Tomislav Karamarko, the leader of the senior ruling Croatian Democratic Union (HDZ), said on June 7 that the party has initiated procedures to remove technocratic Prime Minister Tihomir Oreskovic.
The collapse of Croatia’s ruling coalition has been happening step by step, but its end now seems certain. Croatia’s main opposition party, the Social Democratic Party (SDP), has decided to support HDZ’s non-confidence motion against Oreskovic, meaning the prime minister is virtually certain to be ousted given the overwhelming majority the two parties command in the parliament.
Karamarko said on June 4 that Oreskovic should resign or HDZ would seek a government reshuffle. The previous day, Oreskovic called on both his deputies - Karamarko and Bozo Petrov, leader of the HDZ's junior coalition partner Bridge of Independent Lists (Most) - to resign due to an on-going row between the coalition partners over a no-confidence vote against Karamarko.
Karamarko defined the current government as “dysfunctional” and said that the HDZ does not want to be a “clown in this bad story” on June 7, according to About Croatia. The non-confidence vote against Oreskovic will be a “positive shock” and there is still time for a government reshuffle, according to Karamarko.
The deputy prime minister also wrote on his Facebook page that Croatia has “no time for ... high level scrimmages” and that the HDZ “no longer wants and will not participate in political intrigue and games”.
Karamarko said on June 4 that early elections were possible.
Zoran Milanovic, the head of the SDP, is also keen for elections to be held. Milanovic said on June 7 the that SDP will push for early elections by the middle of next month.
"We are in a complicated situation ... and the message is that we need to go to the polls as soon as possible," said Milanovic told a press conference at the party's headquarters on June 7, according to a party statement.
Tim Ash from Nomura Securities reiterated on June 7 in an e-mailed note that it will be hard to see the market-friendly Oreskovic surviving, given the SDP’s decision to vote to oust him. “So this could be the end of the Oreskovic/[Finance Minister Zdravko] Maric double act which played so well with investors over the past six months, according to Ash. Maric likely will stay for the time being as long as the HDZ still leads the coalition government, Ash said.
The timing of the no-confidence vote against Oreskovic is unclear. If it is held before the SDP’s no-confidence motion against Karamarko, which should be held by June 18 according to Croatian legislation, Karamarko will escape from facing a no-confidence vote in the parliament since the current ruling coalition will have already collapsed.
After the HDZ files the no-confidence vote against Oreskovic, the government has eight days to send the motion to the parliament, according to About Croatia. About Croatia also reported that if a new prime minister is not elected by the parliament within 30 days of the collapse of the current government, the president should call early elections.
Erste Group research said on June 6 that politics will remain the top story in Croatia while the no-confidence motion against Karamarko prompts questions about political stability in the region. “The political situation in Croatia is still unclear and it is very hard to make any sound predictions,” Erste said, adding that “the probability of early elections is clearly on the rise, but a reshuffle of the government would be more rational for coalition parties HDZ and Most, as both could be strongly hit in snap elections.”
While the Croatian government has been approaching to the end, concerns over the future of the reforms initiated by Oreskovic’s government has been rising. Another concern is whether the current political turmoil will damage the recent macroeconomic recovery. Croatia emerged from a six-year recession in 2015.
A possible snap election seems unlikely to bring a radically different result from last November’s election, and is even less likely to address Croatia’s deep-seated economic challenges. Oreskovic warned on June 3 that early elections would cost Croatia between€1bn and €2bn, and would also hurt on-going reforms.
The current ruling coalition came to power in January, and holds only 76 seats in the 151-seat parliament, giving it a very slim majority especially following Most’s loss of four MPs.
Oreskovic’s cabinet has never enjoyed comfort since it came into power. However, it seems that the claims that surfaced about Karamarko’s wife Ana Karamarko’s business links with a lobbyist working for Hungarian state-owned energy company MOL - precipitating the current crisis - will be the final nail in the government’s coffin.