Croatia: Latest working life developments – Q1 2018

A slight economic slowdown, serious problems with big companies, a protest rally by Croatian Telekom workers and preparations for the National Reform Programme are the main topics of interest in this article. This country update reports on the latest developments in working life in Croatia in the first quarter of 2018.

Economic growth dependent on structural reforms

The fourth quarter of 2017 recorded a 2% increase in Croatian GDP (3.3% in the third quarter) and the yearly average for 2017 was 2.8%. The same growth is expected to be recorded in the first quarter of 2018. This was likely due to the ongoing poor business climate, a lack of major reforms, and a lower-than-expected absorption of EU funds. The European Commission stressed in its Country Report Croatia 2018 that the country’s prospects of speeding up its economic growth would increasingly depend on its capacity to implement structural reforms. According to the Commission, Croatia’s complex relations across levels of government are preventing the efficient utilisation of resources and delivery of public services. Raising potential growth requires structural reforms that will allow for faster productivity growth, higher participation in the labour market, and a more attractive business environment for investment.

Companies in serious trouble

Croatia’s largest shipyard, Uljanik in Pula, is in danger of going bankrupt because the government did not approve a state guarantee for an emergency rescue loan. Several foreign shipbuilding companies were interested in taking part in Uljanik’s financial restructuring but, on 27 March 2018, the company selected a domestic strategic partner: Kermas Limited.

Trade unions are against the mass layoff of workers and the closure of the shipyard. The workers have not received a salary for five months and the unions have announced a strike if they do not receive their salaries very soon. As workers are also Uljanik shareholders, and hold more than 40% of the shares, it could be said that they are threatening themselves.

The case of food and retail conglomerate Agrokor is another of the main political and economic talking points in Croatia. In February 2018, about 10 months after the government took control of the company (via the so-called ‘Lex Agrokor’ law) and appointed Ante Ramljak as a special administrator, Mr Ante decided to resign. He was replaced by Fabris Peruško, who had been a member of the board of directors of Tisak, one of Agrokor’s subsidiaries.

Croatian Telekom workers stage protest rally

On 17 March 2018, workers from Croatian Telekom (HT) staged a rally protesting wage cuts and lay-offs, and requested a meeting with the management. As well as cutting wages, HT has been laying off 150–200 employees each year and has made 50% of its staff redundant over the last four years. The company is also entrusting more and more tasks to external servers, agency workers and students.

Social partners prepare National Reform Programme 

In March 2018, the government held five thematic meetings with social partners to prepare for the 2018 National Reform Programme. However, trade unions complained that it was more like a presentation from the government than a meeting, because their proposals and comments were usually ignored.

Commentary

The European Commission assesses Croatia's compliance with the country-specific recommendations accompanying the Country Report Croatia 2018 on a five-grade scale: 'no progress', 'imited progress', 'some progress', 'substantial progress' and 'full implementation'. Out of five major recommendations (concerning the areas of fiscal framework, the pension system, educational reform, public administration, and business regulation), four areas registered 'limited progress' and one area (public administration) displayed 'no progress'. The lack of progress is worrying as it is likely to hamper the country’s growth prospects, particularly in light of the ongoing problems with Uljanik and HT.

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