European Commission Recommends no Corrective Action against Croatia

vladaLPJ Issue 133, May 18 2015

On 13 May, the European Commission (EC) adopted country-specific Economic Policy Recommendations (CSRs) for 2015 and 2016, urging member states to create jobs and stimulate growth.

Regarding Croatia, the EC found there was no need to take corrective action against the country, as part of the procedure to correct macroeconomic imbalances.  The EU executive grades the imbalances in six categories.  Upon evaluating the government’s National Reform Programme submitted in April, the EU executive placed Croatia in the fifth category, which covers member states with excessive imbalances that require specific monitoring and decisive policy action. The Macroeconomic Imbalance Procedure (MIP) is activated only for countries in the sixth category.

In February, the EC published its “Country Report Croatia 2015”, concluding that Croatia was experiencing excessive macroeconomic imbalances.  The Commission then said the economic situation in Croatia required decisive political action.  The country has been in the Excessive Deficit Procedure (EDP) since January 2014 (see LPJ 116).  Under the EDP, the government plans to trim the deficit to 5% of GDP in 2015, 3.9% in 2016, and 2.7% in 2017.  Based on the EC’s spring forecast (see LPJ 132), a timely and durable correction of the excessive deficit by 2016 is not expected…

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