25th Oct 2016


Why does Croatia need lobbying to join the EU?

  • Croatia's PM Jadranka Kosor: Cosmetic or real reforms? (Photo: Croatian Government)

Croatia is being heralded as the next candidate nation to join the European Union. Intriguingly, Austria and Germany, Croatia's historical supporters have robustly lobbied for an accelerated entry into the single market.

On January 27, 2011, The European Parliament's (EP) Foreign Affairs Committee adopted a draft resolution stating that Croatia can conclude its EU membership talks by the end of June 2011. The document, drafted by Austrian MEP Hannes Swoboda, the assembly's rapporteur for Croatia, praised Croatia for its "substantial" reform progress.

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In a sharp contrast to Austrian and German leaders lauding Croatian politicians, the 2010 EU Progress Report on Croatia released in November conveys that an unreformed judiciary and rampant political corruption represent major challenges: "The number of court verdicts has increased but this mainly concerns petty corruption cases. There have been no final court rulings in serious political corruption cases. A high number of reported cases are dismissed after pre-investigation, with insufficient scrutiny."

The brunt of Croatia's rampant corruption is now being felt by Austrian and German taxpayers as they paid a hefty bill generated by their own banks' dubious Balkan transactions. Germans bailed out BayerLB with €10 billion of which €3.8 billion was directly linked to the losses by Austrian Hypo Alpe Adria Bank's foray into the Balkans.

Germany's public prosecutor is probing into reasons why BayerLB purchased loss-making Austrian Hypo Alpe Adria. In Austria, its taxpayers paid an initial €500 million for Hypo Bank's nationalisation.

Austria's Carinthian parliamentary commission is investigating Hypo Alpe Adria's €8 billion worth of suspicious uncollected loans in 12 countries with several €100 million loans directed to Croatia. The commission's representatives Rolf Holub and Peter Pilz have widened their investigation to identifying Austrian and Croatian politicians who took part in the import of weapons into Croatia in the early 1990s and siphoned off €2 billion to secret bank accounts in Hypo Alpe Adria.

The Austrian commission states that these monies were then laundered to Croatia in the form of Hypo Bank loans. Military services in Vienna possesses documents from 2001 which identify the late Franjo Tudjman, then-president of Croatia, a jailed former general Vladimir Zagorec and 10 other Croatian politicians as key individuals in this colossal corruption and money-laundry scheme.

Mr Holub from the Austrian commission confirmed that Croatia's former Prime Minister Ivo Sanader and former head of the ruling party Croatian Democratic Union (HDZ) is the main focus of their probe in Croatia followed by Germany's honorary consul in Rijeka, Croatia and HDZ party loyalist Mr Robert Jezic.

What makes Mr Swoboda and his colleagues in Brussels think that Croatia will confront this unscrupulous power base by July 2011, if this Balkan nexus comprised of organized crime, corrupt government officials and their private partners haven't been touched for two decades?

Although externally initiated and aided investigations have drawn attention to corruption in Croatia, they have not yet produced any high-profile conviction.

When observing two high profile corruption cases including Croatia's former cabinet ministers Damir Polancec and Berislav Roncevic, the court's initial decisions have now entered the lengthy appeal process.

The EU Progress Report amplifies this concern by stating, "A track record of effective investigation, prosecution and court rulings remains to be established, especially for high level corruption."

Hungary's prosecutor probing into Hungarian oil company Mol's questionable transactions with state-owned Croatia's food company Podravka resulted in the indictment on fraud of Croatia's then-Deputy Prime Minister Damir Polancec.

According to Hungary's prosecutor, Mol provided a €34.2 million loan to Podravka via the Hungarian OTP bank, in return for Croatian oil company INA's shares, even though Podravka does not own a single INA share. Before taking office, Mr Polancec served as board member of Podravka and according to the Financial Times, senior Podravka officials are suspected of diverting funds to buy private shares with company money.

In 2006, Austria's Interpol alerted Croatian authorities of $4.7 million withdrawn in cash from an Austrian bank by a Croatian citizen who happened to be a broker in the deal involving Croatia's state-owned shipyard Brodosplit. Immediately, the State Attorney's Office in Graz, Austria, initiated criminal proceedings against the broker on money laundering suspicions.

After a four-year delay, Croatia's prosecutor finally decided to indict the broker. The broker claims that €2 million had been siphoned off every month for many years from Brodosplit for the governing party Croatian Democratic Union's (HDZ) financing needs.

The recent 2010 Daimler bribery case unearthed by US authorities provides yet another example of collusion between Western companies and Balkan politicians. According to the US Securities and Exchange Commission, top executives of Daimler admitted paying €4.7 million in bribes to Croatian officials from 2002 to 2008. This inquiry has failed to produce results.

In spite of cosmetic changes initiated by Croatia's current Prime Minister Jadranka Kosor, a number of senior cabinet members and top HDZ politicians remain in power amid allegations of corruption and illicit enrichment. Ms Kosor's own residential property in Zagreb has come under question by Croatia's few independent media sources including political weekly Nacional and online media Index.HR. The rightful owner of the facility now occupied by prime minister Kosor lost property rights under an opaque and corrupt-ridden system.

The EU Report poignantly states, "the concept of conflict of interest is still little understood in Croatia" - which is to say it is very-well understood and not sanctioned. Confiscation of illicit enrichment amassed by public officials and their cronies based on the reverse burden of proof could serve as the first step in resolving past political corruption cases and effectively deterring future crimes.

Devoid of the rule of law, protection of property rights, an independent judiciary and clear separation of powers, it is impossible for Croatia to effectively wage war against political corruption and organized crime.

Nearly €4 billion of EU taxpayer funds are being prepared as a hand-out for Croatia's politicians to spend when the candidate country joins the EU. Brussels is sending an unconditional €472 million in pre-accession aid to Croatia. Funds would be better used by deploying visiting judges and prosecutors from countries with a strong rule of law tradition to assist in creating Croatia's independent judiciary. Strict monitoring mechanisms applied in Croatia - similar to those established for Bulgaria and Romania should help ensure Croatia's irreversible transition to a rule of law nation.

As long as the EU sends assistance funds which will total in the billions of euros, Brussels' leaders have an obligation and fiduciary responsibility to require what is best for EU member state taxpayers and honouring Croatia's citizens yearning for real reforms.

In turn, Croatia's politicians must be required to demonstrate responsible conduct and provide accountability for EU taxpayer funds spent on the prolonged reform process. This must be verified by independent sources and not politicians' parochial interests.

Natasha Srdoc and Joel Anand Samy are co-founders of the Adriatic Institute for Public Policy in Rijeka, Croatia


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