,  the  Act  introduces  the  obligation  for  the 
agency to submit statements of objection to the parties. It also makes decisions by the CCA 
subject  to  review  by  the  High  Administrative  Court.  The  CCA  needs  further  strengthening 
due to its additional tasks arising from the new Competition Act. 

The CCA took 18 decisions in antitrust and merger cases, including six on agreements, two on 
a dominant position, eleven on concentrations and four opinions. The CCA has continued to 
provide  the  government  with  assessments  of  draft  laws  and  other  expert  opinions. 
Preparations in the field of antitrust, including mergers, are well on track. 

There has been some progress in the field of State aid. The CCA resolved 23 cases, of which 
20  involved  aid  schemes  and  three  concerned  individual  aid  measures.  More  remains  to  be 
done on competition advocacy, particularly at regional and local levels. Legislative alignment 
is almost completed and the main procedural principles of State aid control are in place and in 
line  with  the  acquis.  As  regards  state  aid  in  the  transport  sector,  Croatia  has  published  a 
decision establishing the main rules on State aid, in line with the acquis.  

In  October  2009,  the  Croatian  authorities  initiated  the  process  of  amending  the  Radio-
Television  Act.  A  draft  was  submitted  for  public  consultation.  Substantial  comments  were 
made by the CCA regarding the public financing to be received. 

Croatia’s  steel  industry  faced  difficulties  due  to  the  global  economic  and  financial  crisis. 
Production  at  the  Željezara  Split  steel  mill  is  still  suspended.  The  Croatian  authorities  are 
currently seeking a new buyer for this mill. At the CMC Sisak steel mill, deviations from the 
original  plan  were  observed,  while  at  the  same  time  new  investments  were  launched.  The 
national  restructuring  plan  (NRP)  and  the  individual  business  plans  adopted  by  the 
government in June 2008 have therefore become obsolete and urgently need to be revised. 

In the shipbuilding sector, Croatia has made substantial progress. The tendering procedure for 
the six yards was completed in May 2010 following a one-month extension of the deadline. 
The tender documentation was in line with the SAA State aid rules and the acquis. Bids were 
submitted for three yards. The restructuring plans presented by the bidders are being analysed 
by the CCA. Restructuring the steel and shipbuilding industries in Croatia is a key element of 
the accession negotiations in this chapter. 

Conclusion 

Significant  progress  has  been  achieved,  in  particular  towards  the  privatisation  and 
restructuring  of  the  shipyards.  Overall,  a  good  level  of  alignment  has  been  achieved. 
However, further efforts are still required to improve the CCA’s enforcement record against 
cartels,  to  improve  administrative  capacity  further,  in  particular  in  the  area  of  antitrust,  to 
complete alignment of the Croatian Broadcasting Act, to update the NRP for the steel industry 
and to adopt restructuring plans in line with the state aid acquis for the shipyards in difficulty. 

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4.9. 

Chapter 9: Financial Services 

Substantial  progress  can  be  reported  in  the  field  of  banks  and  financial  conglomerates. 
Croatia  amended  the  Credit  Institutions  Act  (which  has  entered  into  force)  and  the 
implementing  legislation  transposing  the  revised  Capital  Requirements  Directive  (CRD).  It 
also transposed other relevant EU directives. The Deposit Insurance Act was further aligned 
with the acquis, by shortening the compensation periods with effect as of Croatia's accession. 
Croatia  is  monitoring  changes  to  the  CRD  and  preparing  for  transposition.  Home-host 
supervisory coordination is continuously being enhanced. However, cross-sector cooperation 
and  cross-border  coordination  for  crisis  preparedness  and  management  require  further 
strengthening. The Croatian National Bank (CNB) signed memoranda of understanding with 
Banque  de  France,  the  German  supervisory  agency  (BaFin)  and  the  financial  supervisor  of 
San  Marino.  A  new  memorandum  with  the  financial  supervisor  of  Montenegro  facilitates 
cooperation between home and host supervisors. In response to the global financial crisis, the 
Croatian  Agency  for  Supervision  of  Financial  Services  (HANFA),  the  Ministry  of  Finance 
and  the  CNB  signed  a  memorandum  of  understanding  on  managing  financial  crisis.  No 
progress  can  be  reported  with  winding-up  procedures,  where  alignment  of  the  legislation  is 
satisfactory. Overall, preparations in this area are well on track. 

With regard to insurance and occupational pensions, further progress has been made in the 
field  of  insurance,  reaching  a  high  level  of  alignment  with  the  acquis.  Implementing 
legislation has been adopted in many areas. However, there are still minor inconsistencies in 
implementation  of  the  EU  legislation  on  life  and  non-life  insurance.  HANFA  has  put 
considerable  effort  into  training  insurance  and  reinsurance  companies  on  implementation  of 
the legislation, particularly on Solvency II issues. Preparations for transposition of Solvency 
II requirements have commenced. Some alignment of the implementing legislation has taken 
place  in  the  case  of  pension  insurance,  regarding  financial  reports  of  pension  funds  and 
pension  companies,  investment  criteria  and  limitations  for  pension  funds  and  registration  of 
insured persons in mandatory pension funds. However, further action is needed to complete 
alignment  in  this  field,  including  with  Directive  2003/41/EC  regarding  voluntary  pension 
insurance.  Amendments  to  legislation  to  complete  alignment  with  the  Institutions  for 
Occupational  Retirement  Provision  (IORP)  Directive  are  still  outstanding.  Action  is  also 
needed to guarantee proper functioning of the insurance and occupational pensions markets.  

No  progress  has  been  made  in  the  area  of  financial  market  infrastructure.  Croatia’s 
legislation on such infrastructure is appropriate.  

Some progress can be reported in the areas of securities markets and investment services, 
where alignment of the legislation is already very advanced. Croatia has adopted a substantial 
volume  of  implementing  legislation.  An  IT  application  has  been  developed  for  transaction 
reporting for investment companies and for the register of prescribed information for issuers.  

As  regards  administrative  capacity,  the  CNB  improved  the  capacity  of  the  Prudential 
Regulation and Bank Supervision Departments by redeploying  staff  within the bank. It  also 
introduced  new  IT  support  for  monitoring  and  reporting  on  changes  in  EU  legislation.  The 
CNB organised a series of workshops with banks on implementation of the Credit Institutions 
Act. Measures to strengthen the administrative capacity of HANFA and its cooperation with 
foreign  supervisors  have  continued.  HANFA  continues  to  be  active  in  raising  public 
awareness and training all interested parties (investors, police, State attorneys and journalists). 
Measures to enhance the administrative capacity of HANFA need to continue. 

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Conclusion 

Substantial progress can be reported on this chapter, both on alignment of legislation and on 
strengthening  administrative  capacity.  However,  further  strengthening  of  the  administrative 
capacity of the regulators is needed to improve their supervisory activities and consultations 
and cooperation with service providers on the financial markets. 

4.10.  Chapter 10: Information society and media 

Croatia has made significant progress with aligning its policy, legislation and regulations with 
the  acquis  on  electronic  communications  and  information  technologies.  Market  analysis 
procedures  and  regulations  are  well  advanced,  including  preparation  of  cost  models  and 
accounting  separation  imposed  on  dominant  (SMP)  operators.  The  switchover  to  digital 
television  broadcasting  has  also  been  handled  successfully  and  a  full  digital  transition  is 
planned for end 2010. However, in spite of the regulations in place, competition on the fixed 
broadband  market  remains  limited.  In  June  2010,  the  fixed  broadband  penetration  rate  was 
16%,  with  the  incumbent  holding  86%  of  the  market.  Mobile  internet  had  grown  to  6%  by 
July 2010. The mobile penetration rate is steady at 136%.  

The ‘crisis tax’ introduced in 2009 on mobile operators’ revenue remains in force. No analysis 
of  its  non-detrimental  effects  on  market  liberalisation  has  been  published  for  public  review, 
since the measure mostly affects the latest entrant on the market. Further progress has been 
made  on  strengthening  the  administrative  capacity  of  the  Croatian  Post  and  Electronic 
Communications Agency. However, continuous training and management efforts are needed 
in  order  to  develop  the  agency  into  a  strategic  player  endorsing  the  policy  goals  of  a  level 
playing field. The agency’s role vis-à-vis operators needs to be reinforced. Work to increase 
the  transparency  of  decisions  is  ongoing  and  needs  to  continue.  Overall  preparations  in  this 
area are well advanced. However, major decisions to increase competition still lie ahead, in 
particular on the internet broadband market. 

Preparations in the area of information society services are nearing completion. However, it 
is necessary to continue to follow up EU policy developments closely, for instance regarding 
the safer internet programme. Information society policies need to be further integrated into 
all government policies. Political awareness needs to be further improved to identify the full 
societal  benefits  of  the  information  society,  including  the  need  for  faster  competition  in  all 
segments of the market.  

Good  progress  can  be  reported  in  the  field  of  audiovisual  policy,  in  particular  with 
transposing the Audiovisual Media Services Directive. The Electronic Media Act entered into 
force  and  the  Council  for  Electronic  Media  adopted  four  by-laws  aiming  to  implement  the 
Law. The Electronic Media Council has also been further strengthened. However, interference 
in  the  media  landscape  by  economic  and  political  interest  groups  persists.  Anti-competitive 
State aid to the national broadcaster has continued. (See Chapter 8 – Competition) Both are 
harming liberalisation of services and development of the sector.  

Conclusion 

Croatia  has  made  significant  progress  and  has  achieved  a  high  level  of  alignment  with  the 
acquis in this chapter. However, continued efforts are needed to strengthen the capacity of the 
two  national  regulators  to  apply  the  legal  framework  correctly.  Political  will  and  technical 
efforts  are  needed  to  sustain  liberalisation  of  all  segments  of  electronic  communications 

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markets,  to  yield  tangible  results  in  terms  of  development  of  the  information  society  and  to 
promote competition on the broadcasting market and the independence of the public service 
broadcaster.  

4.11.  Chapter 11: Agriculture and rural development 

Progress  was  achieved  with  regard  to  horizontal  issues.  Croatia  adopted  an  agricultural 
policy  framework  for  2010-2013  on  the  reform  of  the  national  support  system  and  further 
alignment with the common agricultural policy (CAP). Croatia’s agricultural policy is based 
on a high level of coupled payments, in particular in the dairy sector and for cattle fattening, 
tobacco, pigmeat, sheep and goats. Croatia has adopted a Law on State support for agriculture 
to reform the current system. Croatia needs to step up efforts to achieve full alignment with 
the acquis. 

Good progress was made towards setting up the paying agency and establishing an integrated 
administration and control system (IACS) including a land parcel identification system (LIPS) 
which are key elements for the accession negotiations in this chapter. Croatia adopted the plan 
for  the  establishment  of  the  IACS  (including  LPIS)  and  the  paying  agency  and  made  good 
progress in its implementation. Croatia needs to continue its efforts to have a fully operational 
IACS system and paying agency in place with effect from accession. 

Progress  was  made  on  implementation  of  the  farm  accountancy  data  network  (FADN). 
Additional human and budgetary resources need to be allocated to the FADN. 

Good  progress  was  achieved  with  regard  to  the  common  market  organisation  (CMO). 
Croatia  adopted  the  Act  on  the  organisation  of  the  market  in  agricultural  products  and  an 
action  plan  for  harmonisation  with  the  CMO  which  is  a  key  element  for  the  accession 
negotiations  in  this  chapter.  Croatia  needs  to  continue  its  efforts  to  have  a  fully  operational 
system  in  place  with  effect  from  accession.  Croatia  adopted  an  implementation  plan  to 
establish a fully functional vineyard register by the end of 2010. 

In the area of rural development, Croatia completed the SAPARD programme leaving half 
of the funds  available  to the country unused. Croatia started  implementing certain measures 
under  the  Instrument  for  Pre-Accession  for  Rural  Development  (IPARD).  Croatia  needs  to 
step up its efforts to improve absorption capacity for rural development funds.  

Croatia is advancing on alignment with the acquis in the areas of quality policy and organic 
farming. 

Conclusion 

Overall,  good  progress  can  be  reported  in  this  chapter,  in  particular  on  establishment  and 
implementation of the paying agency and of the integrated administration and control system 
and on the common market organisation. Croatia needs to undertake considerable efforts in all 
these areas in order to have fully operational and compliant systems in place upon accession. 
Efforts are also needed to align the agricultural support system fully with the acquis. Croatia 
needs to increase the absorption capacity for rural development funds. 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy 

Good  progress  can  be  reported  on  implementation  of  the  strategy  for  transposition, 
implementation  and enforcement  of  the acquis for food safety, veterinary and phytosanitary 

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policy. As regards general food safety, Croatia has adopted implementing legislation based 
on  the  Food  Act  aligned  with  the  acquis.  Croatia  needs  to  continue  strengthening  its 
administrative and control capacity. 

Good  progress  was  made  in  the  veterinary  sector  with  the  adoption  of  several  additional 
pieces  of  implementing  legislation,  based  on  the  fully  aligned  Veterinary  Act.  Croatia  has 
recruited additional official veterinarians. Croatia needs to continue these efforts, in particular 
with regard to setting up border inspection posts and official controls. 

Significant  progress  can  be  reported  in  the  area  of  placing  on  the  market  food  and  feed. 
Croatia has adopted the national programme for upgrading establishments for food of animal 
origin  and  animal  by-products.  The  number  of  non-compliant  establishments  continued  to 
decrease.  Croatia  needs  to  continue  implementing  the  national  programme  for  upgrading 
establishments. In the area of animal by-products (ABP), deficiencies need to be addressed, 
in particular for intermediate plants and for handling category 1 materials. 

There  has  been  progress  in  the  area  of  genetically  modified  organisms  (GMOs)  with  the 
adoption  of  implementing  legislation  relating  to  conditions  for  laboratories  involved  in 
testing, control and monitoring. In addition, the Law on GMOs and implementing legislation 
on  monitoring  of  GMOs  have  been  amended.  Further  efforts  will  be  required  in  order  to 
achieve  full  alignment.  Laboratories  and  administrative  capacity  need  to  be  further 
strengthened in order to implement and enforce the legislation.  

Good  progress  continued  on  phytosanitary  issues,  with  the  adoption  of  several  additional 
pieces  of  implementing  legislation  in  the  fields  of  plant  health,  plant  protection,  seeds  and 
planting material and registration of varieties of agricultural plants. Croatia needs to continue 
these efforts, in particular with regard to setting up border inspection posts and training staff. 

Conclusion 

Good overall progress has been made, in particular with the adoption and implementation of 
secondary legislation. Transposition of the acquis is well advanced in all sectors. Significant 
progress  has  been  made  through  the  adoption  of  the  national  programme  for  establishments 
upgrading  food  of  animal  origin  and  animal  by-products.  Continued  efforts  are  required 
regarding  the  programme's  implementation,  as  well  as  on  strengthening  administrative  and 
control capacity, and setting up border inspection posts.  

4.13.  Chapter 13: Fisheries 

Croatia  has  made  good  progress  in  the  areas  of  resource  and  fleet  management  and 
inspection and control which are key elements for the accession negotiations in this chapter. 
It  has  continued  to  implement  legislation  on  landing  declarations  and  sales  notes.  The 
fisheries  monitoring  centre  (FMC)  is  operating  and  additional  staff  have  been  recruited.  As 
for statistics, Croatia is nearing completion of its alignment with the acquis on collection and 
processing  of  fisheries  data  and  statistics  on  fishing  vessels.  Registration  of  commercial 
fishing  vessels  is  well  advanced,  but  needs  to  be  fully  harmonised  with  the  acquis.  The 
installation of the satellite based vessel monitoring system (VMS) has not been completed yet. 
An  entry-exit  scheme  is  lacking.  The  administrative  and  technical  capacity  of  the  fisheries 
inspectorates  is  improving,  but  still  needs  further  strengthening.  This  implies,  in  particular, 
recruitment and training of additional fisheries inspectors to carry out checks at the coast. 

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There  has  been  good  progress  on  structural  action.  Croatia  designated  the  administrative 
bodies  to  implement  the  European  Fisheries  Fund  which  is  a  key  element  of  the  accession 
negotiation  in  this  chapter.  Efforts  are  needed  to  finalise  the  national  fisheries  strategy. 
Croatia needs further to align state aid with the acquis. 

Good  progress  can  be  reported  on  market  policy.  Collection  of  information  on  species, 
quantities  and  prices  is  continuing.  Croatia  made  further  progress  on  alignment  with  the 
acquis by adopting the Act on structural support and market organisation for fisheries which 
is  a  key  element  for  the  accession  negotiations  in  this  chapter.  Greater  effort  is  needed  on 
establishing producers’ organisations and aligning marketing standards. 

In  the  area  of  international  agreements,  Croatia  transposed  and  implemented  all  the 
recommendations  of  the  International  Commission  for  the  Conservation  of  Atlantic  Tunas 
(ICCAT) regulating catches, farming and trading. However, more effort needs to be made on 
adjustment of fleet and farming capacity. 

Conclusion 

Croatia  has  made  good  progress  in  aligning  with  the  acquis  in  the  field  of  fisheries. 
Preparations are well advanced. Croatia needs to increase the efforts on implementation of the 
legislation,  in  particular  with  regard  to  fleet  management,  inspection  and  control  and 
structural  policy.  Croatia  also  needs  to  follow  up  implementation  of  its  international 
agreements.  

4.14.  Chapter 14: Transport policy 

Progress  can  be  reported  on  road  transport.  Improvements  have  been  made  as  regards 
implementation  of  the  digital  tachograph,  which  is  now  fully  operational.  In  addition, 
inspection  capacity  has  been  enhanced,  by  providing  specialised  equipment  and  further 
training,  and  the  number  of  inspections  has  increased.  Croatia  needs  further  to  improve  its 
administrative capacity for implementing the road safety policy, including social acquis. 

Good progress has been achieved in the case of rail transport. The administrative capacity of 
the  railway  regulatory  body  has  been  increased.  The  Market  Regulatory  Agency  is  fully 
operational. Progress has been made with railway safety legislation. Safety training has been 
provided  to  employees  of  HZ  Infrastruktura  and  the  HZ  railway  undertakings.  The  safety 
authority  and  the  accident  investigation  body  have  been  established,  but  respective 
management bodies are not yet appointed and agencies are not yet functioning. Progress has 
been  made  with  transposition  and  implementation  of  EU  railway  legislation.  The  functional 
separation between HZ Infrastruktura and HZ Holding is under implementation, based on the 
amended Railway Act. The rail market is fully open for Croatian undertakings only and rail 
access  to  the  maritime  and  inland  waterways  ports  is  still  only  for  the  existing  state-run 
railway. Since 2009, HZ Infrastruktura publishes the Network Statement and path application 
forms in Croatian and English. 

There  has  been  progress  in  the  legislation  on  inland  waterways  transport,  following 
Croatia’s  development  plan  for  inland  waterways  (2007-2012).  Croatia  is  participating  in 
preparing the Danube Strategy and actively participates in the improvement of the Sava River 
development, in particular concerning alignment of river banks and other technical matters in 
close cooperation with the SAVA Commission. 

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In November 2009, Croatia adopted a new Law on combined transport, which needs to be 
revised slightly in order to comply with the acquis. 

There  has  been  good  progress  in  the  area  of  air  transport.  The  Civil  Aviation  Agency  is 
functioning  well.  Implementation  of  the  first  phase  of  the  ECAA  Agreement  has  been 
completed.  In  the  air  traffic  management  field  Croatia  has  made  good  progress  transposing 
most  of  the  single  European  sky legislative  framework  and  is  participating  in  integration  of 
the region’s airspace into a functional airspace block and is participating in integration of the 
region’s  airspace  into  a  functional  airspace  block.  However,  the  Aviation  Act  needs  to  be 
amended and further action is necessary to ensure full alignment with the aviation acquis. 

Good  progress  can  be  reported  in  the  area  of  maritime  transport.  Implementation  of  the 
vessel  traffic  monitoring  information  system  (VTMIS)  is  still  in  progress.  Croatia  is  on  the 
‘white list’ of the Paris memorandum of understanding. Croatia made good progress regarding 
administrative capacity for maritime safety.  

Croatia intends to take part in the Galileo satellite navigation programme made of European 
Navigation Overlay System (EGNOS) and Galileo. 

Conclusion 

Further progress has been achieved and, overall, the level of alignment in this chapter is good. 
Additional  efforts  are  still  needed  to  implement  and  enforce  the  acquis.  This  applies,  in 
particular, to continued implementation of the first phase and work on the second phase of the 
ECAA Agreement, completion of alignment of the aviation legislation and full functioning of 
the railway safety authority and accident investigation body.  

4.15.  Chapter 15: Energy 

Croatia  adopted  a  new  Energy  Development  Strategy  for  the  period  up  to  2020  in  October 
2009.  

There has been some progress in the area of security of supply. As regards the establishment 
of the mandatory 90 days of emergency oil stocks, Croatia has adapted its plan for security, 
formation and replenishment of mandatory stocks of oil and oil products and for storage and 
regional  distribution  thereof  to  bring  it  into  line  with  the  new  Oil  Stocks  Directive.  In  May 
2010, the oil stocks management agency signed long-term storage contracts for 480,000 m3 of 
crude  oil  and  120,000  m3  of  petroleum  products.  These  contracts  will  allow  for  the 
construction of new storage capacities in Croatia. The Croatian Regulation on the security of 
gas supplies was amended in December 2009 in order to define in more detail the measures 
for  reducing  or  cutting  natural  gas  supplies  to  individual  customers  in  the  event  of  a  crisis. 
Implementing  legislation  on  concession  fees  for  gas  distribution  and  for  construction  of  the 
gas  system  has  been  enacted.  In  the  area  of  security  of  supply,  Croatia  continues  to  partly 
meet its targets. 

There  has  been  some  progress  in  connection  with  the  internal  energy  market.  Croatia  has 
adopted  joint  auctioning  rules  with  Hungary.  The  electricity  and  gas  markets  are  still 
dominated  by  single  suppliers.  In  July  2010,  upon  a  governmental  proposal,  the  Parliament 
dismissed the members of the board of the regulator (HERA), on the ground that HERA had 
undermined market stability by violating the principle of efficiency and economy that is to be 
applied in administrative matters. Croatia needs to strengthen the independence and powers of 

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the  regulator.  The  Croatian  TSO  delays  the  process  establishing  a  regional  coordination  for 
capacity allocation and congestion management in electricity. 

Some progress can be reported in the area of renewable energy sources.  

The  government  adopted  the  National  Renewable  Energy  Action  Plan  in  June  2010,  as 
foreseen under the new Renewable Energy Directive. Feed-in tariffs for electricity produced 
from RES and cogeneration have been amended. Implementing legislation on incentives for 
use  of  biofuels  in  transport  has  been  enacted.  Croatia  will  not  meet  its  2010  target  for 
electricity  production  from  renewable  energy  sources  covered  by  incentives.  The  complex, 
lengthy  administrative  procedure  is  a  disincentive  to  increasing  investment  in  RES. 
Alignment of the legislation is advanced, but substantial efforts will be required if Croatia is 
to achieve its target of meeting 20% of final energy demand from renewable sources by 2020. 

Progress  can  be  reported  in  the  energy  efficiency.  Implementing  legislation  on  energy 
efficiency  in  buildings  and  the  method  for  calculating  energy  savings  in  final  consumption 
have been enacted. The government adopted the document on national cogeneration potential 
in January 2010. The first National Energy Efficiency Action Plan was adopted in April 2010. 
Alignment with the acquis is advanced. 

Good  progress  has  been  made  on  nuclear  safety  and  radiation  protection.  The  Law  on 
radiological  and  nuclear  safety  entered  into  force.  The  functions  of  the  two  regulatory 
authorities  have  been  formally  united  under  the  State  Office  for  Radiological  and  Nuclear 
Safety, yet the merger is not yet fully operational. In addition, the inspection functions are still 
assigned  to  the  Ministry  of  Health  and  Social  Welfare,  which  could  call  into  question  the 
independence  of  the  regulatory  body  for  radiation  protection.  The  Euratom  directives  on 
public  information  and  on  shipment  of  radioactive  waste  and  substances  have  not  yet  been 
transposed. No national emergency plan for nuclear accidents has been developed yet. Several 
regulations, in particular on medical exposure and occupational exposure, have not yet been 
implemented. Administrative capacity in this area needs strengthening.  

Conclusion 

Further progress has been achieved and, overall, the level of alignment in this chapter is high. 
Additional efforts are still needed to implement and enforce the acquis, in particular to open 
the  gas  and  electricity  markets,  on  capacity  allocation  for  electricity,  and  to  meet  the  EU’s 
targets for RES and energy efficiency. Furthermore, the administrative procedures related to 
RES need to be simplified. Significant efforts are needed to secure the administrative capacity 
and independence of the energy sector regulatory authorities. 

4.16.  Chapter 16: Taxation 

Limited progress can be reported in the area of indirect taxation, as Croatia’s legislation is 
largely  in  line  with  the  acquis.  However,  further  alignment  is  required  in  the  field  of  VAT, 
notably on the scope of the reduced rates and of exemptions, free zones and special schemes, 
and  in  the  field  of  excise  duties  with  regard  to  duties  on  coffee  and  coffee  products,  and  to 
chargeability  of  duty  on  coal,  gas  and  electricity,  minimum  rates  and  small  producers.  The 
provisions applicable to car taxation have yet to be aligned with the acquis. 

In  the  area  of  direct  taxation,  Croatia  started  preparations  for  the  bilateral  Savings 
agreements  providing  for  the  same  measures  as  those  in  the  Directive  2003/48/EC,  to  be 

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concluded with the relevant Member States' dependent or associated territories. In this area, 
Croatia’s legislation is largely in line with the acquis.  

Some progress can be reported on administrative cooperation and mutual assistance. The 
personal  identification  is  now  mandatory  for  tax  returns  and  for  tax  collection  and  refunds. 
The  preparations  for  administrative  cooperation  and  mutual  assistance  with  Member  States 
are largely complete, including setting up the Central Liaison Office and the Excise Liaison 
Office.  

Croatia  has  made  good  progress  on  operational  capacity  and  computerisation.  The 
preparations  for  developing  the  national  application  of  the  VAT  Information  Electronic 
System (VIES) and the Excise Movements Control System (EMCS v3) were completed. Full 
testing could take place once the network connection is activated. Further efforts are required 
to  reinforce  the  IT  capacity  of  the  tax  and  customs  administrations  and  complete  the  IT 
applications required upon accession.  

Conclusion 

Progress was made in this chapter, in particular on operational capacity and computerisation. 
Croatia’s  legislation  in  the  field  of  direct  and  indirect  taxation  is  largely  in  line  with  the 
acquis. Nevertheless, some further alignment is required, most notably in the fields of VAT 
and  excise  duties.  Efforts 
including  on  IT 
interconnectivity, need to continue. 

to  strengthen  administrative  capacity, 

4.17.  Chapter 17: Economic and Monetary Policy 

Substantial progress can be reported on alignment in the field of monetary policy, which was 
completed by the amendment to the Constitution ensuring the full independence of the Central 
Bank. 

Some progress has been made in the area of economic policy. The institutional and technical 
capacity for developing medium-term macroeconomic and fiscal frameworks is continuing to 
improve.  The  Pre-accession  Economic  Programme  (PEP)  for  2010-2012  presented  a 
comprehensive  and  consistent  macroeconomic  and  fiscal  framework  for  economic  policies. 
Due to the unexpected persistence of the economic crisis in the country, the relevance of the 
PEP  as  a  core  document  for  economic  policy-making  has  significantly  diminished.  The 
government  has  developed  a  comprehensive  Economic  Recovery  Programme  setting  out  a 
medium-  and  long-term  structural  reform  strategy.  Implementation  started  in  2010  and  is 
foreseen to be completed by 2020. A broad political consensus on the essentials of a market 
economy has been maintained. Fiscal reporting still needs to be brought in line with ESA95 
standards.  

Conclusion 

There  has  been  further  progress  in  the  area  of  economic  and  monetary  policy  and,  overall, 
alignment  with  the  acquis  in  this  area  is  completed.  However,  policy  coordination  requires 
further improvement. 

4.18.  Chapter 18: Statistics 

Good  progress  can  be  reported  concerning  statistical  infrastructure.  The  number  of 
employees  at  the  Central  Bureau  of  Statistics  (CBS)  increased  slightly.  Integration  of  the 

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regional offices into the CBS took effect on 1 January 2010. The work of the regional offices 
is being reorganised. This Accession Partnership priority has been met. The objectives of the 
statistical  master  plan  have,  so  far,  been  achieved.  Cooperation  with  other  official  statistics 
providers  has  further  improved  and  the  exchange  of  administrative  data  has  increased.  A 
dissemination strategy has been adopted and is being implemented. The responsibilities of the 
CBS in the compilation of the Excessive Deficit Notification should be significantly increased 
and  CBS  should  have  the  leading  methodological  role  in  this  exercise.  Preparations  in  this 
area are well on track. 

Good  progress  can  be  reported  in  the  field  of  classifications  and  registers.  The  CBS  has 
established a classification database. The NACE Rev. 2 classification of economic activities is 
in use. The coverage and quality of the business register has further improved. Preparations in 
this field are on track. 

Good  progress  has  been  made  in  the  sector  statistics.  The  preparations  for  the  next 
population  and  housing  census  are  advancing  well.  As  for  social  statistics,  the  first  regular 
survey of income and living conditions was conducted. In the case of the national accounts, 
significant progress has been made. The organisation of tasks has been clarified and a detailed 
work  plan  exists.  Work  on  establishing  external  trade  statistics  in  accordance  with  the 
Intrastat system is well under way. In the area of short-term business statistics, new indicators 
have been produced. Statistics on industrial production (Prodcom), energy and transport now 
fully comply with the acquis. Substantial progress has been made in the area of agricultural 
statistics, in particular in the form of increased use of administrative data sources, statistics on 
orchards  and  vineyards  and  economic  accounts  for  agriculture.  In  the  field  of  science  and 
technology statistics, further alignment with EU regulations has been achieved. Preparations 
in this area are well advanced.  

Conclusion 

Substantial  progress  has  been  made  on  modernising  the  statistical  infrastructure.  Overall,  a 
good level of alignment has been achieved. Efforts need to continue in order to align Croatian 
statistics fully with EU requirements.  

4.19.  Chapter 19: Social Policy and employment 

There  has  been  good  progress  in  the  area  of  labour  law.  The  new  Labour  Act  entered  into 
force.  Alignment  of  the  legislation  is  advanced,  but  needs  to  be  completed.  The  Wage 
Guarantee Agency has become operational, but is not yet fully staffed. The liaison office for 
posting  of  workers  within  the  Ministry  of  the  Economy,  Labour  and  Entrepreneurship 
(MoELE) has been established. 

Progress has continued in the field of health and safety at work through consolidation of the 
capacities  of  the  Occupational  Health  and  Safety  department  of  the  MoELE,  the  State 
Inspectorate,  the  Institute  for  Health  Protection  and  Safety  at  Work  and  the  Institute  for 
Occupational Health and Safety Insurance.  The current number of labour inspectors dealing 
with health and safety still falls short of the requirements of the State Inspectorate Act.  

With  regard  to  social  dialogue,  there  has  been  little  progress.  Some  improvements  can  be 
reported in the voting system of the Economic and Social Council (ESC) and in the setting up 
of three sectoral councils. However, strengthening social dialogue within the decision-making 
process and in policy design remains a key question to be addressed. The climate of tripartite 

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social  dialogue  has  deteriorated  during  the  reporting  period,  as  trade  union  organisations 
considered that new legislation was not properly processed through this body. This resulted in 
a  temporary  suspension  of  their  participation:  the  ESC  has  not  yet  resumed  its  work.  The 
capacity of social partners remains weak. The representativeness criteria for participation of 
trade unions in collective bargaining have not yet been adopted. Preparations in this area need 
to continue.  

Some progress has been made in the area of employment policy. The follow-up to the Joint 
Assessment  of  Employment  Policy  Priorities  (JAP)  is  largely  satisfactory.  An  ambitious 
Economic Recovery Programme has been adopted, which includes measures aimed at making 
the labour market more dynamic (see Economic criteria). The introduction of the flexicurity 
principle needs to be underpinned by mapping out a specific pathway. Structural weaknesses 
on  the  labour  market  such  as  the  low  employment  rate  persist.  Improving  the  education 
system has received some attention, but initiatives on lifelong learning have not yet resulted in 
a strategic approach.  

Good  progress  has  been  made  in  the  preparations  for  the  European  Social  Fund.  The 
operating structure responsible for the Operational Programme for IPA component IV (human 
resources  development)  has  been  working  well.  Adequate  training  has  continued.  However, 
delays have been noted in recruitment of staff.  

Some  progress  can  be  reported  on  social  inclusion.  The  follow-up  to  the  Joint  Inclusion 
Memorandum  (JIM)  is  largely  satisfactory.  Coherent  monitoring  and  evaluation  systems  to 
assess  policy  reforms  in  this  field  need  to  be  further  developed.  Progress  in  the  field  of 
administrative  and  fiscal  decentralisation  of  social  services  remains  limited.  The  transition 
from  institutional  to  community-based  care  has  continued  at  a  slow  pace,  particularly  for 
people with mental disabilities. The full impact of the economic crisis on poverty remains to 
be assessed, with children being the most vulnerable group. Adoption of the Social Welfare 
Act has been delayed further, without any clear justification.  

The highest number of complaints received by the Ombudsman for Persons with Disabilities 
relate  to  entitlement  to  social  rights.  In  the  public  sector,  employment  quotas  are  not  met. 
Budgetary  constraints  are  still  preventing  the  Ombudsperson  Office  from  strengthening  its 
representation at regional and local levels.  

Croatia  made  some  progress  in  the  area  of  social  protection.  Steps  have  been  taken  to 
equalise the pension age between men and women. More efforts to improve employment of 
older  workers  and  to  protect  elderly  without  income  are  needed.  The  support  ratio  and  the 
deficit  of  the  public  PAYG  scheme  worsened  in  the  wake  of  the  economic  crisis.  Croatia 
needs to continue a comprehensive health care reform. The social benefits reform to improve 
targeting of social spending is still pending. 

There  has  been  good  progress  in  the  field  of  anti-discrimination.  The  relevant  directives 
have  been  transposed.  However,  some  provisions  require  further  alignment  with  the  acquis, 
with regard to the exceptions to the principle of non-discrimination. Budgetary constraints and 
insufficient staff resources continue to limit the capacity of the Ombudsman to carry out the 
full  range  of  tasks  assigned  by  the  Anti-discrimination  Act.  Monitoring  of  cases  of 
discrimination  has  been  established  but  needs  fine-tuning.  National  minorities  are  still  not 
proportionally represented in public bodies or services, including at local and regional levels. 
(See Political criteria – Economic and social rights)  

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Overall, there has been good progress in the field of equal opportunities. Alignment is well 
advanced, but needs to be completed in the case of the Act on maternity and parental benefits 
and the Act on occupational safety and health. Good progress was achieved on establishing 
the gender dimension in public policy and in anti-discrimination legislation. The capacity of 
the  office  of  the  Ombudsperson  for  Gender  Equality  is  being  strengthened.  Progress  was 
made on implementation of the national policy to promote gender equality for 2006-2010. As 
regards the labour market, considerable improvements have been made in compliance of job 
vacancies with the Gender Equality Act. Awareness-raising activities on gender equality have 
continued. However, the conditions for employment of women are still unfavourable 

Conclusion 

Overall, good progress has been made on this chapter and preparations are generally on track. 
There is a good level of alignment with the acquis and preparations are on course. However, 
some gaps remain in alignment of the legislation, notably on transposing labour law directives 
outside  the  scope  of  the  Labour  Act,  and  in  the  fields  of  anti-discrimination  and  gender 
equality. The Social Welfare Act remains to be adopted. Due attention should be paid to the 
functioning of social dialogue. Administrative capacity requires further strengthening.  

4.20.  Chapter 20: Enterprise and industrial policy 

Some progress was made with regard to enterprise and industrial policy principles. Further 
efforts were made on implementation of enterprise policy principles, particularly of the Small 
Business  Act  for  Europe.  The  government  adopted  a  development  strategy  to  promote 
entrepreneurship among women. Alignment of Croatia’s definition of ‘SME’ with the acquis 
recommended definition is not yet completed. Further progress has been made in the area of 
business registration, especially in the form of introduction of the e-register online application 
but is not yet fully functioning. 

Further  to  the  decision  on  abolition  of  the  Regulatory  Impact  Assessment  Office,  the 
government  adopted  a  decree  amending  the  structure  and  functions  of  the  Government 
Legislation Office (GLO) which was appointed as the body responsible for regulatory impact 
assessment  (RIA)  in  Croatia.  The  GLO  has  taken  steps  in  order  to  be  able  to  conduct 
professionally regulatory impact assessments.  

Industrial policy measures were taken to alleviate the effects of the crisis. In April 2010, the 
government  adopted  the  Economic  Recovery  Programme,  which  includes  measures  to 
improve the business environment and create a competitive economy (see Economic criteria). 
However, an assessment of the efficiency of measures in the existing industrial strategy was 
not done 

In  the  area  of  enterprise  and  industrial  policy  instruments,  Croatia  has  made  some 
progress,  mainly  thanks  to  active  participation  in  the  EU’s  Competitiveness  and  Innovation 
Programme (CIP). Croatia participates in the Europe Enterprise Network. 

There has been some progress in the field of sector policies, like in the shipbuilding industry, 
where  the  tendering  procedure  was  finalised  in  May  (see  Chapter  8  on  both  steel  and 
shipbuilding).  Further  work  was  carried  out  in  the  area  of  tourism,  with  the  adoption  of 
legislation implementing the Law on tourist boards and on promotion of Croatian tourism. 

Conclusion 

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Croatia  made  progress  in  this  chapter,  particularly  with  regard  to  policy  principles  and 
instruments.  Overall,  alignment  with  the  acquis  in  this  chapter  is  very  advanced.  Further 
sustained  efforts  need  to  focus  on  improving  the  business  environment,  by  reducing  the 
administrative burden, and on innovation and skills. Alignment of the definition of SME with 
the  acquis  needs  to  be  completed.  Efforts  to  restructure  the  steel  and,  particularly, 
shipbuilding industries need to be pursued.  

4.21.  Chapter 21: Trans European Networks 

There  has  been  good  progress  with  development  of  transport  networks.  Croatia  has 
maintained  active  cooperation  under  the  memorandum  of  understanding  on  development  of 
the South-East Europe Core Regional Transport Network and has continued implementing the 
multi-annual  development  plan  for  2010-2014  for  the  South-East  Europe  Transport 
Observatory  (SEETO).  Croatia  made  good  progress  on  implementation  of  ISPA  and  IPA 
railway  and  inland  waterway  projects  and  has  started  to  prepare  the  Transport  Operational 
Programme for the Cohesion and Structural Funds.  

In  the  case  of  energy  networks,  the  new  double  400  kV  Ernestinovo-Pecs  (HU)  electricity 
line  is  currently  operating  on  a  trial  basis.  Construction  of  the  Croatia-Hungary  gas 
interconnector is in progress. Preparations for the Adria LNG terminal on the KRK island are 
continuing,  however,  the  project  sponsors  decided  before  the  summer  to  postpone  the 
investment  decision.  Progress  is  being  made  on  the  construction  of  the  gas  transmission 
pipeline on the coast, towards the south (to Ploce), which is part of the Energy Community 
Gas Ring concept.  

As  regards  the  telecommunications  networks  Croatia  is  actively  participating  in  the 
Information and Communication  Technologies pillar of the Competitiveness and Innovation 
Framework Programme (CIP). 

Conclusion 

Croatia  made 
telecommunications networks in 2010. Alignment with the acquis has been completed. 

further  progress  with  development  of 

transport,  energy  and 

its 

4.22.  Chapter 22: Regional policy and coordination of structural instruments 

Further  progress  has  been  achieved  and  the  legislative  framework  necessary  to  ensure  full 
compatibility of operations financed by the Structural Funds with EU policies and legislation 
is  now  largely  in  place.  However,  full  implementation  of  the  legislative  framework  at  all 
levels  needs  to  be  ensured  by  further  building  up  administrative  capacity  and  by  providing 
guidance documentation for those who need to implement the legislation. 

Preparations in this area are advanced. 

There  has  been  progress  with  the  institutional  framework.  Croatia  has  adopted  advanced 
individual  organisational  development  strategies  for  key  organisations 
in 
management and implementation of cohesion policy. On the basis of these strategies, Croatia 
adopted  the  designation  of  the  institutional  set-up  for  managing  structural  instruments. 
Preparations in this area are advanced. 

involved 

There  has  been  some  progress  in  the  area  of  administrative  capacity.  An  Institutional 
Development  and  Capacity-Building  Strategy,  including  a  career  planning  and  salaries 

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strategy  for  civil  servants  involved  in  management  of  EU  funds,  has  been  submitted  to  the 
Commission. In February, a decision was adopted to increase staffing by nearly 300 and step 
up  training  activities  for  IPA  structures  by  the  end  of  2010.  However,  preparations  for 
implementing  the  cohesion  policy  need  to  be  significantly  strengthened  by  enhancing 
administrative capacity and project preparation (especially on transport and the environment). 
Both  the  programming  stage  and  setting-up  of  the  institutional  system  under  the  IPA  were 
accomplished well, but the track record of implementation under IPA so far is mixed, notably 
due to limited administrative capacity in certain IPA bodies. Implementation of major projects 
is  lagging  behind,  due  to  low  quality  of  projects  applications  and  tender  documentation.  To 
achieve  a  smooth  transition  from  the  IPA  to  the  more  comprehensive  funding  under  the 
Structural and Cohesion Funds, further efforts are required to build up necessary expertise and 
ensure transfer of know-how between the relevant authorities. Commitment and ownership on 
the  part  of  the  line  ministries,  staffing  and  staff  retention  policy  need  to  be  enhanced. 
Preparations in this area are advancing. 

Good progress has been made with programming. A Ministerial Commission on use of EU 
funds  was  established  with  top-level  political  participation.  Croatia  revised  its  National 
Strategic  Reference  Framework  (NSRF),  which  is  now  an  advanced  and  comprehensive 
document  outlining  the  key  priorities  and  expected  results  of  cohesion  policy  assistance.  In 
June  2010,  Croatia  embarked  on  public  consultations  on  the  NSRF.  Drafts  of  operational 
programmes  for  structural  funds  and  cohesion  funds  have  been  developed.  Progress  with 
preparing an adequate, mature project pipeline needs to be enhanced. Preparations in this area 
are fairly advanced. 

There  has  been  good  progress  in  the  area  of  monitoring  and  evaluation  of  the  IPA 
operational programmes. Further advances have been made with setting up and operating the 
monitoring  and  evaluation  system  for  the  Structural  Funds,  including  an  electronic 
management and information system which is operational under IPA. Croatia is also using an 
IT  tool  (LOTHAR)  to  monitor  absorption  of  funds.  Preparations  in  this  area  are  fairly 
advanced. 

Some  progress  can  be  reported  in  the  area  of  financial  management  and  control.  (See 
Chapter  32  —  Financial  control)  The  implementation  of  roadmaps  to  further  strengthen 
financial management and control systems is continuing. Follow-up audits on IPA conferral 
of  management  confirmed  that  internal  control  procedures  are  broadly  satisfactory.  Croatia 
needs to build up its capacity in these fields. Preparations in this area are advancing. 

Conclusion 

Good  progress  was  made  under  this  chapter,  notably  on  preparing  strategic  documents  and 
designating  the  institutions  and  mechanisms  to  implement  the  EU  cohesion  policy. 
Administrative capacity was further strengthened by recruiting and training staff. Croatia is at 
an advanced stage of preparations for cohesion policy and needs to complete its preparations 
by focusing on establishment of a mature project pipeline and absorption of funds. 

4.23.  Chapter 23: Judiciary and fundamental rights 

There has been some progress in the area of the judiciary. 

There has been good progress as regards the independence of the judiciary, which has been 
strengthened  through  amendments  to  the  Constitution  and  the  laws  on  the  state  judicial 

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council (SJC), the state attorneys offices and the courts. According to the new Constitutional 
provisions,  the  SJC  will  in  future  comprise  eleven  members,  seven  judges  to  be  elected  by 
peers,  two  law  professors  and  two  members  of  Parliament.  Similar  arrangements  will  apply 
for the State Prosecutorial Council (SPC). Other provisions further reduce the risk of political 
interference  in  the  judiciary:  the  SJC  rather  than  the  Ministry  of  Justice  (MoJ)  will  now 
appoint Presidents of courts, the President of the Supreme Court will have greater control over 
court  management  and  the  five-year  probation  period  for  judges  is  abolished.  However, 
shortcomings remain in the functioning of both the SJC and SPC. Overall, it is important that 
these bodies demonstrate independence and accountability, especially when performing their 
key functions in the area of appointments, discipline and career management, so that effective 
self regulation of the judicial profession is assured.  

Progress  was  also  made  towards  the  introduction  of  uniform,  transparent,  objective  and 
nationally  applicable  criteria  for  the  appointment  of  judges  and  prosecutors.  A  completely 
new  selection  system  is  in  the  process  of  being  established  based  on  a  school  for  judicial 
officials  under  the  judicial  academy  (JA).  From  October  2010  candidates  for  judge  and 
prosecutor  positions  will  need  to  pass  a  competitive  entry  exam  to  the  school  for  judicial 
officials,  followed  by  2-year  initial  training  and  a  final  exam.  For  appointments  in  the 
meantime,  a  revised  selection  procedure  for  new  judges  was  introduced.  Implementing 
regulations introducing improved selection  criteria  were  also adopted, including written and 
oral exams to be conducted by the SJC.  

However, both selection systems remain to be tested in practice. There is no track record of 
appointments based on the revised criteria. The criteria for assessing the oral exam are vague 
and  it  is  not  clear  how  these  will  be  applied  in  practice.  Further  implementing  rules  are 
required.  The  SJC  does  not  have  sufficient  capacity  to  carry  out  its  new  tasks,  although 
adopted legislation will exonerate members of 50% of their normal work and stronger support 
services for the SJC will be established. Careful management of the two selection procedures 
(under the SJC and the JA) will be required, not least as these are expected to run in parallel 
until January 2013.  

Some  progress  has  been  made  as  regards  the  impartiality  of  the  judiciary.  The  SJC  has 
adopted a more transparent methodology for the local judicial councils to evaluate judges for 
the  purposes  of  promotion.  The  State  Judicial  Council  conducted  fourteen  disciplinary 
proceedings  in  2009.  However,  five  of  these  were  not  admissible  because  they  had  been 
launched  by  acting  rather  than  permanent  presidents  of  courts  and  six  are  still  pending. 
Disciplinary proceedings resulted in only one fine, one acquittal and one judge resigning after 
the  procedure  was  launched.  No  disciplinary  proceedings  were  conducted  by  the  State 
Prosecutorial  Council  (SPC)  in  2009.  Disciplinary  proceedings  against  attorneys  and  judges 
continue  to  lack  transparency.  Further  improvements  are  needed  to  ensure  the  accuracy  of 
declarations of assets by judges and prosecutors are systematically checked. 

Good  progress  has  been  made  as  regards  professionalism  and  competence  of  the  judiciary. 
The  Judicial  Academy  has  become  an  independent  institution  from  the  MoJ,  with  its  own 
budget and increased staffing. Permanent premises have now been made available to the JA 
and are in the process of renovation. In the meantime, alternative, improved accommodation 
has  been  made  available,  also  to  the  SJC  and  SPC.  Professional  training  programmes  have 
continued, including initial training and covering matters of EU law. Implementing legislation 
necessary  to  set-up  the  school  for  judicial  officials  was  adopted.  More  generally,  improved 
publication of and access to court decisions is called for in view of the development of case 
law and in the interest of public dissemination. 

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Progress has been made in relation to the efficiency of the judiciary. The backlog of cases was 
further  reduced  by  10%  (796,000  in  December  2009  compared  to  887,000  in  2008).  Good 
progress was made in reducing the number of cases older than 3 years. Old civil cases were 
reduced  by  17%  to  84,251  and  old criminal  cases  by  16%  to  3,667. In  general,  courts  have 
increased their productivity. However, the backlog of cases has been reduced unevenly among 
the various courts. Some courts continue to suffer from disproportionately large numbers of 
old  civil  cases,  for  example  the  municipal  courts  in  Zagreb,  Split  and  Zadar.  Certain 
categories  of  cases  also  remain  problematic.  The  number  of  enforcement  cases  has  been 
increasing  and  constitute  40%  of  all  civil  cases.  Problems  with  the  enforcement  of  court 
rulings continue to hamper the efficient working of the judicial system. The Law on Private 
Bailiffs and the amendments to the Law on Enforcement remain to be adopted. The economic 
crisis  has  triggered  many  bankruptcy  proceedings  (increased  by  22%)  which  have 
overburdened  the  commercial  courts.  The  handling  of  administrative  cases  continues  to  be 
slow, to lack transparency and is not in line with European standards. The backlog of cases 
has remained constant for the last two years (36,460 in 2009 compared to 36,802 in 2008) and 
the average duration of cases is longer than 3 years.  

There has been some progress in the rationalisation  of the court network. The first physical 
mergers of municipal courts have occurred. Amendments to the Law on Misdemeanours were 
adopted, reducing the number of misdemeanour courts from 114 to 63. However, none of the 
misdemeanour courts have been physically merged yet, with full physical mergers planned to 
be complete only by 2019. The Ministry of Justice department supervising the rationalisation 
process  is  understaffed.  There  is  a  lack  of  clarity  as  to  the  financial  impact  of  court 
rationalisation  which  puts  into  question  its  implementation  in  practice.  Further  steps  are 
needed to extend rationalisation to the county courts, states attorneys' offices and commercial 
courts.  

With  regard  to  the  infrastructure  and  equipment  of  courts,  there  has  been  limited  progress. 
The  integrated  case  management  system  (ICMS)  is  in  the  process  of  being  rolled-out  to  all 
commercial, county and some of the municipal courts. ICMS is now in place in 69 out of a 
planned 103 courts. A special case tracking system was also tested in two prosecution offices. 
However,  the  budget  allocated  to  court  IT  infrastructure  remains  insufficient  to  cover  the 
needs and may delay further roll-out of ICMS. Misdemeanour courts continue to suffer from a 
shortage of equipment and a very low standard of premises. The lack of a unified statistical 
system related to case management remains an obstacle to the adoption of appropriate, tailor 
made measures for tackling the case backlog. Further improvement to random case allocation 
in courts is needed.  

The  system  of  judicial  inspections  has  shown  good  results.  The  inspectors  have  improved 
their  internal  organisation  and  developed  checklists.  The  number  of  inspections  planned  for 
2010 was increased to 22 compared to 5 in 2009. The number of inspectors has also increased 
to four. However, judicial inspections are still performed only in courts and not in prosecution 
offices. 

There  has  been  good  progress  with  application  of  the  new  Criminal  Procedure  Code. 
Applicable  to  organised  crime  and  corruption  cases  since  2009,  the  new  procedure  has 
accelerated  the  investigation  phase,  with  better  cooperation  between  the  police  and 
prosecution  services  leading  to  more  indictments.  However,  there  are  now  about  200  cases 
pending at the four specialised USKOK chambers at County Courts. The 54 judges working 
in these specialised chambers have not been relieved of their previous duties. Preparation for 
the  enforcement  of  the  new  code  for  all  other  criminal  cases  from  2011  is  continuing.  The 

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new  procedures  provide  for  stricter  deadlines  for  interviewing  suspects,  which  will  require 
additional police resources. 

As regards alternative dispute resolution (ADR), a code of ethics of mediators was adopted. A 
mediators’ register was also established. Specific training was provided to judges and private 
mediators.  The  success  rate  of  mediation  cases  has  improved  and  is  currently  between  50-
60% in commercial courts and 30-40% in out of court mediation. However the strategic study 
adopted in 2009 did not achieve the predicted results as there has been a sharp decline in the 
number of cases referred to court mediation (about 40%). This reflects the lack of incentive 
given  to  judges  to  use  ADR.  The  extent  of  out-of  court  mediation  remains  limited.  Further 
simplification of mediation is necessary. 

Implementation of the judicial reform strategy has continued. A new action plan and a large 
volume of new legislation was adopted. The MoJ underwent a major reorganisation with the 
aim  of  improving  efficiency.  The  number  of  directorates  was  reduced  and  management 
responsibilities transferred from state secretaries to heads of directorates in order to improve 
efficiency.  However,  adequate  monitoring  of  reform  measures  remains  problematic  due  to 
limited administrative capacity. The MoJ lacks the capacity to plan the human resource needs 
of the courts. It  has failed to take into  account the impact of the rationalisation  process  and 
other  reforms,  for  example  the  criminal  procedure  reform  abolishing  the  role  of  the 
investigative judge. There is no systematic assessment of the impact of new measures. Post-
legislative scrutiny remains very weak.  

Croatia  continued  to  try  war  crimes  with  approximately  two  dozen  trials  on-going  in 
2009/2010.  A  more  balanced  approach  to  trials  has  continued.  More  cases  involving  Croat 
perpetrators,  including  members  of  the  Croatian  armed  forces,  were  pursued.  The  State 
Prosecutor continued reviewing potentially questionable in absentia verdicts from the 1990s. 
Re-trials were requested in 15 cases, of which 14 were granted involving 90 people convicted 
in absentia. In most cases, the original verdicts were overturned. Measures have been taken to 
protect witnesses with improved witness support services at certain courts. There have been 
some  attempts  to  remedy  misapplication  of  the  Amnesty  Law  in  cases  which  could  be 
considered war crimes.  

However,  impunity  for  war  crimes  remains  a  problem,  especially  where  the  victims  were 
ethnic Serbs or the alleged perpetrators were members of the Croatian security forces. Many 
hundreds  of  cases  remain  to  be  investigated  and  prosecuted,  despite  recent  action  by  the 
police and prosecutors. Problems persist in certain localities. Insufficient use is being made of 
one  powerful  weapon  for  impartial  prosecution  of  war  crimes  –  the  specialised  war  crime 
courts,  although  an  increased  willingness  to  use  this  possibility  is  evident  recently.  Where 
convictions  are  obtained,  sentences  in  war  crimes  cases  are,  in  general,  considerably  lighter 
than those imposed for the equivalent underlying crimes not classified as war crimes. The use 
of mitigating factors in sentencing gives rise to different treatment linked to ethnicity. Work 
on reviewing questionable in absentia verdicts from the 1990s should continue, including by 
making use of protection of legality provisions and overcoming problems with presentation of 
new facts.  

The legacy of incorrect application of the Amnesty Law continues to have a negative impact, 
preventing families of victims from obtaining compensation. Transparency in this area is also 
lacking.  Initial  attempts  to  remedy  the  situation  show  limited  results.  Further  efforts  are 
required  to  ensure  defendants  are  provided  with  an  adequate  defence,  including  by  making 
greater  use  of  the  list  of  defence  attorneys,  which  is  used  in  only  around  two  thirds  of  in 

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absentia cases. Implementation of legislation to protect witnesses and witness confidentiality 
needs to be improved.  

There has been good progress in the fight against corruption.  

The  political  will  to  fight  corruption  has  been  further  strengthened.  Implementation  of  the 
anti-corruption  strategy  and  related  action  plan  has  continued.  The  action  plan  was  revised 
and,  following  numerous  scandals  involving  public  companies,  the  government  adopted  a 
specific  anti-corruption  programme  for  trading  companies  in  state  ownership  (2010-2012). 
Overall  coordination  of  the  implementation  of  anti-corruption  efforts  has  improved.  The 
governmental  coordination  committee  to  monitor  the  implementation  of  the  anti-corruption 
action  plan  has  been  upgraded  to  ministerial  level,  directly  chaired  by  the  Prime  Minister. 
This has increased the authority of the anti-corruption unit of the Ministry of Justice which is 
in charge of coordinating the implementation of the anti-corruption action plan. The national 
council  for  monitoring  the  anti-corruption  strategy  continued  to  be  proactive  and  regularly 
held public debates and hearings. However, coordination of anti-corruption efforts needs to be 
further strengthened. The MoJ anti-corruption sector is understaffed and proactive follow-up 
of implementation issues are needed.  

The  legal  framework  to  combat  corruption  has  been  further  improved.  Amendments  to  the 
USKOK  Act  extend  USKOK's  remit  to  tax  fraud  cases  linked  to  organised  crime  and 
corruption. The new Labour Act lays down new provisions to protect whistleblowers. These 
include no "just cause  for  dismissal"  of the whistleblower and the  reversal of the burden of 
proof  in  cases  of  alleged  discrimination  following  whistle  blowing  on  corruption  cases. 
Legislation  for  the  suppression  of  corruption  is  basically  sound.  However,  legislation  in  the 
area of prevention remains under developed (see below).  

As  regards  the  suppression  of  corruption,  the  office  for  the  fight  against  corruption  and 
organised crime (USKOK) continued to be active and issued indictments in some important 
cases.  The  overall  number  of  cases  being  handled  by  USKOK  has  increased.  USKOK  has 
begun to investigate possible high level corruption, initiating investigations involving senior 
political  personalities.  Other  medium  and  high  level  cases  are  under  investigation  and 
prosecution,  often  involving  state-owned  companies.  The  first  high  level  political  cases  are 
before  the  courts.  Police  effectiveness  and  inter-agency  cooperation  has  improved.  The 
number of police officers available to the regional PNUSKOK (the national police office for 
the  suppression  of  corruption  and  organised  crime)  offices  has  increased  from  52  to  82. 
USKOK has been reinforced with the appointment of three further prosecutors. Competence 
for  managing  confiscated  assets  has  been  granted  to  the  central  state  office  for  the 
management of state property.  

However,  corruption  is  still  prevalent  in  many  areas.  The  recently  upgraded  legal  and 
administrative  structures  remain  to  be  fully  tested  in  practice,  particularly  in  terms  of  the 
courts’ ability to handle the increased number and complexity of cases. The number of court 
verdicts  has  increased  but  this  mainly  concerns  petty  corruption  cases.  There  have  been  no 
final  court  rulings  in  serious  political  corruption  cases.  The  administrative  capacity  of  State 
bodies for fighting corruption continues to need improvement. USKOK has been coping well 
with the increased number of cases, but is starting to look stretched and will need to make full 
use of its on-going reinforcement. A high number of reported cases are dismissed after pre-
investigation, with insufficient scrutiny.  

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The increasing number of cases related to financial crimes has highlighted some deficiencies 
in  PNUSKOK  and  USKOK’s  capacities  to  deal  with  sophisticated  financial  crimes. 
International  cooperation  on  the  collection  of  admissible  evidence  needs  to  be  improved. 
Investigation  and  prosecution  of  tax  fraud  related  to  corruption  activities  needs  to  be 
reinforced. The prosecution of money laundering needs to be strengthened within corruption 
cases.  Croatia  will  need  to  pay  particular  attention  to  implementation  of  new  provisions  for 
the management of confiscated assets.  

There  has  been  limited  progress  in  the  area  of  prevention  of  corruption.  The  right  to 
information has been introduced as a constitutional right. The internal structure of the office 
of the commission for the prevention of conflicts of interest has been changed in order to give 
the commission further independence from the Parliament.  Provisions have been introduced 
in an amended Conflict of Interest Act to depoliticise appointments to supervisory boards of 
state-owned  companies.  This  law  also  provides  for  strengthened  verification  of  the  assets 
declarations  of  public  officials.  However,  these  measures  are  not  yet  operational.  Some 
awareness  raising  measures  were  taken  but  the  concept  of  conflict  of  interest  is  still  little 
understood  in  Croatia,  especially  at  local  level.  There  is  limited  monitoring  of  legal 
compliance and the sanctions available are ineffective. There has been no improvement in the 
application of access to information legislation. Supervision of the law is weak, and access to 
redress for citizens is overly complicated. In order to prevent corruption, greater transparency 
in public administration is required, particularly in the area of public spending. It is extremely 
difficult for citizens to obtain information on the final execution costs of public procurement 
contracts,  especially  at  local  level.  Shortcomings  remain  with  regard  to  the  financing  of 
political  activities  and  election  campaigns,  where  there  is  no  fully  effective  independent 
oversight.  

(See also 2.1. Democracy and Rule of law) 

As regards fundamental rights, there has been some progress.  

There has been good progress concerning the protection of personal data. The Data Protection 
Agency has given its opinion on numerous laws and regulations, and increased its supervision 
and  control  activities.  However,  full  alignment  with  the  Data  Protection  Directive  and  the 
Council of Europe instruments remains to be completed.  

As  regards  access  to  justice,  there  has  been  some  progress.  In  the  area  of  administrative 
justice  a  new  law  on  Administrative  Court  Disputes  foresees  the  introduction  from  January 
2013 of four first instance courts and of a Higher Administrative Court. This reform provides 
for  courts  of  full  jurisdiction  in  the  meaning  of  Article  6  of  the  European  Convention  on 
Human  Rights.  In  the  area  of  legal  aid,  implementing  legislation  has  been  amended  to 
simplify procedures and to increase the fees for lawyers to take on legal aid cases.  

However,  planning  for  implementation  of  the  new  system  of  administrative  justice  is  at  an 
early stage. Procedures for legal aid remain complicated and the overall level of aid provided 
is  low.  In  practice,  access  to  justice  for  vulnerable  persons  with  insufficient  means  remains 
difficult.  The  provisions  of  the  law  on  legal  aid  are  still  interpreted  narrowly  and  are  not 
enforced  uniformly  among  the  twenty  county  offices  responsible  for  implementation.  The 
number  of  applications  for  legal  aid  has  been  considerably  lower  than  expected.  Between 
February 2009 and April 2010, a total of 5,152 requests were received, of which 3,536 were 
approved. NGOs continue to be the main providers of free legal advice and have ten times as 

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many cases than those covered under the national system. However, they are experiencing a 
decline in funding.  

Some  progress  was  made  with  regard  to  the  prison  system.  Legislation  foreseeing  a  new 
system  of  probation  from  2012  was  adopted  and  a  probation  directorate  was  established 
within  the  Ministry  of  Justice.  Work  related  to  the  expansion  of  existing  detention  and 
treatment facilities has started and will be finalised in 2012. In the meantime, Croatian prisons 
remain  overcrowded  and  provide  inadequate  health  protection.  Prison  occupancy  stands  at 
150-160%. The number of detainees in pre-trial procedure is increasing.  

Freedom  of  expression,  including  freedom  and  pluralism  of  the  media,  is  provided  for  in 
Croatian  law  and  is  still  generally  respected.  However,  editors  and  journalists  continue  to 
report undue political pressure. Problems with local media remain.  

There  has  been  some  progress  with  regard  to  women's  rights  and  gender  equality,  but  the 
number of registered cases of domestic violence has increased, the position of women in the 
labour market has not significantly changed and women continue to be under-represented in 
economic and political decision-making bodies.  

Limited  progress  can  be  reported  with  regard  to  children's  rights.  The  Ombudsman  for 
Children  became  more  active  in  promoting  and  protecting  children  rights,  but  it  lacks 
appropriate office space and staff resources to carry out its mandate.  

There  has  been  some  progress  in  the  area  of  socially  vulnerable  and/or  persons  with 
disabilities.  The  Office  of  the  Ombudsman  for  Persons  with  Disabilities  is  now  adequately 
staffed.  There  is,  however,  a  lack  of  information  on  rights  and  entitlements  in  the  area  of 
social  welfare,  health  care  and  pension  insurance.  Criteria  for  the  establishment  of 
entitlements  are  not  equally  applied,  and  legislative  provisions  regulating  specific  rights  are 
fragmented.  The  transition  from  institutional  care  to  community-based  care  services  has 
progressed slowly.  

Some steps have been taken to raise awareness of the new anti-discrimination law. However, 
knowledge of its scope is limited and only a small number of discrimination complaints reach 
the  court.  There  has  been  some  progress  in  the  implementation  of  hate  crime  legislation. 
Awareness  raising  measures  have  been  carried  out  and  some  cases  initiated.  However, 
implementation is at an early stage. LGBT people have faced threats and attacks, with limited 
follow-up by the authorities. 

There  has  been  some  progress  with  regard  to  minorities.  High-level  public  expressions  of 
commitment  to  the  rights  of  minorities,  reaffirming  their  place  in  Croatian  society,  have 
continued.  Improved  relations  in  the  region,  particularly  between  Croatia  and  Serbia,  have 
allowed for a more positive focus on minority issues. The revised Constitution now explicitly 
lists  all  22  national  minorities.  Provisions  of  the  constitutional  law  on  the  rights  of  national 
minorities  (CLRNM)  on  minority  representation  in  parliament  were  strengthened.  Training 
for  the  media  as  well  as  the  police  has  been  provided  aimed  at  improving  the  portrayal  of 
minorities and raising awareness of relevant legislation respectively. The Roma minority has 
continued  to  receive  attention,  with  improvements  particularly  in  pre-school  education.  The 
level  of  funding  available  for  minority  organisations  has  been  decreased  by  only  1.25%  to 
€5.7m in the revised budget, despite more extensive cuts elsewhere. 

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However, many problems remain for minorities. Croatia needs to continue to foster a spirit of 
tolerance  towards  the  Serb  minority  in  particular  and  take  appropriate  measures  to  protect 
those  who  may  still  be  subject  to  threats  or  acts  of  discrimination,  hostility  or  violence. 
Minorities continue to face particular difficulties in the area of employment, both in terms of 
under-representation  in  state  administration,  the  judiciary  and  the  police  as  well  as  in  the 
wider public sector. There has been no improvement in the level of employment of minorities 
in those bodies covered by the CLRNM Implementation of the law has been complicated by 
general limits on recruitment introduced as part of the recession measures. Monitoring of the 
implementation of recruitment plans for national minorities has been weak. Legal provisions 
and programmes need to be implemented with more determination, and adequate monitoring 
assured, especially in the area of employment. The Roma minority faces particularly difficult 
living  conditions  and  challenges  remain  in  the  areas  of  education,  social  protection,  health 
care, employment and access to personal documents. 

There  has  been  some  progress  on  refugee  return  issues.  Refugees  continued  to  return  to 
Croatia,  with  the  Croatian  authorities  having  now  registered  over  132,600  returnees  in  total 
belonging  to  the  Serb  minority,  which  corresponds  to  approximately  half  of  those  who  fled 
the  country  up  until  1995.  Some  progress  was  made  with  regard  to  housing  issues.  The 
government's self-imposed 2008 benchmark for the provision of 1,400 accommodation units 
to former occupancy and tenancy rights holders under its housing care programme has been 
met, partially by transferring cases to reconstruction programmes. A revised action plan has 
been adopted for implementation of the 2009 target of providing 2,070 accommodation units, 
with  the  aim  of  full  implementation  in  2011.  Improved  administrative  monitoring  has  been 
introduced,  including  the  involvement  of  the  United  National  High  Commissioner  for 
Refugees.  A  purchase  option  under  favourable  conditions  for  housing  care  beneficiaries 
outside  the  areas  of  special  state  concern  has  been  introduced.  Progress  was  made  with 
reconstruction  of  damaged  houses,  as  well  as  with  processing  the  substantial  backlog  of 
appeals  against  rejected  applications  for  reconstruction  assistance.  Some  900  houses  were 
included in the 2009/2010 programme. Implementation of the decision on validating pension 
rights  has  continued  and  monitoring  to  address  inconsistencies  between  different  regional 
offices has improved.  

However, many problems remain for refugees and returnees. Lack of housing remains a key 
obstacle  to  sustainable  return.  Progress  towards  meeting  the  2009  benchmark  has  been 
delayed and implementation is at around 31%. Moreover, 2-3,000 applications not covered by 
the  action  plans  still  remain  to  be  fully  processed  and  housing  units  made  available  to 
returning refugees. Sufficient budgetary funding should be made available accordingly. Some 
6,000  appeals  for  housing  reconstruction  still  remain  pending.  The  current  rejection  rate  of 
convalidation  applications  is  still  high  at  44%  and  a  more  consistent  approach  by  regional 
offices should continue to be strived for. Efforts to create the economic and social conditions 
necessary for the sustainability of refugee return need to be accelerated. 

As regards citizens rights, Croatia adopted legislation on the right to vote for EU citizens in 
European  Parliament  and  local  elections  in  Croatia.  Further  measures  will  be  needed  to 
achieve  full  alignment  with  Directive  2004/38/EC  on  the  right  of  citizens  of  the  Union  and 
their family members to move and reside freely within the territory of the Member States.  

Conclusion  

Croatia has made good progress on judiciary and fundamental rights. Reform of the judiciary 
has continued with the adoption of new legislation strengthening judicial independence and a 

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further reduction of the case backlog. However, judicial reform remains a major undertaking 
and significant challenges remain, especially relating to judicial efficiency, independence and 
accountability.  Anti-corruption  efforts  have  been  stepped  up  with  some  positive  results  but 
corruption  remains  prevalent  in  many  areas.  A  track  record  of  effective  investigation, 
prosecution and court rulings remains to be established, especially for high level corruption. 
Preventive  measures  such  as  improved  transparency  of  public  spending  need  to  be 
strengthened. Protection of fundamental rights has been strengthened but need to be improved 
in practice, especially for minorities and refugees.  

4.24.  Chapter 24: Justice, freedom and security 

Progress  can  be  reported  in  the  field  of  migration.  In  October  2009,  the  ministries  of  the 
Interior  and  of  Health  have  signed  a  protocol  defining  the  standard  operating  procedure  for 
reception  and  return  of  unaccompanied  minors.  However,  nomination  of  guardians  for  this 
vulnerable group,  in  line with  the internationally  recognised principle of the best interest of 
the  child,  is  uneven.  The  Ministry  of  the  Interior  (MoI)  has  amended  the  rules  on  travel 
documents and visas for foreigners with a view to aligning them with the Law on foreigners.  

The number of police officers dealing with irregular migration has increased from 339 to 350. 
A  total  of  3,219  irregular  migrants  have  been  apprehended  in  2009  (1,546  at  the  border), 
which amounts to a 20% decrease over 2008. In all, 461 migrants have been detained in the 
Ježevo  deportation  centre  and  1,019  have  been  deported.  Also,  132  irregular  minors  have 
been apprehended, and 25 of them have been placed at the Ježevo centre. Eighteen of them 
have applied for asylum. Activities aimed at the construction of a special facility for minors at 
Ježevo have started. Special attention needs to be paid to the treatment and accommodation of 
this vulnerable group. New readmission agreements with Serbia and Montenegro have entered 
into  force  on  1  May  2010.  Readmission  agreements  have  been  signed  with  Slovakia  and 
Malta. Negotiations have started with Kosovo. 

Significant  progress  can  be  reported  in  the  field  of  asylum.  The  Act  amending  the  Asylum 
Act  entered  into  force  in  July  2010,  fully  aligning  Croatia’s  legislation  with  the  acquis,  in 
particular with regard to interviews of asylum-seekers in the accelerated procedure, free legal 
aid  at  second  instance,  terminology  and  the  duration  of  subsidiary  protection.  The 
independence  of  the  Asylum  Commission,  which  will  function  as  a  second-instance  body 
until March 2012, has been significantly improved, including by providing for an additional 
member  from  the  judiciary.  It  has  continued  to  interview  all  asylum-seekers,  although 
interviews  only  have  become  compulsory  after  the  amendments  to  the  Asylum  Law  were 
adopted.  A  fast  judicial  review  has  been  introduced  for  asylum-seekers  in  detention.  Full 
access is given to the UNHCR at border crossing points and in the transit zone. Croatia has 
also improved the conditions to ensure better integration of refugees into society, including by 
providing  access  to  Croatian  language  courses.  Continued  attention  needs  to  be  paid  to 
practical  integration  of  refugees  in  Croatia  and  to  coordination  between  the  relevant 
authorities.  

In 2009 Croatia has received 120 asylum requests for 147 persons. In response, by April 2010 
it has granted 14 people refugee status and six subsidiary protection status. Between 1 January 
and  30  September  2010,  155  applications  for  asylum  have  been  submitted  to  Croatia.  It  is 
positive to note that the number of asylum-seekers brought before the misdemeanour courts to 
be  charged  with  irregular  entry  has  dropped  by  90%.  Training  of  MoI  staff  and  of  border 
police officers on asylum has continued. Croatia needs to continue paying attention to training 
border police officers and Asylum Commission as well as Administrative Court staff on the 

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asylum procedure. Establishment of a second reception facility should be considered.  

Good  progress  has  been  made  on  visa  policy  and  the  security  features  of  Croatian  travel 
documents. Biometric passports have been issued at all police stations since January 2010 and 
at  all  diplomatic  missions  and  consulates  except  Tripoli  since  July  2010.  Further  alignment 
with  the  acquis  on  travel  documents  for  aliens  and  on  visa  forms  has  been  achieved. 
Legislation  aligning  the  visa  sticker  to  the  EU  requirements  on  the  uniform  format  of  visas 
has  entered  into  force  on  1  September  2010  and  the  new  sticker  has  been  introduced  at 
diplomatic missions and consulates; old stickers continue to be used until depletion of existing 
stock. The Croatian visa database has been rolled out at all diplomatic missions and consular 
posts  except  Tripoli  and  at  44  border  crossing  points.  The  Ministry  of  Foreign  Affairs  has 
become the central State body in charge of issuing visas. Further alignment is still required, 
notably with regard to the uniform procedure for issuing visas and the new EU Visa Code. 

The EU ‘positive’ list of non-EU countries not requiring a visa and the ‘negative’ list remain 
partly aligned. An Agreement on mutual travel by nationals has been signed with the Russian 
Federation.  The  government  has  adopted  a  decision  on  temporary  liberalisation  of  the  visa 
arrangements  for  citizens  of  the  Russian  Federation,  Ukraine  and  Kazakhstan  for  transit 
through Croatia or stays of up to 90 days between 1 April and 31 October 2010, , which is not 
in line with the EU acquis. For the same limited period, the government has adopted another 
decision facilitating entry to Croatia for the purposes of tourism for non-EU nationals holding 
a Schengen visa or a residence permit issues by a Schengen state and based on a number of 
additional set criteria. 

There  has  been  progress  with  regard  to  external  borders  and  Schengen.  The  Integrated 
Border Management (IBM) Action Plan and the Schengen Action Plan have been revised in 
March  2010  and  needs  to  be  regularly  updated. The  roadmaps  for  establishing  the  SIRENE 
(supplementary  information  request  at  the  national  entry)  office  and  the  national  system  for 
the Schengen Information System (SIS II) have been adopted. Further efforts are needed for 
the  timely  implementation  of  these  roadmaps.  Croatia  has  established a  national  focal  point 
for  exchanges  of  information  with  Frontex  and  has  adopted  a  Cooperation  Plan  for 
implementation  of  the  working  arrangement.  Croatia  participates  in  the  Frontex  developed 
Western Balkans Risk Analysis Network. 

The  Border  Police  has  been  substantially  reinforced  with  the  addition  of  600  new  police 
officers who graduated from the academy in March 2010, thus bringing the total border police 
force to 5,875. Staff shortages suffered at border crossing points (BCPs) and police stations in 
previous years were addressed and performance on the ground improved. So far 3,800 border 
police officers have been given specialised training. However, around 1,000 officers have yet 
to complete the specialised training for border police. Acquisition of the equipment required 
by  the  IBM  Action  Plan  is  under  way,  but  has  suffered  some  delays.  The  National  Border 
Management Information System (NBMIS) has continued to be rolled out and is operational 
at 18 BCPs. Police officers have access to Interpol databases. 

The IBM Action Plan needs to be revised to include calculations for the staff and equipment 
complements for the blue border, reinforce green border surveillance and introduce the new 
concept  for  the  Metkovic/Neum  BCPs  and  a  joint  operational  centre  for  maritime 
surveillance.  Training  needs  to  continue.  Inter-agency  cooperation  on  IBM  is  ensured  by 
means  of  formal  working  groups  and  procedures  but  needs  to  be  enhanced  at  both  regional 
and local levels.  

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In  the  case  of  judicial  co-operation  in  civil  and  criminal  matters,  there  has  been  further 
progress. Croatia has adopted implementing legislation laying the foundation for practical and 
operational  judicial  cooperation  with  Eurojust  and  has  appointed  a  liaison  officer.  In  2009, 
over 90% of the 1,469 requests for recognition/enforcement of decisions by foreign courts and 
arbitration  decisions  have  been  dealt  with  within  one  year.  Attention  needs  to  be  paid  to 
avoiding any build-up of a backlog at municipal courts. 

Following  the  amendment  to  the  Constitution  allowing  extradition  of  Croatian  citizens,  the 
Act on judicial cooperation in criminal matters has been amended in July 2010. The European 
arrest  warrant  and  the  European  enforcement  order  can  therefore  be  implemented  from  the 
date  of  accession.  An  Extradition  Agreement  was  signed  with  Montenegro.  The  Extradition 
Agreement  with  Serbia  has  entered  into  force  in  June  2010,  and  for  the  first  time  a  person 
arrested in Croatia was extradited to Serbia. The Agreement with Bosnia and Herzegovina on 
mutual  enforcement  of  judgments  in  criminal  matters  has  been  amended  to  facilitate 
enforcement of rulings.  

Some progress has been made as regards police co-operation. Agreements have been signed 
with  Poland,  Israel  and  Malta.  An  Agreement  on  combating  cross-border  crime  was  signed 
with  Bosnia  and  Herzegovina.  The  Agreements  with  Greece  and  Serbia  have  entered  into 
force. A Europol National Unit has been established in the MoI. Memoranda of understanding 
have  been  signed  with  the  United  States  of  America  and  Kosovo  and  Interpol.  Croatia  has 
deployed a fourth police representative to the EULEX mission in Kosovo. Cooperation with 
Serbia on fighting organised crime has been enhanced, through exchanges of police officers. 
Croatia  continues  to  be  active  in  international  police  cooperation.  The  Police  Law  and  the 
implementing legislation on police salaries and on the internal organisation of the MoI need to 
be amended in order to increase flexibility in organisational decisions within the police.  

Progress can be reported in the fight against organised crime. The National Police Office for 
the Suppression of Corruption and Organised Crime (PNUSKOK) has been fully operational 
since September 2009. Four regional operational departments have started work. High-profile 
cases  of  organised  crime  have  been  investigated  swiftly.  The  Ministry  of  the  Interior  has 
drawn  up  an  organised  crime  threat  assessment  (OCTA)  for  2009,  based  on  the  European 
crime intelligence model. The ministry, in cooperation with the Office for the Suppression of 
Corruption  and  Organised  Crime  (USKOK),  has  drawn  up  the  Plan  for  Priorities  in  the 
Suppression of Organised Crime and has started implementing it. USKOK has been active in 
prosecuting  high-profile  cases  of  organised  crime.  However,  further  efforts  in  this  area  are 
necessary,  particularly  as  regards  use  of  the  new  legislative  framework  and  international 
agreements in practice. An agreement establishing a regional office for improving cooperation 
in  the  fight  against  organised  crime  was  signed  in  October  2010  with  Albania,  Bosnia  and 
Herzegovina, Montenegro, Serbia and the former Yugoslav Republic of Macedonia. 

Some  progress  has  been  achieved  in  the  fight  against  trafficking  of  human  beings.  The 
Protocol  on  proceedings  during  the  voluntary  return  of  human  trafficking  victims  has  been 
adopted.  Amendments  have  been  made  to  the  Protocol  on  identification  of,  help  to  and 
protection of victims of trafficking in human beings to harmonise it with the Aliens Act and 
the  Protocol  on  proceedings  during  voluntary  return  of  victims.  In  2009,  eight  victims  of 
trafficking  have  been  identified  while  the  regional  trend  points  towards  a  decrease  in 
trafficking  of  human  beings.  Efforts  to  identify  victims  of  labour  exploitation  need  to  be 
intensified.  Training  of  police  officers,  judges,  labour  inspectors  and  health  employees  has 
been  organised.  Regional  cooperation  with  neighbouring  countries  and  interdisciplinary 
cooperation to prevent and identify victims of human trafficking need to be intensified.  

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Limited progress on the fight against money laundering can be reported. Croatia's results in 
investigation and prosecution of money laundering cases remain steady but in low numbers. . 
The coordination of the competent national authorities and the establishment of the Integrated 
Criminal  Intelligence  System  are  important  achievements.  However,  the  recent  Threat 
Assessments  produced  by  Europol  and  the  SECI  Centre  (Southeast  European  Cooperative 
Initiative) show the clear need for Croatia to step up its efforts and reach concrete results in 
this  area.  Overall,  Croatia  is  moderately  advanced  in  this  area.  (See  Chapter  4:  Free 
movement of capital.) 

Progress can be reported in the fight against terrorism. The MoI has adopted the Maritime 
Anti-terrorism Plan, but the action plan for prevention and suppression of terrorism has yet to 
be  adopted.  Little  progress  has  been  made  on  strengthening  Croatia’s  administrative  and 
operational capacity. Inter-agency coordination also needs to be enhanced. Training for bomb 
disposal experts needs to be introduced on a permanent basis and experts’ practice needs to be 
coordinated  by  law.  Some  of  the  older  X-ray  equipment  is  not  in  line  with  EU  standards. 
Croatia  needs  to  complete  re-examination  of  the  storage  facilities  for  explosives  and 
ammunition in line with the acquis and to replace old equipment. 

Progress has continued in the fight against drugs. The 2010 programme for implementation 
of the Action Plan on Combating Drugs Abuse in Croatia has been adopted. An amendment to 
the Drug Abuse Prevention Act revised the checks on trade in precursors, aligned the list of 
precursors with the EU acquis and shortened the time limits for destroying seized drugs. The 
police have targeted their activities on organised criminal groups rather than on small street-
dealers. Training of police officers and provision of the necessary equipment have continued. 
The  national  focal  point  (NFP)  has  delivered  its  third  annual  report  to  the  European 
Monitoring Centre for Drugs and Drug Addiction (EMCDDA) and has been able to report on 
four of the five indicators. Two new permanent posts for the national focal point have been 
advertised and one of them has already been filled. However, the results in investigation and 
prosecution of drug related crime need to be considerably enhanced. Croatia remains on one 
of the main trafficking routes for drugs to the EU. 

In 2009, a total of 7,934 persons have been treated by the national drug addiction institutes. 
From  2010  on,  as  one  of  the  measures  to  upgrade  their  standards,  every  therapeutic 
community has to provide data on treated patients to the Office for Drugs. The government 
has  adopted  a  National  Programme  for  Prevention  of  Drugs  amongst  Youth  with  a  view  to 
updating the existing programmes.  

No progress can be reported on customs cooperation.  

(For counterfeiting of the euro see chapter 32 – financial control.) 

Conclusion 

Overall,  Croatia  made  substantial  progress  in  this  chapter.  The  asylum  system  has  been 
significantly improved and the Asylum Commission strengthened. Attention needs to be paid 
to  integrating  persons  granted  protection  in  Croatia  and  to  protecting  minors  amongst 
irregular migrants. Good progress has been made in the field of visas, with the introduction of 
the uniform visa format and the setting-up of the Croatian visa database. However, alignment 
with  the  acquis  on  visas  needs  to  continue.  Progress  has  been  made  in  the  field  of  external 
borders,  notably  in  terms  of  staffing  of  the  Border  Police.  However,  several  aspects  of  the 
IBM Action Plan need to be amended and the upgrading of equipment needs to be stepped up. 

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Significant  progress  was  made  in  the  field  of  judicial  cooperation  in  civil  and  criminal 
legal  framework  which  will  allow 
to 
matters,  notably  with 
implementation  of  the  European  arrest  warrant  with  effect  from  accession  and  with  the 
signature  of  an  extradition  agreement  with  Serbia.  Progress  also  continued  in  the  counter-
narcotics  policy,  but  results  in  investigations  and  prosecution  of  the  drug  cases  need  to  be 
enhanced.  

the  amendments 

the 

4.25.  Chapter 25: Science and research 

Further progress can be reported with respect to research policy where, overall, the level of 
alignment  is  already  high.  However,  private-sector  involvement  and  the  success  rate  in  the 
Specific  Programme  on  ‘People’  and,  more  specifically,  in  the  Marie  Currie  fellowships, 
remain low.  

Croatia  continued  to  participate  actively  in  the  EU’s  Seventh  Framework  Programme 
(FP7). Croatia also strengthened its administrative capacity by reviewing the nominations to 
the  FP7  management  committees  and  providing  training  to  the  national  contact  points.  The 
action plan to stimulate participation in FP7 has produced good results, but the economic and 
financial crisis has put a temporary end to financial incentives.  

With respect to its future integration into the European Research Area (ERA), Croatia has 
made  further  progress  in  aligning  its  research  policy  with  the  targets  and  actions  of  the 
European  Research  and  Innovation  Area.  On  mobility  of  researchers,  the  Ordinance  on  the 
Register of Researchers has been amended opening funding from the State budget also to non-
Croatian  scientists.  Research  job  vacancies  have  started  to  be  advertised  on  Euraxess  job 
portal.  The  Act  on  the  National  Foundation  for  Science  and  Higher  Education  is  being 
implemented,  except  the  provisions  concerning  financing  research  projects  in  a  more 
competitive way, based on scientific excellence. No progress was made on the overall level of 
investment in research which has been stagnating since 2007 at about 0.9% of Croatia’s GDP. 
Involvement of industry and SMEs in research activities is still weak. 

Conclusion 

Progress in this chapter has continued, but has slowed down as a result of the economic and 
financial  crisis.  Implementation  and  monitoring  of  commitments  remain  crucial.  Efforts  are 
needed  to  further  improve  the  administrative  and  research  capacity.  Investment  in  research, 
through the involvement of industry and SMEs is to be increased.  

4.26.  Chapter 26: Education and culture 

There has been good progress in the field of education, training and youth. The education 
reform has continued under the Education System Development Plan for 2005–2010. Croatia 
is participating in the strategic framework for European cooperation in education and training, 
ET 2020.  Croatia's  performance  is  still  above  the  EU-level  benchmarks  in  relation  to  early 
school-leavers and upper secondary completion rates. It improved but is still two thirds of the 
EU average for tertiary education attainment and participation in pre-school education. Adult 
participation in lifelong learning remains very low. The plan of activities for development of a 
national  qualifications  framework  (NQF)  is  being  implemented.  National  secondary  school-
leaving  exams  have  been  introduced.  Implementation  of  the  Bologna  process  in  higher 
education  has  continued.  Remaining  challenges  include  implementing  structural  reform  of 
universities  and  of  their  funding,  implementing  a  learning  outcomes  approach  and  adoption 

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and  self-certification  of  the  Croatian  Qualifications  Framework.  The  reform  of  vocational 
education and training and adult education is being implemented.  

The National Agency has kept implementing preparatory measures, including management of 
pilot projects, with a view to fully participate in the Life-long Learning and Youth in Action 
programmes. A declaration of assurance on the functioning of the National Agency has been 
provided.  The  Accession  Partnership  priorities  in  the  field  of  education,  training  and  youth 
have been by and large met. 

Progress  can  also  be  reported  in  the  field  of  culture.  Additional  efforts  have  been  made  to 
further  promote  Croatia's  participation  in  the  EU  Culture  and  Europe  for  Citizens 
programmes.  

Conclusion 

Further progress has been made in the areas of education, training, youth and culture. There is 
a good level of alignment with the acquis. Croatia needs to continue its efforts to prepare for 
the management of the Lifelong Learning and Youth in Action Programmes. Adult education 
requires continuous attention. 

4.27.  Chapter 27: Environment 

Some  progress  has  been  made  in  the  horizontal  legislation.  The  transposition  process  is 
almost completed in this sector. Efforts to implement environmental impact assessment (EIA) 
and  strategic  environmental  assessment  (SEA)  need  to  be  increased.  Implementation  of 
provisions  on  public  participation  and  access  to  justice  in  environmental  matters  remains 
insufficient. In this respect, cooperation with the judiciary needs to be strengthened.  

There has been good progress in the field of air quality. Croatia has produced a programme 
for  a  gradual  decrease  in  emissions  of  certain  air  pollutants  up  to  the  end  of  2010  with 
emission projections for the period 2010–2020. Transposition of the new acquis on ambient 
air quality and cleaner air for Europe is pending.  

There  has  been  little  progress  in  waste  management.  Sustained  efforts  for  remediation  of 
existing  landfills  and  hot-spots  and  further  establishment  of  systems  for  collection  and 
management of different categories of waste are needed.  

In  the  field  of  water  quality,  a  significant  step  forward  was  taken  with  the  adoption  of  the 
new Water Act and the Water Management Financing Act. Implementing legislation relating 
to bathing water quality was also enacted. Investment in this sector is currently insufficient. 
Monitoring and reporting also need to be improved. Significant efforts are still needed in this 
area, including finalisation of a river basin management plan.  

There  has  been  some  progress  in  the  field  of  nature  protection  with  the  adoption  of 
implementing  legislation  on  nature  impact  assessments.  Preparations  for  drafting  a  list  of 
marine  Natura  2000  sites  have  started.  Gaps  remain  in  the  administrative  capacity  for 
implementing and enforcing the acquis, especially in the State Institute for Nature Protection 
and  at  local  level.  In  the  forestry  sector,  activities  to  implement  the  existing  Croatian  legal 
framework have continued.  

Alignment  is  well  advanced  in  the  area  of  industrial  pollution  control  and  risk 
management. Efforts have been made on further developing the European Pollutant Release 

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and  Transfer  Register  (EPRTR).  Activities  for  alignment  of  existing  installations  with  the 
requirements of the Integrated Pollution Prevention and Control and Large Combustion Plants 
Directives have been intensified. Significant financial resources and efforts will be required to 
ensure sufficient administrative capacity in this sector.  

Alignment  with  the  acquis  has  further  progressed  in  the  field  of  chemicals,  with  the 
amendment of the Law on biocides and the adoption of the list of limited or banned dangerous 
chemicals. Efforts to implement and enforce legislation on chemicals and SEVESO II need to 
be stepped up. 

As regards climate change, good progress can be reported. Croatia associated itself with the 
Copenhagen  Accord. The  country also continues  to fulfil  its reporting  obligations  under the 
UNFCCC and the Kyoto Protocol. While Croatia is making steady progress in aligning with 
climate  change  acquis,  further  efforts  are  needed, 
the 
implementation  of  the  EU  Emissions  Trading  Scheme,  fuel  quality  requirements  and  EU 
acquis adopted after 2009. However, Croatia has lodged an appeal against the decision of the 
Compliance Committee of the Kyoto Protocol regarding Croatia's compliance.  

in  particular 

to  complete 

Full transposition of the noise abatement legislation has been achieved. Noise maps for towns 
and municipalities have yet to be adopted.  

Croatia joined the European Civil Protection Mechanism in 2009. It pays the costs out of its 
own budget. Croatia has been advancing well in its preparations as regards civil protection.  

Efforts to strengthen Croatia’s administrative capacity have slowed down. Further efforts are 
still  needed  in  this  area  to  allow  proper  implementation  and  enforcement  of  the  legislation. 
Channels  for  coordination  between  ministries  and  bodies  involved  in  environmental 
protection need to be improved.  

Conclusion 

Overall,  good  progress  has  been  made  in  this  chapter  as  regards  both  alignment  and 
implementation  of  the  legislation.  Overall,  Croatia's  preparations  are  nearing  completion. 
Legislative alignment in the field of water quality and also, to a certain extent, climate change 
needs  to  be  completed  Administrative  capacity,  especially  at  local  level,  needs  further 
strengthening, in particular  in  the  fields of nature protection and  industrial pollution control 
and  risk  management.  Implementation  of  the  horizontal  acquis,  most  notably  on  EIA,  SEA 
and  access  to  information  and  justice  in  environmental  matters,  and  cooperation  with  non-
governmental organisations active in the field of environment needs to be improved needs to 
be improved.  

4.28.  Chapter 28: Consumer and health protection 

There  has  been  progress  in  the  field  of  consumer  protection.  Government  funding  for 
regional  counselling  centres  has  continued.  Public  awareness  of  the  system  for  out-of-court 
settlement  of  consumer  disputes  remains  low.  Training  for  judges  is  continuing.  A  new 
collective redress system for consumers has been put in place. Similar provisions have been 
introduced  to  give  traders  the  same  rights  to  collective  protection  against  unlawful 
advertising.  

A National Consumer Protection Programme for 2009–2012 was adopted. Use of the existing 
system to collect consumer complaints has substantially increased, but needs to be improved. 

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About  30,000  market  inspections  on  consumer  issues  were  carried  out,  including  some  in 
response to complaints by consumers. The inspections highlighted the need to improve price 
labelling and use of the warranty and to consolidate traders’ legal obligation to facilitate and 
address complaints. Administrative capacity needs to be further strengthened. The support for 
the  consumer  movement  needs  to  be  continued  and  consumers’  access  to  justice  further 
improved  with  the  aid  of  effective  implementation  of  the  National  Consumer  Protection 
Programme.  

Some progress can be reported in the field of product safety-related issues. Coordination and 
cooperation between market surveillance authorities is in place. Market surveillance activities 
were given a sound legal basis and have become more effective (See Chapter). 

There  has  been  some  progress  in  the  area  of  non-safety-related  issues.  Implementing 
legislation on retail price labelling was adopted. Further revision of the Consumer Credit Act 
is necessary to achieve full alignment with the EU legislation.  

Good progress can be reported in the area of public health. Progress has been moderate in the 
area  of  tobacco.  The  revisions  of  the  Tobacco  Act  have  softened  certain  conditions,  but 
remain in line with the acquis.  

Good progress has been made in the field of communicable diseases where Croatia meets the 
requirements  of  the  acquis.  On  pandemic  influenza,  a  new  computerised  network  connects 
hospitals, county public health institutes and the Croatian National Institute for Public Health. 
The Ministry of Health and Social Welfare adopted a new National Generic Integrated Plan 
for coordinated action in public health emergencies.  

Good  progress  can  be  reported  in  the  area  of  blood,  tissues  and  cells,  where  by-laws  have 
been adopted with the aim of completing alignment of the legislation. The reorganisation of 
the transfusion services is continuing. However, quality management of all blood transfusion 
centres is not yet ensured. Facilities for handling tissues and cells have not yet been upgraded, 
restructured  and  licensed  in  accordance  with  the  EU  technical  requirements.  In  the  field  of 
reproductive cells, implementing legislation was adopted. As regards administrative capacity, 
the  newly  established  Department  for  the  Inspection  and  Monitoring  of  Blood,  Tissues  and 
Cells has begun to process applications for authorisations for assisted reproductive technology 
(ART) establishments, but not yet for blood and tissues/cells establishments.  

Some  progress  can  be  reported  in  the  field  of  mental  health.  The  Mental  Health  Promotion 
Strategy  was  adopted.  A  network  of  45  teams  working  on  mental  health  care,  addiction 
prevention  and  out-patient  treatment  was  set  up  in  public  health  institutes.  However, 
community-based 
to 
institutionalisation.  Financial  resources  allocated  to  mental  health  care  are  still  scarce.  The 
Accession Partnership priority in this field has therefore not been met yet. Preparations in this 
field have started. 

insufficiently  developed  as  an  alternative 

services 

remain 

In the area of cancer screening, the national programme for early detection of cervical cancer 
has  been  adopted.  The  national  programmes  for  early  detection  of  colorectal  cancer  and  of 
breast  cancer  are  producing  results.  However,  education  of  the  targeted  population  and 
investment in equipment are still needed to increase coverage. Preparations in these areas are 
well on track.  

Conclusion 

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There has been good progress in the area of consumer and health protection. Alignment with 
the acquis is well advanced. Sustained efforts are necessary in order further to strengthen the 
administrative capacity to implement and enforce the legislation.  

4.29.  Chapter 29: Customs Union 

Some progress has been made in the customs legislation. The new Regulation on the customs 
tariff  for  2010  entered  into  force,  aligning  the  Croatian  tariff  with  the  2010  Combined 
Nomenclature.  Further  alignment  with  the  EU  provisions  on  security  aspects  has  been 
achieved.  The  new  system  for  relief  from  customs  duties  entered  into  force.  Overall, 
alignment of the customs rules with the acquis is very high, but minor discrepancies remain in 
the allocation of tariff quotas and the internal transit arrangements. 

Good  progress  can  also  be  reported  on  administrative  and  operational  capacity.  The 
customs  administration  adopted  its  new  Business  Strategy  2010-2012  in  July  and  continued 
implementing  its  Anti-Corruption  Programme,  including  an  awareness  campaign  and  the 
policy of systematic rotation of staff. The capacity and role of the internal control unit have 
been  strengthened.  Preparations  for  developing  the  national  application  of  the  Integrated 
Tariff Management System (ITMS) and the New Computerised Transit System (NCTS v4.0) 
were completed. Full testing could take place once the network connection is activated. The 
Croatian  customs  administration  still  has  very  limited  in-house  capacity  to  guarantee  the 
continuity of its IT services and remains heavily dependent on external companies. Overall, in 
the  areas  of  administrative  and  operational  capacity,  Croatia  has  continued  to  address  its 
targets and priorities consistently. 

Conclusion 

Good progress has been made in this chapter. Croatia’s customs legislation is aligned with the 
acquis to a very large extent and additional alignment was achieved over the reporting period. 
Croatia has also continued to make progress on its administrative capacity, notably in the area 
of IT interconnectivity, where preparations for two key IT systems were completed. Further 
progress  towards  removing  the  last  discrepancies  in  Croatia’s  legislation,  implementing  the 
Anti-Corruption Strategy and preparing for IT interconnectivity is required.  

4.30.  Chapter 30: External relations 

Further progress has been made in connection with the common commercial policy. Croatia 
continued to cooperate and coordinate with the Commission with the aim of aligning with EU 
policies and positions towards non-EU countries and within international organisations. 

After the WTO investigation on the provisional safeguard measures introduced in June 2009, 
Croatia withdrew the safeguard measures on cheese supplements and started to reimburse the 
duties paid by importers. The measures on hard cheeses (Edam and Gouda) were confirmed in 
November 2009 and expired in January 2010. Croatia needs to ensure full compliance with its 
international  obligations  when  resorting  to  the  safeguard  measures  allowed  under  the 
Stabilisation  and  Association  Agreement  and  the  WTO  rules.  Croatia  furthermore  needs  to 
ensure a swift reimbursement of the duties paid by importers on cheese supplements during 
the period for which the provisional measures were applied. 

Croatia continued aligning with the EU list of dual-use items and raising operators’ awareness 
of  the  issue  of  dual-use  goods.  It  continued  to  train  customs  officers  in  this  field.  The 

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administrative,  control  and  reporting  capacity  for  dual-use  goods  needs  to  be  further 
enhanced,  in  particular  with  the  aid  of  training.  Preparations  in  this  area  are  nearing 
completion.  

In the area of bilateral agreements with non-EU countries, Croatia continued to implement 
its action plan to bring international agreements into line with the acquis, but further efforts 
are required, in particular with regard to bilateral investment treaties. Preparations in this area 
are on track.  

Some  progress  can  be  reported  on  development  policy  and  humanitarian  aid.  Work 
continued  on  the  programme  to  implement  the  National  Strategy  for  Development 
Cooperation  for  the  period  2009-2014.  Further  efforts  are  required  to  complete  the  legal 
framework in this area and to reinforce the administrative capacity. Overall, preparations in 
this field are on track.  

Conclusion 

Some progress has been made in this chapter. Overall, Croatia has reached an advanced level 
of  alignment  in  the  area  of  external  relations  and  is  continuing  to  coordinate  and  align  its 
positions  in  international  fora.  However,  Croatia  needs  to  pay  attention  to  fully  complying 
with  its  international  obligations  when  resorting  to  safeguards.  Further  strengthening  of 
administrative capacity is needed in the areas of development policy and humanitarian aid.  

4.31.  Chapter 31: Foreign, Security and Defence Policy 

The regular political dialogue between the EU and Croatia continued to cover foreign policy 
issues.  (As  regards  neighbourly  relations  with  other  enlargement  countries  and  Member 
States, see Section 2.3 under Political criteria.) 

As regards the common foreign and security policy (CFSP), Croatia has continued to align 
itself  when  invited,  with  all  relevant  Council  decisions  and  EU  declarations.  It  has  been 
actively  participating  in  the  Barcelona  Process  –  Union  for  the  Mediterranean.  Croatia  has 
further developed its administrative capacity to work within the EU CFSP structures. The post 
of  Political  Director  in  the  Ministry  for  Foreign  Affairs  and  European  Integration  is  being 
established. 

There have been no particular developments with regard to sanctions and restrictive measures 
or on conflict prevention.  

As regards non-proliferation, implementation of the National Strategy and Action Plan for the 
Control  of  Small  Arms  and  Light  Weapons  has  begun.  Public-awareness  activities  have 
continued,  including  measures  to  collect  and  destroy  weapons.  Efforts  to  strengthen  the 
implementation  and  enforcement  capacity  are  continuing.  These  are  key  elements  for  the 
accession negotiations in this chapter. 

With regard to cooperation with international organisations, Croatia has, as a member of the 
UN, the OSCE, the Council of Europe and NATO, maintained its involvement in the policy-
making of these organisations. In December 2009, Croatia completed its two-year term as a 
non-permanent  member  of  the  UN  Security  Council.  During  this  period  Croatia  chaired  the 
Security  Council’s  Counter-Terrorism  Committee.  (As  regards  the  International  Criminal 
Court, see Political criteria — Regional issues and international obligations.) 

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There  have  been  no  particular  developments  with  regard  to  security  measures  (classified 
information).  

Croatia reinforced its participation in EU missions to support implementation of the common 
security  and  defence  policy  (CSDP).  It  has  been  participating  in  the  EU  operation  off  the 
Somali coast (EU NAVFOR Somalia - ATALANTA). Croatia continued to provide logistical 
support  to  the  EUFOR  Althea  mission  in  Bosnia  and  Herzegovina.  The  country  remains 
committed to participating in the EU battlegroups. Administrative capacity-building measures 
have  continued,  including  training  for  and  participation  by  Croatian  officials  in  the 
appropriate fora with EU counterparts.  

Croatia continued to support EU civilian missions. Croatia is participating in the EU rule of 
law mission (EULEX) in Kosovo and the EUPOL mission in Afghanistan with a total of five 
police officers and three judicial and administrative officials.  

Croatia has continued to take part in NATO missions, with 320 members of the armed forces 
engaged in two missions in Afghanistan and in Kosovo. 

Conclusion 

Croatia has made further progress in this chapter. It has continued to participate in several EU 
CSDP missions. Overall, Croatia has reached a high level of alignment in the area of foreign, 
security  and  defence  policy.  Croatia  needs  to  continue  strengthening  implementation  and 
enforcement of arms control, including the transparency of arms-related information. 

4.32.  Chapter 32: Financial Control 

Further progress has been made in the implementation of public internal financial control 
(PIFC).  The  Central  Harmonisation  Unit  (CHU)  in  the  Ministry  of  Finance  continued  to 
oversee  implementation  of  the  PIFC  strategy  for  the  period  2009-2011.  In  September  2009, 
the  CHU  issued  guidelines  for  conducting  a  risk  management  procedure  to  assist  budget 
users.  Based  on  the  contributions  of  budget  users  at  the  state  and  local  level,  the  CHU 
elaborated  a  consolidated  2009  annual  report  on  the  PIFC  system  and  presented  it  to  the 
government. The administrative capacity of the CHU and all budget users at central and local 
levels needs to be further strengthened, including on risk management. Implementation of the 
internal auditor’s training plan continued. A Programme Council for professional training of 
internal auditors in the public sector was established in February 2010.  

Good progress can be reported in the field of external audit. The State Audit Office’s (SAO) 
independence was consolidated, after parliament adopted amendments to the Constitution in 
June 2010. Reporting by the SAO to parliament improved, as in May 2010 the SAO submitted 
its  first  audit  report  on  budget  execution  to  parliament  prior  to  the  discharge  of  the  budget. 
However, parliament should further strengthen its ownership and follow-up to SAO reports. 
Implementation  of  the  SAO’s  strategic  development  plan  for  the  period  2008-2012  is 
continuing. So far, the SAO’s approach to audits remains primarily transaction-based. More 
focus  needs  to  be  placed  on  a  systems-based  audit  approach  and  further  development  of 
performance  audit  work.  With  this  in  mind,  auditors  need  to  be  continuously  trained  on 
modern audit techniques.  

Progress has been made on protection of the EU’s financial interests. The institutional and 
legislative  set-up  for  coordinating  cooperation  between  OLAF  and  the  Croatian  national 

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authorities is in place. An anti-fraud strategy for protection of the EU’s financial interests for 
the  period  2010-2012,  including  an  action  plan,  was  adopted  by  the  government  in  January 
2010  and  regular  information  is  provided  about  the  measures  taken  to  implement  it.  The 
operational independence of the Anti-Fraud Coordination Structure (AFCOS) is described in 
this  document.  The  Department  for  Combating  Irregularities  and  Fraud  in  the  Ministry  of 
Finance needs to improve its performance in its key role of coordinating the AFCOS network. 
Operational  cooperation  of  the  Croatian  authorities  with  the  Commission  is  considered 
smooth. 

Progress  can  be  reported  on  protection  of  the  euro  against  counterfeiting.  Following 
consultations with OLAF, Croatia transposed the most recent EU legislation in March 2010, 
i.e. the two Council regulations on protection of the euro against counterfeiting and on medals 
and tokens similar to euro coins.  

Conclusion 

Overall, progress can be reported in this chapter. Efforts need to focus on the sustainability of 
the reforms. Croatia needs to continue updating its PIFC policy paper regularly. The bodies 
involved in the AFCOS system need to enhance their efforts on implementing the anti-fraud 
strategy efficiently. Parliamentary ownership of the SAO’s reports needs to be enhanced. 

4.33.  Chapter 33: Financial and budgetary provisions 

There has been further progress in the area of financial and budgetary provisions.  

With  regard  to  traditional  own  resources  (TOR),  the  simulation  exercise  for  A  and  B 
accounts  for  the  last  quarter  of  2009  was  completed.  Workshops  on  the  methods  of 
establishing, accounting, book-keeping and making available and reporting on TOR were held 
in the customs administration. However, there have been delays in preparing the IT module 
for managing the A and B accounts. Work on a system for writing off irrecoverable debts has 
to be accelerated. Post-clearance auditing needs to be strengthened. Further measures need to 
be taken to establish the relevant legal and administrative framework and control mechanisms 
for sugar levies. Effective instruments for combating customs duty and VAT fraud have to be 
applied to protect the financial interests of the EU. 

With regard to the VAT resource, further simulations of the VAT base have been carried out 
and analytical capacity improved. Efforts will be needed to develop further the statistical basis 
and  capacity  for  calculation  of  the  weighted  average  rate.  Croatia  needs  to  ensure 
implementation of the protocol on privileges and immunities of the European Communities. 

With  regard  to  the  GNI  resource,  the  Croatian  authorities  have  achieved  good  results  with 
application of the ESA95 method. Further efforts will be needed to improve the quality of the 
national accounts and GNI calculations.  

infrastructure, 

regards  administrative 

As 
for  Coordination  and 
Management of EU own resources in the Ministry of Finance has improved its capacity for 
developing  and  coordinating  an  effective  EU  own  resources  system.  Experience  has  been 
gained  from  establishing  direct  contacts  with  EU  Member  States,  from  continuous  training 
and from implementation of the own resources twinning light project.  

the  Department 

Conclusion 

EN 

65 

   EN 

 
There  has  been  further  progress  in  this  chapter.  The  institutional  capacity  for  applying  the 
rules on own resources has been further developed. Overall, Croatia has reached a good level 
of alignment with the acquis and capacity to implement it, except in the case of sugar levies. 
Croatia  needs  to  further  enhance  its  coordination  capacity  and  put  in  place  the  rules  and 
procedures still pending.  

EN 

66 

   EN 

 
Statistical Annex 

STATISTICAL DATA (as of 14 October 2010) 
Croatia 

Basic data 
Population (thousand) 
Total area of the country (km²) 

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous 
year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Agriculture and fisheries 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

Inflation rate 
Annual average inflation rate (HICP, % change on previous year) 

Note

1) 

Note
2) 
2) 
2) 

2) 

2) 
2) 
2) 
2) 
2) 
2) 
2) 
2) 
2) 

2000 
4 498e 
56 542 

2001 
4 439e 
56 542 

2002 
4 445 
56 542 

2003 
4 443 
56 594b

2004 
4 442 
56 594 

2005 
4 444 
56 594 

2006 
4 443 
56 594 

2007 
4 441 
56 594 

2008 
4 436 
56 594 

2009 
4 435 
56 594 

2002 

2000 

2001 
176 690 190 796
25 538 
23 146 
5 752 
5 229 

342 159  333 063 
45 379 
47 370 
10 246 
10 683 
9 400.0e 9 900.0e 10 700.0e 11 200.0 12 100.0 12 700.0b 13 500.0 15 000.0 15 700.0  15 100.0 

2003 
2004 
208 223  227 012 245 550
32 759 
30 011 
28 112 
7 380 
6 759 
6 331 

2007 
2006 
264 367  286 341 314 223
42 833 
39 102 
35 725 
9 656 
8 807 
8 043 

2008 

2009 

2005 

49.2 

50.0 

52.2 

54.1 

55.8 

56.4b 

57.0 

60.2 

62.5 

64.0 

3.0 
4.0 
-0.9 
-3.4 
61.3e 

8.4 
23.4 
4.9 
63.2 
84.6 
18.8 
-0.2 
42.0 
45.3 

3.8 
-5.4 
9.8 
-4.2 
66.5e 

8.4 
22.8 
5.4 
63.4 
82.7 
19.4 
1.7 
43.8 
47.6 

Note
3) 

Note

2000 
100.0 

2001 
106.0 

2000 
4.5 

2001 
4.3 

5.4 
4.2 
1.2 
1.3 
66.6e 

8.2 
21.9 
5.5 
64.4 
83.1 
21.2 
4.0 
41.0 
49.4 

2002 
111.8 

2002 
2.5 

5.0 
0.6 
4.3 
-7.3 
68.6e 

6.8 
21.4 
6.6 
65.3 
81.4 
25.0 
1.5 
42.9 
50.8 

4.3 
1.7 
2.5 
6.7 
69.5e 

7.2 
21.8 
7.1 
63.9 
80.4 
24.6 
1.3 
43.3 
49.6 

2003 
116.3 

2004 
120.6 

2003 
2.4 

2004 
2.1 

4.2 
0.8e 
3.4 
-0.4 
70.4e 

6.5 
20.9 
7.4 
65.2 
80.2 
24.6 
1.7 
42.6 
49.1 

2005 
126.7 

2005 
3.0 

4.7 
-0.6e 
5.4 
-10.2 
73.8e 

6.3 
20.6 
7.7 
65.3 
78.9 
26.1 
2.0 
43.4 
50.4 

5.5 
3.5e 
1.9 
-0.7 
75.7e 

6.1 
20.4 
7.7 
65.8 
78.7 
26.2 
2.7 
42.8 
50.4 

2.4 
1.1e 
1.3 
1.4 
76.6e 

6.4 
20.2 
8.3 
65.0 
77.7 
27.6 
3.2 
41.9 
50.3 

-5.8 
-1.8 
-4.1 
-1.3 
: 

6.7 
19.1 
8.1 
66.0 
76.7 
24.7 
2.0 
36.1 
39.4 

2006 
132.4 

2007 
139.8 

2008 
142.1 

2009 
129.0 

2006 
3.3 

2007 
2.7 

2008 
5.8 

2009 
2.2 

EN 

67 

EN 

 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
General government debt relative to GDP (%) 

Financial indicators 
Gross foreign debt of the whole economy, relative to GDP (%) 
Gross foreign debt of the whole economy, relative to total exports (%) 
Money supply: M1 (banknotes, coins, overnight deposits, million euro) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
Interest rates: day-to-day money rate, per annum (%) 
Lending interest rate (one year), per annum (%) 
Deposit interest rate (one year), per annum (%) 
euro exchange rates: average of period - 1 euro = … national currency 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: all goods, all partners (million euro) 
Terms of trade (export price index / import price index) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Note

4) 

4) 

Note
5) 
5) 

Note
6) 
6) 

Note

2000 
-568 
-3 492 
2 470 
-505 
959 
25 
1 136 
-5 
15 
1 141 
916 

2000 
: 
: 

2000 
53.0 
126.0 
2 373 
: 
: 
9 483 
6.9 
20.6 
8.2 
7.634 
100.0 
3 783 

2000 
: 
: 
: 
98.3 
: 
: 

2001 
-821 
-4 595 
3 303 
-628 
1 099 
65 
1 258 
-210 
-152 
1 467 
1 344 

2001 
-6.5 
40.1 

2001 
53.3 
121.7 
3 216 
: 
: 
11 891 
3.0 
19.5 
6.6 
7.471 
98.5 
5 334 

2001 
: 
: 
: 
94.4 
: 
: 

2002 
-2 099 
-5 958 
3 285 
-578 
1 152 
32 
531 
-607 
-72 
1 138 
1 063 

2002 
-4.1 
40.0 

2002 
53.9 
131.2 
4 148 
: 
: 
15 119 
1.3 
16.5 
5.4 
7.407 
96.6 
5 651 

2003 
-1 889 
-6 971 
4 933 
-1 095 
1 245 
71 
1 657 
-106 
-7 
1 762 
1 498 

2003 
-5.5 
40.9 

2003 
66.3 
154.3 
4 432 
: 
: 
16 526 
4.3 
15.0 
3.8 
7.564 
95.0 
6 554 

2004 
-1 434 
-6 724 
4 769 
-670 
1 192 
3 
671 
-279 
-14 
950 
919 

2004 
-4.3 
43.2 

2004 
70.0 
161.8 
4 505 
: 
: 
18 417 
5.9 
14.4 
3.8 
7.496 
92.3 
6 436 

2005 
-1 976 
-7 518 
5 318 
-959 
1 184 
10 
1 276 
-192 
-66 
1 468 
1 439 

2005 
-3.5 
38.3 

2005 
72.1 
169.2 
5 263 
: 
: 
22 836 
3.4 
13.1 
3.9 
7.400 
91.0 
7 438 

2006 
-2 715 
-8 344 
5 705 
-1 183 
1 107 
-9 
2 557 
-208 
37 
2 765 
3 500 

2006 
-3.0 
35.5 

2006 
74.9 
172.5 
6 606 
: 
: 
27 274 
2.4 
12.1 
4.0 
7.323 
89.9 
8 725 

2007 
-3 236 
-9 434 
6 267 
-1 113 
1 043 
-17 
3 403 
-267 
-563 
3 670 
3 687 

2007 
-2.5 
32.9 

2007 
76.9 
179.7 
7 901 
: 
: 
30 863 
5.6 
12.1 
4.2 
7.336 
88.5 
9 307 

2008 
-4 338 
-10 794 
6 958 
-1 572 
1 071 
-20 
3 203 
-989 
-738 
4 192 
3 242 

2008 
-1.4 
28.9 

2008 
82.6 
197.1 
7 539 
: 
: 
34 756 
6.6 
12.2 
4.8 
7.223 
85.8 
9 121 

2009 
-2 448 
-7 398 
5 676 
-1 761 
1 036 
-31 
957 
-919 
-528 
1 875 
1 842 

2009 
-4.1 
35.3 

2009 
95.0 
263.1 
6 458 
: 
: 
34 700 
7.8 
12.6 
5.3 
7.340 
88.1 
10 376 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

11 327.0  12 509.9 13 354.4 14 949.5  17 104.7 18 686.5 20 761.9  14 806.1 
8 251.6  8 854.7 
5 188.2 
7 393.6 
-6 138.9 
-8 853.1 -9 831.8 -11 419.8  -7 412.5 
97.8 
66.1 
71.9 

5 438.9  6 453.8 
-7 071.0 -6 900.5
109.3b 
65.8 
71.0 

7 069.4 
-7 880.1 
92.6 
63.3 
67.9 

100.2 
64.3 
67.2 

109.2 
61.0 
62.3 

97.5 
68.3 
73.3 

96.1 
62.1 
64.2 

97.5 
60.9 
64.8 

9 342.1 

EN 

68 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

Labour market 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
Employment rate (15-64): share of population aged 15 to 64 that is in employment (%) 

Employment rate male (15-64) (%) 
Employment rate female (15-64) (%) 

Employment rate of older workers (55-64): share of population aged 55 to 64 that is in 
employment (%) 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed 
(%) 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and 
more (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the CPI) 
(2000=100) 
Early school leavers - Share of population aged 18-24 with at most lower secondary education 
and not in further education or training (%) 

Standard of living 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
Spending on human resources (public expenditure on education in % of GDP) 
Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Note

Note
7) 
7) 
7) 
7) 

7) 

7) 
7) 
7) 
7) 
7) 
7) 
7) 

8) 

9) 

2000 
-1.5 
7.4 
70.5 
77.8 

2000 
62.2 
51.3 
57.4 
45.5 

2001 
-1.9 
7.7 
71.1 
78.1 

2001 
62.2 
51.8 
59.0 
44.9 

2002 
-2.4 
7.0 
71.2 
78.3 

2002 
62.9 
53.4 
60.5 
46.7 

2003 
-2.9 
6.3 
71.4 
78.4 

2003 
62.4 
53.4 
60.3 
46.7 

2004 
-2.1 
6.1 
72.0 
79.0 

2004 
63.7 
54.7 
61.8 
47.8 

2005 
-2.1 
5.7 
71.8 
78.8 

2005 
63.3 
55.0 
61.7 
48.6 

2006 
-2.0 
5.2 
72.5 
79.3 

2006 
62.6 
55.6 
62.0 
49.4 

2007 
-2.4 
5.6 
72.3 
79.2 

2007 
63.2 
57.1 
64.4 
50.0 

2008 
-1.9 
4.5 
72.4 
79.6 

2008 
63.2 
57.8 
65.0 
50.7 

2009 
: 
5.3 
72.9 
79.6 

2009 
62.4 
56.6 
62.4 
51.0 

24.2 

23.7 

24.8 

28.4 

30.1 

32.6 

34.3 

35.8 

36.7 

38.5 

11.7 
22.7 
5.9 
59.6 
17.0 
15.9 
18.2 

15.6 
23.1 
6.3 
55.0 
16.3 
14.4 
18.7 

15.5 
22.6 
7.2 
54.6 
14.7 
13.2 
16.5 

16.9 
22.1 
8.1 
52.8 
14.1 
12.8 
15.6 

17.0 
21.4 
8.2 
53.2 
13.6 
12.0 
15.6 

17.3 
20.5 
8.2 
54.0 
12.6 
11.6 
13.8 

14.2 
20.9 
8.4 
56.3 
11.1 
9.8 
12.7 

13.0 
21.8 
8.8 
56.4 
9.6 
8.4 
11.2 

13.6 
21.6 
8.9 
55.9 
8.4 
7.0 
10.1 

14.1 
20.0 
8.7 
57.3 
9.1 
8.0 
10.3 

43.1 

41.7 

34.4 

35.8 

33.8 

32.0 

28.8 

24.0 

22.0 

25.1 

9.1 

10.1 

8.9 

8.4 

7.3 

7.4 

6.7 

5.9 

5.3 

5.2 

Note

2000 

2001 

4 869.0  5 061.0 

2002 
5 366.0 

2003 

2004 

5 623.0  5 985.0 

2005 
6 248.0 

2006 

2007 

6 634.0  7 047.0 

2008 
7 544.0 

2009 
7 711.0 

100.0 

99.2 

103.2 

106.1 

112.2 

113.4 

116.6 

120.4 

121.5 

121.3 

10) 

: 

: 

8.3 

8.4 

6.2 

4.8 

5.1 

3.9 

3.7 

5.4 

Note

Note

Note

2000 
250.1 
247.2 

2001 
269.3 
390.0 

2000 
47.8 
0.4 

2000 
4.5 
1.1 
: 

2001 
47.8 
0.4 

2001 
4.2 
0.9 
: 

2002 
280.0 
520.4 

2002 
47.8 
0.5 

2002 
4.3 
1.0 
: 

2003 
291.1 
571.0 

2004 
301.1 
638.3 

2003 
47.7 
0.6 

2003 
4.5 
1.0 
: 

2004 
47.7 
0.7 

2004 
: 
1.1 
: 

2005 
311.6 
821.4 

2005 
47.7 
0.8 

2005 
: 
0.9 
: 

2006 
323.2 
989.2 

2007 
335.7 
1 133.7 

2008 
346.1 
1 325.4 

2009 
345.5 
1 360.7 

2006 
47.7 
0.9 

2006 
: 
0.8 
: 

2007 
47.7 
1.0 

2007 
: 
0.8 
41.0 

2008 
47.7 
1.0 

2008 
: 
0.9 
45.0 

2009 
47.7 
1.1 

2009 
: 
: 
50.0 

EN 

69 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Environment 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
Primary production of natural gas (thousand TOE) 

Net imports of all energy products (thousand TOE) 
Gross inland energy consumption (thousand TOE) 
Electricity generation (thousand GWh) 

Note

Note

11) 

2000 
82.4 
286.0 
40.0 
: 

2000 
3 562 
1 328 
0 
1 355 
4 174 
7 819 
10.7 

2001 
86.4 
280.3 
42.7 
75.9 

2001 
3 730 
1 232 
0 
1 642 
4 166 
7 959 
12.2 

2002 
89.4 
288.1 
33.9 
76.4 

2002 
3 689 
1 200 
0 
1 732 
4 967 
8 624 
12.3 

2003 
94.8 
281.0 
29.4 
76.1 

2003 
3 727 
1 138 
0 
1 789 
4 985 
8 828 
12.7 

2004 
94.9 
269.9 
41.0 
76.7 

2004 
3 852 
1 079 
0 
1 796 
5 090 
8 842 
13.3 

2005 
96.7 
260.8 
40.4 
75.9 

2005 
3 781 
1 017 
0 
1 854 
5 234 
8 902 
13.1 

2006 
98.1 
250.4 
36.1 
74.8 

2006 
4 128 
985 
0 
2 204 
4 866 
8 948 
13.0 

2007 
102.8 
247.3 
25.4 
74.0 

2007 
4 037 
937 
0 
2 349 
5 315 
9 323 
12.4 

2008 
99.1 
235.4 
30.3 
76.5 

2008 
3 964 
875 
0 
2 217 
5 491 
9 122 
12.6 

2009 
: 
: 
: 
77.7 

2009 
: 
: 
: 
: 
: 
: 
: 

Note

2007 

2008 

2006 

2003 

2001 

2005 

2004 

2002 

2000 

88.7 
1 169 
427 
1 234 
608 
626 
2 312 
482 
196 

107.4 
1 178 
438 
1 234 
632 
674 
2 829 
965 
208 

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous 
year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 
: = not available 
p = provisional value 
e = estimated value 
b = break in series 
1) Land area; break in series due to improved methodology. 
2) Since 2006, data is calculated on the basis of the sum of quarterly values. 
3) Gross series; include NACE Sections C to E. 
4) The balance of payments sign conventions are used. For FDI abroad a minus sign means investment abroad by the reporting economy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, while a minus sign 
indicates that disinvestment exceeded investment. 
5) Data as received by Eurostat in the framework of the annual fiscal notification procedure in spring each year. 
6) Gross foreign debt of the whole economy excluding Special Purpose Entities. 
7) 2000 to 2001, second half of the year; data used until 2006 refer to half-year periods and from 2007 used data refer to quarter periods. 
8) For 1996-2006, data refer to the second half of the year; data used until 2006 refer to half-year periods and from 2007 used data refer to quarter periods. 
9) 1996 to 2001, second half of the year; for 1996-2001, long-term unemployment refers to thirteen months or more; data used until 2006 refer to half-year periods and from 2007 used data refer to quarter 
periods. 
10) Second half of the year; data used until 2006 refer to half-year periods and from 2007 used data refer to quarter periods. 
11) 2000-2008: Croatia closed all coal mines in 1999 and 2000 and therefore, there is no production of coal starting in 2000. 

107.9 
1 181 
417 
1 286 
677 
716 
3 080 
1 183 
218 

106.9 
1 176 
466 
1 489 
848 
708 
3 067 
1 260 
150 

97.3 
1 202 
467 
1 348 
738 
883 
2 534 
1 583 
281 

108.5 
1 288 
454 
1 104 
727 
848 
3 726 
1 270 
308 

107.4 
1 211 
471 
1 205 
931 
813 
3 039 
1 338 
286 

103.4 
1 230 
483 
1 488 
783 
870 
3 034 
1 560 
304 

91.4 
1 196 
444 
1 347 
673 
686 
2 014 
678 
154 

2009 

100.1 
1 300 
447 
1 250 
695 
838 
3 442 
1 217 
337 

EN 

70 

EN