Croatian Parliament approves revised budget aims to limit deficit

Croatian Parliament on Friday approved the rebalanced budget for 2014 after several months of debates. With the new and revised budget, the revenue has been increased by 4 billion kunas (721 million U.S. dollars) to 117 billion kunas. Projected expenditures have been increased by 100 million to 130.7 billion kunas. The highest amount of the extra revenue will come from the restructured pension system. While introducing the new version of the budget, Finance Minister Slavko Linic said higher revenues and savings need to be ensured, "with the final aim to reduce the deficit and public debt, in line with the recommendations of the European Commission (EC)." Croatia, joined the European Union (EU) in July 2013, is struggling to observe EU's limits on budget deficit. As a newest EU member, it has s three-year period to ensure its deficit under 3 percent of the GDP. The new budget aims at 0.2 percent growth in 2014, instead of the previous 1.3 percent. The Government expects the growth will be stimulated by the foreign investments. Croatia plans to increase revenue by imposing higher health contributions, a higher lottery tax and concession fees. The government will also draw on part of the profits of public companies and reduce the number of beneficiaries of private pension funds. There will be no bonuses for public sector employees and the subsidies for agriculture, ship building and railways. Linic said this is one of the hardest budgets while admitted that it will take years to bring the national economy back to balance and growth. "We really need a few years to put Croatia back on the production track, higher exports and that, to put it simply, we have the economy which is functioning and investing," he said. Croatia has been in the recession for the past 5 years and the EU now expects it to cut all the expenditure that is damaging the wanted goal of 3 percent of the GDP. On Thursday, after holding talks in Brussels with European Commissioner Olli Rehn, who deals with finances and monetary issues, Croatian Prime Minister Zoran Milanovic said it would be "too radical, from the social as well as from the economic point of view" if Croatia cut the deficit in the first year to the extent requested by the European Commission. "The EC has its position, it works with 28 member countries and must therefore have a tougher stance. But we have our own interests and are working seriously. "The correction of 2.3 percent of GDP in the first year, as requested by the EC, is huge. We can bite the bullet, but not the whole cartridge-belt," Milanovic said.