Croatia votes – a close fight for a poisoned chalice

By bne IntelliNews November 4, 2015

Andrew MacDowall in Zagreb -

A government widely seen as having squandered its mandate will face off against conservative opposition regarded as uninspiring at best in Croatia’s parliamentary election on November 8, with the prize something of a poisoned chalice. As the government’s election campaign slogan says, “Croatia is growing” again after six consecutive years of recession, but the pace is meagre and neither side seems willing to push the painful reforms that might accelerate it.

The opposition conservative Croatian Democratic Union (HDZ) is widely seen as most likely to top the poll, and potentially form a governing coalition with a rising new grouping of right-leaning independents. But the ruling Social Democrats (SDP), who won a thumping majority in the last election in 2011, have made a strong comeback in recent months.

The picture is further complicated by Croatia’s regional voting system, and a plethora of small parties and electoral coalitions. Croatia is split into 12 electoral districts. In the first (Zagreb) alone, 19 different party lists are vying for votes, many of which are groupings of several smaller parties: 57 parties in all are participating, including such oddities as the Dubrovnik Democratic Council. Dubrovnik is six hours away by road, but the party is roped into the Zagreb contest via its electoral allies.

As the finish line nears, most polls still show the HDZ-led electoral coalition, the Patriotic Coalition, marginally ahead, , or in another . But the HDZ’s lead has narrowed after a topsy-turvy few years. 

A year ago, the SDP-led government seemed to take a second term for granted, but this confidence was punctured when in January the HDZ’s Kolinda Grabar-Kitarovic won a surprise (and tight) victory in the presidential election, beating the SDP-backed incumbent, and the conservatives seemed set to repeat the triumph in the parliamentary vote. 

With Prime Minister Zoran Milanovic appearing belatedly to have realised he was not a shoo-in for re-election, the government unleashed a number of populist economic measures, while portraying the HDZ as a blast from a corrupt and harsh past. The HDZ was ejected from power in 2011 under a cloud of corruption that saw ex-PM Ivo Sanader put behind bars. Sanader was recently freed on bail pending retrial, but the taint of graft still clings to the party in the popular perception; that it is back on the brink of power after less than five years is to many a sign of the magnitude of the government’s failings.

But conversion of Swiss franc loans into Croatian kuna, debt relief for the poor, and the hiring of US consultant Alex Brown all have contributed to the SDP closing the gap on the HDZ. The economic recovery has also arrived in the nick of time, with the economy forecast to creep forward by 0.8% this year and 1.0% next, according to the International Monetary Fund (IMF). The government hopes that this, combined with measures like loan conversion, plus dislike of the HDZ and its eminence-grise leader Tomislav Karamarko, will outweigh the three previous years of recession and apparent directionless drift on its watch.

Ain't broke, don't fix it

The government argues that swingeing reforms and austerity were never needed in Croatia, and that it has been painstakingly rebalancing the economy towards sectors such as metals, pharmaceuticals, ICT and electronics, and away from over-reliance on construction, which fuelled the 2000s boom but then crashed. It has eased restrictions on “strategic” investments. It also disputes the IMF’s (and analysts’) assertion that the economy has shrunk every year since 2011. The consensus, however, is that has done too little to liberalise the business environment, pare back labour legislation, and tackle rising public debt, despite its comfortable majority.

The question is whether the HDZ is much more willing to push reforms. Its campaign messaging has increasingly veered away from economic policy and towards nationalist messages and boilerplate attacks on the SDP for its status as heir to the Croatian branch of the Yugoslav Communist Party. Karamarko has hinted that the left never wanted Croatian independence, and in rallies regularly cites the name of wartime leader, late president and HDZ founder Franjo Tudjman, of whom he was once an opponent.

The concept of left and right in Croatia is more historical and cultural than economic. One HDZ source with close knowledge of Karamarko says that his party is essentially a socialist one, with a voter base that is both socially conservative and sceptical of economic liberalism. And while the SDP is theoretically social democratic, it has attracted the votes of liberal urban voters who support reform but shun the HDZ’s social policies and tub-thumping.

Senior HDZ sources tell bne IntelliNews that the party will implement pro-business policies, and in particular ensure that Croatia keeps its fiscal deficit within the 3% mandated by the EU. But promising harsh austerity and free market reforms does not go down well with Croatian voters, so the party is taking a softly-softly approach, they say. “In spite of not being too persuasive, the HDZ is more likely to implement policies that are pro-business, such as tax cuts and clamping down on bureaucracy,” says one HDZ former minister on the liberal wing of the party. “On the other hand, SDP have already publicly stated that they do not believe major reforms are needed and their track record has proven that. A large portion of voters may agree with that policy.”

The truth is that few outside Karamarko’s close inner circle know what the leader’s concrete plans are should he become prime minister. A former head of Croatia’s internal security agency and interior minister, he plays his cards close to his chest, even keeping who would take senior cabinet posts vague, allegedly in what appears to have been a successful tactic to keep all his troops hungry.

Even many critics concede that Karamarko is aware of his limitations, and will seek to appoint seasoned experts – albeit from within the HDZ fold – to senior positions, reassuring investors and the EU and Croatia’s neighbours, with whom Prime Minister Milanovic has often picked fights. Grabar-Kitarovic, a former minister of European affairs, ambassador to the US and assistant secretary-general of Nato, is widely expected to take command of foreign policy, including attending sessions of the European Council.

Post-election complications

President Grabar-Kitarovic could play an important role in the formation of the next government if the parliamentary arithmetic is particularly complex. This is more likely than not. While the HDZ still holds out hope for an absolute majority, one senior party source said that it would seek partners to secure 85 of the 151 parliamentary seats.

Of the 151 seats, 140 are allocated on a geographical basis, with 14 for each of the 10 geographical electoral districts. The remaining two “districts” are reserved for the strongly pro-HDZ diaspora (three seats), and minorities within the country (eight seats, some already pledged to the SDP).

Josip Glaurdic, a Southeast Europe expert at the University of Cambridge, tells bne IntelliNews that he expects “Croatia is Growing” and the “Patriotic Coalition” to get 120 of the 140 geographically-determined parliamentary seats between them, with the fragmented allocation of the remaining 20, plus the 11 minority and diaspora seats, leading to a complex picture and potentially weeks of horse-trading to form a government.

The electoral district system puts parties that are either explicitly regional, or rely on strong vote bases in specific regions but have little national reach, in position to be kingmakers. Players to watch include the Istrian Democratic Party (IDS), the Croatian Democratic Alliance of Slavonia and Baranja (HDSSB), and perhaps most of all, the Bridge of Independent Lists (Most).

The IDS, from the Istrian Peninsula, was part of the SDP coalition but left after Milanovic’s decision to confront it head-on in local elections, and is reportedly leaning towards the HDZ; the HDSSB, a hard-right party from the east that split from the HDZ in 2006, counter-intuitively inclines to the SDP. With a week to go before the elections, Most was on the rise, polling around 6%. A grouping of youngish figures including popular mayors from Dalmatia, it is seen as this year’s “third option” that traditionally emerges in Croatian elections, and the most likely coalition partner for the HDZ.

Two other contenders for that moniker have faded – the environmentalist ORaH (a split from the SDP), and the anti-establishment Zivi Zid (“Living Wall”) have faded. Groupings led by political big beasts – former SDP-backed President Ivo Josipovic and former economy minister Radimir Cacic, and Teflon ex-SDP Zagreb mayor Milan Bandic – are expected to scrape seats in their strongholds.

To simplify things somewhat, the small but influential liberal-left Croatian People’s Party (HNS) of Foreign Minister Vesna Pusic and Economy Minister Ivan Vrdoljak has at least decided to stand inside the “Croatia is Growing” coalition.

Government figures who talk up the SDP’s chances of hanging on do so partly on the basis that there will be more parties amenable to coalition with it in the new parliament. Smarter candidate selection to take advantage of the complex preferential voting system will help Milanovic as well, says one, insisting that this is not clutching at straws.

He admits that the HDZ has a formidable ground game, borne of its many years in power and solid vote base energised by nightly rallies; while the “core vote” strategy may have failed Britain's Ed Miliband, it might just work for Karamarko. But voters remain unconvinced by the ex-spook, and the fight has revived something of the dynamic young leader that they once saw in Milanovic.

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