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Scenarios about EU accession of Croatia

Scenarios about EU accession of Croatia. The impact of the global financial crisis on the industrial sectors of Eastern European countries / Industrial change in Croatia Zagreb, Croatia, 27-28 April 2009. Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr.

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Scenarios about EU accession of Croatia

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  1. Scenarios about EU accession of Croatia The impact of the global financial crisis on the industrial sectors of Eastern European countries / Industrial change in Croatia Zagreb, Croatia, 27-28 April 2009 Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr

  2. Croatia and EU perspective • 1991 – better starting position than most of CEE countries • 1992 – 1995 – war • 1995 – 2000 – quiet international isolation • 2000 – Zagreb summit – start of negotiations on SAA • 2001 – SAA signed • 2003 – membership application • 2004 – candidate status • 2005 – start of accession negotiations • 2012 – objectively-optimistic date of EU membership

  3. Problems and halts in negotiations • postponements & blockades: • ITCY cooperation (2005) • Fisheries and Ecological Protection Zone (2008) • border dispute with Slovenia (2008-?) • real problems of EU accession • judical reform; corruption and organised crime • public administration reform • lack of long-term economic policy and budget planning • high state subsidies (2005 2.1% BDP, EU-15 0.6%) • slow implementation of structural reforms – questionable implementation of adopted legislation

  4. Fulfilling membership requirements • by mid-2008 20 chapters opened but only 2 provisionally closed • by April 2009 22 chapters opened, 7 closed • progress reports from EC mostly positive, but certain critics appearing every year in the same form • lack of serious engagement in judical and public administration reform • slow return of refugees, cooperation with the ICTY • 2008 – “5th speed” • rapid process of legislation harmonisation with no studies of impact or costs/benefits • around 140 laws and 300 other legal documents harmonised in 2008 – 40% of total legislation harmonisation since 200.

  5. Macroeconomic indicators • average GDP growth rate 2010-2025 0.6 points higher (around 14% of GDP growth rate) • GDP 2025 up to 9% higher than outside EU • 1,1% effects of common market • up to 7,8% effect of institutional reform • overall price increase 1,4% (services, energy, housing) • lower shock than with NMS, because price level is already more harmonised with EU(2005 62% EU25, purchasing power 48%) • prices of real estate increase 4% (NMS around 30%) • positive balance to the EU budget (0.2% GDP in first 3 years) • no effect on unemployment rate, but positive effect to employment rate Institute for Economics Zagreb, 2007.

  6. Problems with macroeconomic indicators • difficult to distinguish effects of membership from other effects (NMS accession in times of favourable global economic trends, effects of transition...) • impossible to estimate full long-term effects • aggregate data hides real social impact • increasing differences in income and social status • some groups of population benefit, but some lose from EU membership + threat of social dumping inside EU

  7. Effects for the EU • neglible positive impacts on macroeconomic indicators of the EU due to small size of Croatian economy • population increase 1% • total output increase 0.3% • Croatia = 0,3% of EU export • EU demands transitional period for road transport

  8. Value added across sectors, 2001 Croatian economy vs. NMS • contribution of most manufacturing sectors low • contribution of services substantially bigger than in NMS Netherlands Bureau for Economic Policy Analysis, 2007

  9. Croatian economy vs. NMS Export of goods and services as % of GDP (2005) • services count for 45% of Croatian export, while world average is 20% (EU-25 20.5%)

  10. Sectoral impacts • increase in productivity and output as result of eliminating non-tariff barriers easier in manufacturing than in services • overall impact will depend on further liberalisation of services • most developed sectors in Croatia are the ones with low potential for causing effects to common market • transport, services • most export increase expected in sectors with low productivity and low share in total exports • textile, clothes

  11. Sectoral impacts on production Change of production level in % until 2025. as effect of common market Netherlands Bureau for Economic Policy Analysis, 2007

  12. Sectoral impacts on production Change in level of production in % until 2025 as result of institutional reforms Netherlands Bureau for Economic Policy Analysis, 2007

  13. Sectoral impacts AGRICULTURE • problems: high fragmentation + war effect (mines) • on short term costs higher than benefits • final result depends on results of accession negotiations and reforms undertaken before accession FISHERIES • high costs of harmonisation with EU standards and regulations • fleet modernisation needed • on short term costs higher than benefits ENVIRONMENT PROTECTION • costs: 5,5 – 10 billion EUR until 2023

  14. Foreign direct investments • 2005 cumulative FDI 2800 EUR per capita (40% GDP) • relatively high comparing to most transition countries • problem: most of FDI in services (60%) and in already existing companies (privatisation) • banking sector, commerce, telecommunications • privatisation incomes spent for filling holes in budget • low share of green-field FDI • causes: non-existence of clear strategy of economical and especially industrial development • The Industrial Policy of the Republic of Croatia in Preparation for Accession to the EU (2008)

  15. Flexibilisation of labour legislation? Employment Protection Legislation Index 2004.

  16. Conclusions • overall impact of EU membership depends much more on results of institutional reforms than exact date of accession • lack of long term economic policy and sectoral costs and benefits analysis undermines chances of benefiting from accession • as trade unions, we are more interested in overall impact on social picture of Croatia than macroeconomic indicators

  17. Thank you for attention.

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