Croatia’s HDZ and Most agree to form new government

Croatia’s HDZ and Most agree to form new government
By Akin Nazli in Belgrade October 7, 2016

The Croatian Democratic Union (HDZ) and the Bridge of Independent Lists (Most) have reached a coalition deal after Most’s national council approved late on October 6 the understanding agreed between the two parties the previous day.

Most, which has 13 seats, and HDZ, which led the September 11 polls with 61 seats, have been holding a series of coalition talks for the last three weeks. Now the deal with Most has been struck, HDZ leader Andrej Plenkovic is expected to form his new government within weeks, allaying fears of a long period of uncertainty following the September 11 snap election.

Plenkovic expects to enjoy a strong majority in the 151-seat parliament, which is due to hold its first session on October 14, as members of smaller parties have also said they will back the government. 

He is due to meet President Kolinda-Grabar Kitarovic on October 10, when he is expected to be nominated prime minister designate, after which he will have 30 days to form the government. 

Eight national minority MPs, the Croatian Peasant Party’s (HSS) five MPs and Milan Bandic Party’s four MPs will also support the new government, Total Croatia News reported on October 7. The Milan Bandic Party won two seats in the September 11 polls, but later two more MPs joined the party.

“It seems as though the HDZ-led coalition will have a decent working majority at this stage,” Tim Ash from Nomura Securities said on October 7 in an e-mailed comment. Another important question is whether Croatia’s current Finance Minister Zdravko Maric will remain in his position, and also his weight within the cabinet to carry forward reforms, according to Ash.

Most will have four ministries and one deputy PM post within the new cabinet, according to Total Croatia. HDZ and Most have agreed to equally share the four-year term for the parliamentary speaker post.

After the November 2015 elections, it took two and a half months to form a coalition, but this time new government is expected to come into power more quickly. However, a hard agenda waits again the new government.

Long-standing EU reform processes initiated by current technocrat Prime Minister Tihomir Oreskovic cabinet have been on hold for months, after the previous government collapsed in June. The European Commission has already announced that it is waiting for the new government to evaluate Croatian lenders’ claims over the Adriatic country’s Swiss franc loan conversion programme.

The ongoing dispute with Hungarian state-owned energy company MOL over the management of Croatian state-owned energy company INA will remain important during the new HDZ-Most government. Local media speculates Most will maintain control of the energy portfolio and INA case in the new cabinet. The previous HDZ-Most coalition collapsed due to former HDZ leader Tomislav Karamarko’s alleged conflict of interest regarding INA through his wife’s indirect business connection with MOL officials.

On the economics front, new government will be in a comparatively favourable position. Recently, the World Bank revised its 2016 GDP growth forecast for Croatia up to 2.4% from a previous 1.9%. However, the Bank’s senior Croatia economist Sanja Madzarevic-Sujster warned that new government should focus on structural reforms at the beginning of its term to strengthen competitiveness and stabilise public finances.