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Shock and awe. Originally conceived as a military doctrine by a couple of geeks at the US National Defense University to describe the tactics applied to the attack on Iraq in 2003, this phrase could just as well apply to the reaction of the Croatian public in the wake of the International Criminal Tribunal for the Former Yugoslavia (ICTY) verdicts on a brace of Croatian officials recently sentenced to long prison sentences for their roles in the endgame of the break-up of the former Yugoslavia.

After yet another lengthy trial - seemingly a speciality of the ICTY even though it always claims its goal is to deliver speedy justice - Generals Ante Gotovina and Mladen Markac received initial verdicts of 24 and 18 years imprisonment respectively. For those living outside the former war zone, the verdicts seem like merely the latest in a series of decisions that have served to reinforce international prejudices about the tribal nature of conflicts in what erroneously or not is termed the Balkans.

In August 1995, Croatia's Operation Storm - named with more than a nod to 1991's Desert Storm attack on Iraq - seemed to have provided a convenient, if bloody, end to the battle of wills between a secessionist Croatia seeking to break away from the dominance of the Serbian authorities in the former Yugoslavia. An undisputed military triumph that dashed any hopes of Serbian hegemony in Croatia, Operation Storm also ultimately represented a public relations disaster for Croatia, which had long held to the maxim that it was fighting the good fight to establish once and for all its adherence to Western European liberalism. In the course of a few days, Croatian forces brushed aside feeble military resistance by the supporters of Serbian demagogue Slobodan Milosevic and effectively ended any dreams of a Greater Serbia. But at the same time, the killing of over 300 civilians and the expulsion of at least a further 150,000 individuals - as always in the Balkans the numbers are the subject of fierce dispute - created yet another historical bone of contention in the region, whereby Croatia was seen as employing the same brutal tactics at the end of the conflict that Serbia had used at its start.

The ICTY's decision, likely to be appealed in the next couple of months, to declare that Gotovina and Markac had been culpable of crimes against humanity unleashed a veritable tsunami of outrage in the Croatian capital Zagreb, where TV screens on the city's main square, Trg Bana Jelacica, transmitted the damning verdict to a disbelieving public. With Croatia's cooperation with the ICTY regarded as a prerequisite for the country's accession to the EU, the verdict has had a dramatic effect on public opinion regarding EU membership. Latest polls suggest that support for entry into Europe's elite politico-economic club has hit a record low, with just 23% of the population currently in favour of Croatia becoming the 28th member of the EU.

That presents a real headache for the ruling right-wing coalition headed by Prime Minister Jadranka Kosor, who has staked her political future on completing EU accession negotiations this summer. Subsequent to the successful completion of the negotiations that have dragged on for seven years, Kosor has promised that the government will hold a public referendum on EU entry later this year. According to the latest polls, however, it's conceivable that Croatia could become the first country in Emerging Europe to reject the offer of EU membership, a development that could have serious repercussions for Croatia's economic future.

Economic fallout

Based on projected EU entry in 2013, Croatia stands to gain roughly €1.7bn a year in funding from the EU, which would give a vital boost to an economy that has yet to emerge fully from a two-year recession. GDP this year is expected to be in positive territory - forecasts are that GDP will expand by 1-1.5%. However, that would be insufficient to have any positive effect on unemployment levels in Croatia, with the jobless rate running at 19%, or over 300,000 people. While many of its regional peers have cut public spending, with an eye on the elections scheduled for the end of this year the Croatian government has maintained a high level of support for the unemployed, alongside pensioners and war veterans. Collectively, those three social groups now outnumber those in work.

All this has put pressure on the country's finances, with the budget deficit expected to continue to grow, albeit a slower pace than previously, rising to 5% of GDP from 4.6% last year, the highest level since 2003.

Any delay to or even rejection of EU membership is likely to have a major negative effect on sentiment towards Croatia, which is struggling to retain investors' attention. Last year, for example, foreign direct investment was just €1.3bn, almost half the €2.21bn figure for 2009.