Andrew MacDowall in Split -

Across Croatia, the bunting is up and parties are set to kick off in the main squares of its towns and cities as it celebrates re-entry to the European mainstream. But as Croatia seals EU membership, anti-corruption analysts are urging the country to maintain the fight against graft.

Amidst the good cheer, economic reform has stalled and GDP has not shown meaningful growth since 2008, yet Zagreb has pushed past the strict criteria to join the club. Now, with the watchdog concerned that having achieved its goal Zagreb's efforts to stamp out graft risk coming to a standstill, Transparency International (TI) has slammed the failure to really get to grips with political corruption.

For Croats, always proudly Western-looking, favourable comparison to their Balkan neighbours in a report looking into party political financing in the region will come as scant consolation. The international watchdog focused on Croatia's opaque system of campaign financing as a particular weakness.

"Croatia should make political party financing more transparent to strengthen its democracy as it prepares to join the European Union (EU)," TI said in a statement. The report ranks Croatia third from bottom in the region in terms of "the reliability of political parties' financial reporting", beating only Serbia and Macedonia.

"According to the report, independent experts in Croatia estimate that official reports on campaign financing only cover up to 50-60% of the actual revenue in campaign budgets," TI said. A common issue across the whole region is that structures and legislation are in place, but implementation is patchy, and this is apparently the case in Croatia's efforts to increase transparency.

"A lack of reliable and accurate financial reporting from political parties leaves the door open to corruption and abuse of the democratic system by wealthy donors, including big business," said Anne Koch, Transparency International's regional director for Europe and Central Asia.

Unholy alliance

Luka Oreskovic, a Croatian researcher at Harvard University, told bne that the issue of election campaign finance in Croatia is closely tied to the broader challenge of corruption, and that efforts to tackle graft have necessarily to encompass those to enhance transparency in political funding. However, he concedes that reforms in recent years have substantially reduced the flow of suspect money.

Previously, an unholy alliance between parties and PR and marketing companies led to the recycling of cash from the advertising spend of state-owned enterprises (SOE) back to the ruling party. Oreskovic says that this channel has now been "completely eradicated," noting that state-owned companies (of which Croatia still has a number as its privatisation efforts have slowed) are now banned from using PR agencies.

That makes it "highly unlikely that services of PR and marketing companies will be used by SOE's in exchange for later favorable campaign financing and advertisements for the party in power," Oreskovic suggests. However, TI's report suggests "there is evidence to suggest that the media and advertising companies sell advertising space to parties and candidates at different prices", despite legislation intended to stamp out these practices.

As the watchdog says, Croatia has gone further down the path of tackling high-level corruption than most of its neighbours. The jailing last year of former prime minister Ivo Sanander for graft and war profiteering, for instance, has few precedents. Oreskovic cites it as an example of the country's seriousness in the struggle.

The hope is that Croatia's long-awaited EU membership will be an incentive to intensify that campaign, rather than to stall it, as many claim happened in the CEE states that entered the European bloc in 2004.