Croatia’s road to joining the EU

by Edoardo de Silva, Consultant and office manager for Camera di Commercio ItalAfrica Centrale

Feature 9 August 2013

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After 10 years of negotiations, Croatia becomes the second former-Yugoslav state (after Slovenia) to join the European Union on 1 July 2013. In a people’s referendum on 22 January 2012, an overwhelming 66.27% of Croats supported accession to the EU; then on 9 March 2012, the Croatian Parliament unanimously (136/0) ratified the Treaty for Accession to the European Union. One of the most enthusiastic countries to join the EU, Croatia has a lot to gain from the single European market and could be a very positive example for further EU enlargements in the Balkan.

The territory comprising Croatia today was first settled by Slavic speaking populations between the 6-7th centuries. An independent kingdom in the early Middle Ages, Croatia entered into a personal union with the Kingdom of Hungary in 1102. In later times, Croatia was a frontier region divided between the Habsburg and Ottoman Empires. During the Hungarian Revolution in 1848, although part of Hungary, the Ban (ruler) of Croatia sided with Austria against the Hungarian rebels. After the First World War and the dissolution of the old Austro-Hungarian Empire it became part of Kingdom of Yugoslavia.

During the Second World War, the Axis invasion in 1941 caused the dismemberment of Yugoslavia and the creation of the Independent State of Croatia, a satellite state ruled by the right-wing, ultra-catholic and xenophobic Ustase Movement. After the defeat of the Axis and the victory of Marshall Tito’s (himself half- Croatian) communist partisan movement, Croatia became part of newly formed Socialist Federal Republic of Yugoslavia. After Tito’s death in 1980, nationalism and separatist tendencies reemerged again and led to the disintegration of Yugoslavia.

From the initial break-up, it became apparent that Croatia and Slovenia were the most developed and wealthy territories of the former Yugoslavia and were the first to become independent. In stark contrast to Slovenia, where secession was achieved quickly and was relatively bloodless, Croatia’s attempt to gain independence sparked the Croatian War of Independence in 1991, lasting until 1995 with the victory of Croatia against Yugoslav and Serbian separatists. This war belongs to the series of conflicts known as Yugoslavian Wars that tore Yugoslavia apart and revived the horrors of World War II. The struggle for Croatian independence resulted in over 20,000 casualties and more than a quarter of a million displaced persons. After the conflict, Croa- tia moved firmly, although not without obstacles in the way, towards European integration, following in the footsteps of bordering Slovenia and Hungary towards EU accession.

Persistent Border Rivalries

Croatia will now return to a position similar to its old role when it was part of the so-called military frontier of the Austrian Empire. In the past, the country had numerous problems with neighboring nations and Croatia’s EU accession will affect relations in the Balkans where some issues regarding national borders remain open. Of special concern are the borders between Croatia and Serbia, Montene- gro and Bosnia-Herzegovina. Also, once it is officially an EU member, Croatia will have to abandon the Central European Free Trade Agreement (CEFTA) – a trade agreement between non-EU countries in South-East Europe in favor of the EU’s bilateral trade agreements with the rest of the Balkan countries and the EU. Perhaps another major change will be that Croatia will now have to guard the EU’s southern border from the other ex-Yugoslav states.

The possibility of further border disputes was dreaded by many in Croatia. Due to a disagreement with Slovenia mainly related to the area around the Gulf of Piran and its waters that caused Ljubljana to block Croatia’s accession from December 2008 until October 2009. In May 2011, the two countries decided to submit an arbitration agreement to the UN to solve their dispute and a formal decision is expected to be reached by 2014. However, the trouble with Slovenia did not end at lines on a map. Another dispute existed between the two countries regarding the “Ljubljanska Banka issue” on money owed by a Slovenian bank to Croatian depositors dating back to 1991.

The two countries reached an agreement to resolve the issue before Croatia’s accession that EU Commissioner for Enlargement and European Neighborhood Policy, Štefan Füle, welcomed as “a good deal for both countries and for enlargement. This is also a very good example how joint efforts in the area of good neighborly relations bring benefits for both sides and provide basis to solve open issues”.

Croatia also had a dispute with Italy regarding the possibility for Italian citizens to purchase land in Croatia, especially in Istria, which was once a part of the Kingdom of Italy and ceded to Yugoslavia after WWII. The fact that Italians were not allowed to own land in Croatia was considered discriminatory and demanded a solution for the problem. In 2006, an agreement was reached between the two countries allowing Italians to buy land in Croatia and vice- versa. Because of the quick resolution and Croatia’s open attitude to negotiations, Italy was one of the first EU countries to ratify Croatia’s accession treaty in March 2011.

Such resolutions of disputes are important lessons for Croatia’s other neighbors. Bosnia-Herzegovina, for example, shares a significant part of its border with Croa- tia. This will have serious consequences since Bosnia’s agriculture is based mainly on exports to Croatia and now Croatia will accept only goods and services complying with European standards. Many Bosnian Croats also have dual passports, and could take advantage of their Croatian citizenship to enter and work in the EU. In light of the ongoing debates surrounding Bulgaria and Romania’s Schengen accession, other Member States might implement new measures to make sure this type of migration from Bosnia is limited.

Croatia and the Yugoslav Wars

Croatia’s birth as an independent state occurred during the series of conflicts that led to the dissolution of Yugoslavia in the period between 1991 and 1999. Then led by President Franjo Tudjman, Croatia was involved in the conflict known as Croatian War of Independence (1991- 1995) and in the Bosnian War (1991-1995). In the first case, Croatia battled against Serbian and Yugoslav forces with the aim of achieving independence and preserving its borders, while in multi-ethnic Bosnia the conflict was fought between separatist Serbs backed by Belgrade and local Croats and Bosnian Muslims (Bosniaks). However, fighting between Croats and Bosniaks also occurred, one most prominent example was the destruction of the old Ottoman bridge in the city of Mostar by Croatian forces. Around 140,000 people died and about 4 million were displaced and according to the International Center for Transitional Justice acts of ethnic cleansing and war crimes were committed by all sides. Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) was a prerequisite for Croatia to start accession negotiations with the EU.

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) was a prerequisite for Croatia to start accession negotiations with the EU

Ul. Kralja Petra Krešimira IV. 51, 20000, Dubrovnik, Croatia

Dubrovnik, the Pearl of the Adriatic

British romantic poet, Lord Byron, called Dubrovnik, the “Pearl of the Adriatic”. Also known as Ragusa, this old port in Southern Dalmatia is since 1979 on the UNESCO list of World Heritage Sites. As a prosperous maritime republic, Dubrovnik was a great rival of the Republic of Venice in the Adriatic. After long defending its independence, a decline ensued, followed by Napoleonic and then Hapsburg rule. In the 1990s, the port city was heavily bombarded by Serbian/Yugoslav forces. Dubrovnik’s fame is due to its incredibly well preserved old city and by its even more impressive protective wall (almost 2 km). Apart from these ramparts, buildings and palaces of its glory days remain, such as Saint Blaise’s Church (the patron saint), the Sponza Palace and Rector’s Palace built in Renaissance style and the Franciscan monastery with a library housing about 30,000 vol-umes, 216 incunabula, 1,500 valuable handwritten documents.

Entry via the Hague

One of the criteria Croatia had to fulfil to join the EU was to address the legacy of the Yugoslav Wars. Croatia had to cooperate with the International Criminal Tribunal for the former Yugoslavia (ICTY), a body of the United Nations, to deal with the prosecution of war crimes committed during that period. Repeatedly, Croatia received requests from the ICTY for the extradition of some of its citizens and cooperation to fulfil these requests has often been considered insufficient. On one occasion, the fact that the ICTY considered efforts by Croatia to capture general Ante Gotovina, accused of war crimes and crimes against humanity, insufficient, brought to a postponement of the commencement of negotiations with the EU, one day before they were set to begin. Only after his arrest by Spanish police with assistance from the Spanish and Croatian governments in the Canary Islands, and his delivery to The Hague, could negotiations resume.

This connection between accession and cooperation with the ICTY, especially demanded by countries like the Netherlands, was often negatively perceived by sectors of Croat public opinion that caused episodes of Euro-skepticism. In 2011, when General Gotovina and his colleague General Markač were given extended prison sentences which were considered as unjust, there was a definite feeling of anti-Westernism in Croatia. However, the two generals were acquitted by the appeal chamber of the ICTY in November 2012 and released. Upon their return to Croatia, they were greeted as heroes by thousands of people. Croatia had fulfilled the condition to hand over war criminal suspects to the ICTY and no further objections to membership came with regards to this issue.

In the case of Chapter 27 (Environment), the Croatian legislation was considered totally incompatible with the acquis communautaire when negotiations commenced

The event was viewed negatively by Serbians who perceived the ICTY as hypocritical, anti-Serbian and not interested in obtaining a just and impartial verdict for all the parties involved in the conflict. The arrest and delivery to the ICTY of prominent Serb and Bosnian-Serb war criminals such as Radovan Karadžić in 2008 and Ratko Mladić in 2011 was considered a pre-condition for Serbia being awarded candidate status for EU membership. Former Serbian president Milošević was also arrested, but died in prison in 2006 in The Hague before the end of the process. What is sure is that the acquittal of Gotovina and Markač will not ease Serbia’s willingness to further cooperate with the court.

Remaining hurdles

Croatia’s accession to the EU has brought and will continue to bring several changes to the country’s internal politics. During the negotiation process, Croatia had to align its legislation to the 35 chapters of the acquis communautaire, the accumulated legislation, legal acts, and court decisions which constitute the body of European Union law. However, total alignment is considered too demanding to achieve for the candidate country and is not necessarily achieved by present member states.

In the case of Chapter 27 (Environment), the Croatian legislation was considered totally incompatible with the acquis when negotiations commenced. Particularly bad was the situation of the rivers such as the Danube, Drava and Neretva that risked extensive damage caused by channelling projects and industrial and domestic waste, while substantial air pollution was caused by metallurgical plant emissions. The trans-boundary UNESCO Biosphere Reserve “Mura-Drava-Danube” that also includes Slovenia, Austria and Hungary could face serious damages to their fragile ecosystem as will other Croatian rivers and its biodiversity.

Improving the environmental situation has been among the most difficult challenges to be implemented by other countries, like Slovakia and Bulgaria, respectively part of the 2004 and 2007 enlargements. In those countries, the environmental legislation and policy was also considered totally incompatible with the aquis when the chapter was opened. The situation is the same for countries from south-east Europe which figure among the candidates for EU membership, such as Serbia, Montenegro, Macedonia and Turkey. Also in their case radical improvements in environmental issues is needed.

Once part of socialist Yugoslavia, after Croatia’s independence the country slowly strode towards a market economy hindered by the damages caused by the war (particularly hit was its highly remunerative touristic industry) and by inefficient administration and widespread corruption, which had to be addressed. As a new EU member, Croatia will receive approximately €10 billion in EU grants through 2020 and the government plans to use the funds for infrastructure and energy projects and to attract foreign investors. In the absence of structural reforms and increases in efficiency, these benefits will be wasted. Croatia’s small- and medium-sized enterprises could initially suffer when attempting to compete within the European single market.

Overall, there will be a re-orientation of Croatian trade from the Balkans and CEFTA towards the EU, which will cause numerous problems with increases in tariff rates. To give an example one of most profitable Croatian companies, tobacco factory Rovinj, exports largely to neighboring Balkan countries and tobacco exports are expected to be hard hit by the process with an increase of prices and an indirect strengthening of the black market.

As a new EU member, Croatia will receive approximately €10 billion in EU grants through 2020 and the government plans to use the funds for infrastructure and energy projects and to attract foreign investors

Another concern for EU countries is due to the difficult situation of Croatia’s economy, which was badly hit by the economic downturn in 2008 and the effects of the Eurozone crisis, experiencing four years of recession and an unemployment rate of around 20%. In such a situation, to be part of the EU is considered in Croatia to be the only feasible option.

Transit hub

Croatia’s privileged position as a regional transit hub for goods and people will be enhanced with about €10 billion in EU grants by 2020 to boost public investment in infrastructure and energy. French construction company, Bouygues, will build a new terminal at the Zagreb International Airport. The project will cost €190 million in the first phase and is expected to boost Croatia’s tourism industry. EU accession does present some inconveniences in the energy sector since Croatia will have to open its market to European competition which will most likely lead to an increase in energy prices. Russia is also still very much present: as agreed between Gazprom and Croatia’s state-owned company, Plinacro, 2016 should see the realization of 62-mile long extension to Gazprom’s South Stream gas pipeline that will deliver natural gas through Croatia to Euro-pean gas markets. Together with the pipeline, a 500-megawatt power plant is expected to be built by Gazprom near the town of Osijek to maintain the domestic market for the fuel.

Last in Line?

The long path of Croatia’s EU accession seems to be almost complete and the country will be able to reap the benefits of its new status with its responsibilities and its many advantages, such as access to EU funds. The sector that will benefit the most from accession is tourism, which currently makes up 20% of the country’s GDP and will greatly enjoy the advantage of acceding into a larger market and the free flow of goods, capital and people.

Croatia could be a positive example for the other countries of the region, such as Serbia or Bosnia. Montenegro’s accession is strongly supported by Croatia and the two countries have signed an economic and tourism cooperation agreement in February 2013 that aims to improve cooperation in tourism, industry, environment, energy and agriculture. The prospect of joining the EU should encourage these countries to enhance important reforms and improve cooperation with their neighbors.

As seen with the border dispute between Croatia and Slovenia, old rivalries between Balkan states can be obstacles for further admissions. Croatia, once in the EU, could, for example, oppose or hinder negotiations with Serbia as in the case of Greece’s opposition to Macedonian membership. Candidate countries in the process of negotiation such as Turkey, where negotiations have been on indefinite standby are not expected to join anytime soon. In fact, after Croatia, no other country will join the EU this decade. Perhaps this is for the best given current economic distress. Certainly Brussels will consider further enlargements, but for the next years better to consolidate the new entry of Croatia.


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