Tomislav Karamarko resigned on June 21 as the leader of the Croatian Democratic Union (HDZ) after he could not fulfil his promise to form a new coalition in the parliament, following the collapse of the coalition between HDZ and its junior coalition partner Most, Hina reported.

Karamarko’s resignation was one of the junior coalition partner Most’s pre-conditions to save the government. However, the coalition between HDZ and Most does not seem to have a chance to survive without holding snap elections, after the parliament decided to vote on June 20 in favour of the main opposition Social Democratic Party’s (SDP) motion to hold early elections, which are now expected to be held in September.

Andrej Plenkovic, also a member of the European Parliament, emerged as the first candidate for the HDZ leadership post. Plenkovic said on June 20 in a TV interview that he was prepared to run for HDZ president following Karamarko’s resignation, according to Hina. However, Oleg Butkovic, vice president of HDZ, said on June 21 that Plenkovic was only one of the possible candidates for the new party chief, Hina also reported.

On June 15, the parliamentary conflict of interest committee said that Karamarko had been guilty of a conflict of interest over his wife’s business links to a lobbyist working for the Hungarian energy company MOL. Karamarko had also faced a confidence vote on the issue, called by the opposition Social Democratic Party, but this became irrelevant when the HDZ filed a no-confidence motion against Oreskovic.

Karamarko resigned from his Deputy PM post on June 15 amid a growing political crisis in the country. Karamarko’s resignation was believed to be part of the strategy of the Patriotic Coalition, led by the HZD, in advance of new rounds of coalition talks following the expected fall of the government. However, Kreso Beljak, leader of the Croatian Peasant Party (HSS), a junior partner in the ruling Patriotic Coalition, said on June 18 that the Patriotic Coalition as such no longer existed.

Early elections are likely to boost the opposition Social Democratic Party, but look unlikely to bring about a radically different result from last November’s election. Tim Ash from Nomura Securities said on June 8 that Karamarko seems to have pressed the self-destruct button on the ruling HDZ, in a desperate bid to save his own political career. The poll ratings of the HDZ are already suffering, and the party could lose heavily in early elections.

Snap polls will also cause delays in addressing Croatia’s deep-seated economic challenges. Oreskovic claimed on June 3 that early elections would cost Croatia between €1bn and €2bn, and would hurt on-going reforms.

The parliament will be dissolved by July 15. Early elections should be held after 30 days and before 60 days of the dissolution of the parliament, according to Croatian legislation. President Kolinda Grabar-Kitarovic will decide the exact early elections day.

The coalition government collapsed on June 16 after technocratic Prime Minister Tihomir Oreskovic lost a confidence vote. The current cabinet will remain in power as the caretaker government until the new cabinet is formed.

“The question is now “can/will all this political uncertainty kill the recovery?”, according to Ash.

Despite the ongoing political turmoil, macroeconomic indicators for Croatia have remained promising since last year. However, the political stability required to implement long-demanded reforms has not been achieved yet.

Teneo Intelligence said in an e-mailed comment on May 25 that the expected collapse of the coalition would cause further delays to the implementation of economic reforms.