BALKAN BLOG: Octopus hunting in Croatia

By bne IntelliNews January 21, 2010

bne -

The Croatian capital Zagreb may be firmly in the grip of a mid-winter freeze, but the Croatian authorities are preparing to go octopus hunting. Animal rights activists need not be concerned, however, as the octopus in question is not some poor cephalopod, but rather a mafia-like cartel that is accused of wielding enormous political and economic influence away from the public eye and has been the hidden force behind a string of scandals that has rocked the country in recent months.

And the head of the octopus is alleged to be none other than one-time premier Ivo Sanader. How the mighty are fallen. Six months ago, Sanader was the untouchable prime minister of Croatia, having won two general elections for the ruling HDZ party. But his six years at the top of the Croatian political tree came to an abrupt and totally unexpected end at the start of July when he announced his resignation, for reasons that seemingly still remain a mystery to even his closest friends and political colleagues.

Six months on and the once all-powerful Sanader cuts a completely different figure from the assured - many would argue arrogant - one that had led the country since 2003. A disastrously ill-judged and unsuccessful attempt to lead a party putsch against his successor as prime minister, Jadranka Kosor, in late December led to him being thrown out the HDZ and subject to general opprobrium from the Croatian public. But Sanader's problems may only just beginning. There is fervent speculation in the Croatian press that Sanader is the head of the so-called octopus, a secret organization that created a parallel system of power in the Balkan state and has made Croatia an unwelcome byword for corruption and criminality and increasingly a no-go for foreign investors.


Now the Justice Ministry and the anti-corruption agency Uskok has been charged with cutting the octopus down to size and dismantling the unofficial levers of power. PM Kosor, who has won widespread praise for her strong anti-corruption since she came to power in July, has repeatedly said that "nobody is untouchable," interpreted by many as a pointed reference to her one-time boss. Sanader is now seen as the key figure in the background behind financial scandals at power company HEP, postal savings bank HPB, road company HAC and food company Podravka that have shaken the Croatian public's confidence in state institutions and tarnished the country's international image.

Sanader has also been connected with the shenanigans surrounding the emergency nationalization of Austria's Hypo Alpe Adria, with allegations that he financially benefited from the bank's entry into Croatia in the early noughties and actively canvassed for the granting of a banking licence for Bayerische Landesbank when it acquired Hypo Alpe Adria in 2007. A series of revelations in the Austrian and German press about Hypo Alpe Adria's business dealings in Croatia with a host of dubious figures including arms dealers, jewel thieves, war criminals and shady politicians has led to the coining of the phrase "K und K" - Kroatien und Korruption.

Stung by those foreign press allegations and Sanader's attempted putsch, Kosor has now decided to take decisive action and has established a special task force to purge Croatia of the influence of the so-called octopus. At stake is not only Croatia's reputation, but also its potential membership of the EU and its economic future in general, and its attractiveness as a destination for foreign direct investment in particular. Kosor's anti-graft drive will also enjoy the whole-hearted support of the newly elected president of Croatia, Ivo Josipovic, whose campaign based on fighting corruption and firmly establishing the rule of law captured the imagination and votes of the Croatian public. By slaying the octopus, which has caused enormous damage to government finances while enriching a privileged few, the authorities are hoping to restore confidence in Croatia, which has suffered from an almost complete lack of faith among foreign investors and entrepreneurs in any possibility of doing fair and effective business there.

Among the actions likely to taken will be a cabinet reshuffle, involving the removal of pro-Sanader ministers, a purge of state secretaries loyal to Sanader, and investigations in to the past actions of parts of the administrative infrastructure such as the customs service and the police, at both the national and local level.

Kosor, who has been widely praised by the likes of US foreign secretary Hillary Clinton for her uncompromising stance on rooting out institutionalized corruption in Croatia, will no doubt be hoping that by taking action against former members of her own government and political party, she will be able to convince the EU to finally agree to admitting Croatia as the latest member of the EU at the start of 2012.

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