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Economy of Croatia

Following World War II, rapid industrialization and diversification occurred within Croatia. Decentralization came in 1965, allowing growth of certain sectors, particularly the tourist industry. Profits from Croatian industry were used to develop poorer regions in the former Yugoslavia. This, coupled with austerity programs and hyperinflation in the 1980s, contributed to discontent in Croatia.

Privatization and the drive toward a market economy had barely begun under the new Croatian Government when war broke out in 1991. As a result of the war, the economic infrastructure sustained massive damage, particularly the revenue-rich tourism industry. From 1989 to 1993, GDP fell 40.5%. With the end of the war in 1995, tourism and Croatia's economy recovered moderately. However, corruption, cronyism, and a general lack of transparency stymied meaningful economic reform, as well as much-needed foreign investment.

Croatia's economy turned the corner in 2000 as tourism rebounded. The economy expanded by 5.6% in 2002, stimulated by a credit boom led by newly privatized and foreign-capitalized banks, some capital investment (most importantly road construction), further growth in tourism, and gains by small and medium-sized private enterprises. These trends continued, with credit growth fueling strong demand in construction and services, resulting in 4.8% GDP growth in 2006. Unemployment, although still high, began a steady decline over this period. Croatia also benefited from macroeconomic stability over the preceding several years with a stable exchange rate, low inflation, and shrinking government deficits. The start of European Union accession talks in 2005 and the prospect of NATO membership also helped attract higher levels of foreign investment.

Despite these gains, however, substantial challenges remain, particularly in reforming the judicial system and reducing corruption. The privatization process, begun in the 1990s, has been unsteady, largely as a result of public mistrust engendered when many state-owned companies were sold to the politically well-connected at below-market prices. The government sold three large metals plants in early 2007, but the Croatian state still controls a significant part of the economy, with government spending accounting for as much as 40% of GDP. Some large, state-owned industries, such as the country's shipyards, continue to rely on government subsidies, crowding out investment in education and technology needed to ensure the economy's long-term competitiveness.

Croatia has so far weathered the global financial crisis reasonably well, but faces significant challenges in 2010 and beyond. The government has taken steps to implement a plan for economic recovery, but has met with resistance from unions and the opposition. GDP contracted by 5.8% in 2009 and is expected to be flat in 2010, largely due to failing companies, job losses, and therefore a sharp decrease in consumer spending. Croatia's external imbalances and high foreign debt present risks as well, as continued access to foreign credit may be severely limited. An inefficient bureaucracy, relatively high labor costs, and lack of transparency in taxes, fees, and the public tender process have all led to a generally unfavorable climate for foreign investment. To address this, the government has begun to eliminate certain non-tax fees on business, consolidate overlapping government agencies, and identify administrative barriers to foreign investment, but progress is slow.

Economy
Real GDP growth (2009): -5.8%.
Inflation rate (2009): 2.9%.
Unemployment rate (International Labor Organization method, 2009): 9.7%.
Natural resources: Oil, bauxite, low-grade iron ore, calcium, natural asphalt, mica, clays, salt, and hydropower.

Geography of Croatia

Croatia serves as a gateway to eastern Europe. It lies along the east coast of the Adriatic Sea and shares a border with Yugoslavia (Montenegro and Serbia), Bosnia & Herzegovina, Hungary, and Slovenia. The republic swings around like a boomerang from the Pannonian Plains of Slavonia between the Sava, Drava, and Danube Rivers, across hilly, central Croatia to the Istrian Peninsula, then south through Dalmatia along the rugged Adriatic coast. Croatia is made up of 20 counties, plus the city of Zagreb and controls 1,185 islands in the Adriatic Sea, 67 of which are inhabited.


Official Name: Republic of Croatia
Area: 56,538 sq. km. (slightly smaller than West Virginia).
Major cities (2001 census est.): Capital--Zagreb (770,000). Others--Split (200,000), Rijeka (168,000), Osijek (130,000).
Terrain: Croatia is situated between central and eastern Europe. Its terrain is diverse, containing rocky coastlines, densely wooded mountains, plains, lakes and rolling hills.
Climate: Croatia has a mixture of climates. In the north it is continental, Mediterranean along the coast and a semi-highland and highland climate in the central region.

Government of Croatia

The Croatian Parliament, also known as the Sabor, became a unicameral body after its upper house (Chamber of Counties) was eliminated by constitutional amendment in March 2001. The remaining body, the Chamber of Representatives, consists of 153 members who serve 4-year terms elected by direct vote. The Sabor includes 140 members from 14 geographic districts within Croatia (each district holds 10 seats), as well as eight seats guaranteed to representatives of national minorities (3 for the Serb minority, one each for several other smaller groups), and seats for Croatians abroad without fixed residence in Croatia, the large majority of whom reside in Bosnia-Herzegovina. As of the November 2007 parliamentary elections, the diaspora representatives held 5 Sabor seats. Following changes to the constitution in 2010, diaspora representatives would be guaranteed 3 seats in the Sabor. The Sabor meets twice a year--from January 15 to July 15 and from September 15 to December 15.

The powers of the legislature include enactment and amendment of the constitution, passage of laws, adoption of the state budget, declarations of war and peace, alteration of the boundaries of the republic, and carrying out elections and appointments to office.

Following the death of President Tudjman, the powers of the presidency were curtailed and greater responsibility was vested in Parliament. Ivo Josipovic was elected as the third President in January 2010. The president is the head of state and is elected by direct popular vote for a term of 5 years. The president is limited to serving no more than two terms. In addition to being the commander in chief, the president appoints the prime minister and cabinet members with the consent of Parliament.

Jadranka Kosor assumed the office of prime minister after the unexpected resignation of Prime Minister Sanader in July 2009. The prime minister, who is nominated by the president, assumes office following a parliamentary vote of confidence in the new government. The prime minister and government are responsible for proposing legislation and a budget, executing the laws, and guiding the foreign and internal policies of the republic. The HDZ-led government that assumed office in January 2008 represented a coalition agreement between the HDZ (66 seats), the HSS (6 seats), the SDSS (3 seats), and other minority representatives. The HSLS party, which had two seats in the Sabor, decided to leave the coalition in June 2010 but the two HSLS deputies split with their party and reached an agreement to cooperate with the ruling coalition. The lone representative of the HSU previously left the coalition government in July 2009. The current government has, in addition to Prime Minister Kosor, 19 ministers, which includes four deputy prime ministers. Ten of the ministers come from the ranks of the HDZ. Coalition partners hold four cabinet seats: tourism and three deputy prime minister seats, including one responsible for regional development and returns held by a representative of the Croatian Serb SDSS party. This is the highest-ranking government position held by a Croatian Serb since Croatia's independence in 1991. Four cabinet posts are held by non-partisan subject matter experts including the Ministers of Interior, Administration, Education, and Justice.

Croatia has a three-tiered judicial system, consisting of the Supreme Court, county courts, and municipal courts. Croatia's Supreme Court is the highest court in the republic. The Supreme Court assures the uniform application of laws. Members of the high court are appointed by the National Judicial Council, a body of 11 members, and justices on the Supreme Court are appointed for life. The court's hearings are generally open to the public.

The Constitutional Court is a body of 13 judges appointed by Parliament for an 8-year term. The Constitutional Court works to assure the conformity of all laws to the constitution.

Principal Government Officials
President--Ivo Josipovic
Prime Minister--Jadranka Kosor (HDZ)
Deputy Prime Minister/Minister for Economy, Labor and Entrepreneurship--Duro Popijac
Deputy Prime Minister for Regional Development, Forestry and Water Management--Bozidar Pankretic (HSS)
Deputy Prime Minister for Regional Development, Reconstruction and Returns--Slobodan Uzelac (SDSS)
Minister of Foreign Affairs and European Integration--Gordan Jandrokovic
Minister of Defense--Branko Vukelic

Croatia maintains an embassy in the United States at 2343 Massachusetts Avenue NW, Washington DC, 20008-2853, tel. (202) 588-5899, fax: (202) 588-8936. Consulates General of the Republic of Croatia are located in New York City, Chicago, and Los Angeles. Honorary consulates are located in St. Paul, New Orleans, Seattle, and Pittsburgh.

Type: Parliamentary democracy.
Constitution: Adopted December 22, 1990.
Independence (from Yugoslavia): June 25, 1991.
Branches: Executive--president (chief of state), prime minister (head of government), cabinet of ministers. Legislative--unicameral Parliament or Sabor. Judicial--three-tiered system.
Suffrage: Universal at 18.
Political parties (represented in Parliament): Croatian Democratic Union (HDZ), Social Democratic Party of Croatia (SDP), Croatian People’s Party-Liberal Democrats (HNS), Croatian Peasant Party (HSS), Croatian Party of Rights (HSP), Istrian Democratic Assembly (IDS), Croatian Social Liberal Party (HSLS), Independent Democratic Serb Party (SDSS), Croatian Party of Pensioners (HSU), Croatian Democratic Alliance of Slavonia and Baranja (HDSSB). 

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History of Croatia

The Croats are believed to be a purely Slavic people who migrated from Ukraine and settled in present-day Croatia during the 6th century. After a period of self-rule, Croatians agreed to the Pacta Conventa in 1091, submitting themselves to Hungarian authority. By the mid-1400s, concerns over Ottoman expansion led the Croatian Assembly to invite the Habsburgs, under Archduke Ferdinand, to assume control over Croatia. Habsburg rule proved successful in thwarting the Ottomans, and by the 18th, much of Croatia was free of Turkish control.

In 1868, Croatia gained domestic autonomy while remaining under Hungarian authority. Following World War I and the demise of the Austro-Hungarian Empire, Croatia joined the Kingdom of Serbs, Croats, and Slovenes (the Kingdom of Serbs, Croats, and Slovenes became Yugoslavia in 1929). Yugoslavia changed its name once again after World War II. The new state became the Federal Socialist Republic of Yugoslavia and united Croatia and several other states together under the communistic leadership of Marshall Tito (born Josip Broz).

After the death of Tito and with the fall of communism throughout eastern Europe, the Yugoslav federation began to crumple. Croatia held its first multi-party elections since World War II in 1990. Long-time Croatian nationalist Franjo Tudjman was elected President, and one year later, Croatians declared independence from Yugoslavia. Conflict between Serbs and Croats in Croatia escalated, and one month after Croatia declared independence, civil war erupted.

The United Nations mediated a cease-fire in January 1992, but hostilities resumed the next year when Croatia fought to regain one-third of the territory lost the previous year. A second cease-fire was enacted in May 1993, followed by a joint declaration the next January between Croatia and Yugoslavia. However, in September 1993, the Croatian Army led an offensive against the Serb-held Republic of Krajina. A third cease-fire was called in March 1994, but it, too, was broken in May and August 1995 after Croatian forces regained large portions of Krajina, prompting an exodus of Serbs from this area. In November 1995, Croatia agreed to peacefully reintegrate Eastern Slavonia, Baranja, and Western Dirmium under terms of the Erdut Agreement. In December 1995, Croatia signed the Dayton peace agreement, committing itself to a permanent cease-fire and the return of all refugees.

The death of President Tudjman in December 1999, followed by the election of a new coalition government and President in early 2000, brought significant changes to Croatia. Croatia's new government, under the leadership of Prime Minister Racan, has progressed in implementation of the Dayton Peace Accords, regional cooperation, refugee returns, national reconciliation and democratization.

On November 23, 2003, national elections were held for Parliament. The current government, headed by Prime Minister Ivo Sanader, took office in December 2003. The Sanader government has made membership for Croatia in the European Union and in NATO its top priorities. Elections for Parliament are not expected again until November 2007. Presidential elections were held in January 2005. President Mesic was re-elected to a second term in office, defeating Croatian Democratic Union (HDZ) candidate Jadranka Kosor in two rounds of balloting. President Mesic was inaugurated for a second term on February 18, 2005. Presidential elections will next be held in January 2010.

People of Croatia

The Croats are believed to be a purely Slavic people who migrated from Ukraine and settled in present-day Croatia during the 6th century. After a period of self-rule, Croatians agreed to the Pacta Conventa in 1091, submitting themselves to Hungarian authority. By the mid-1400s, concerns over Ottoman expansion led the Croatian Assembly to invite the Habsburgs, under Archduke Ferdinand, to assume control over Croatia. Habsburg rule proved successful in thwarting the Ottomans, and by the 18th century, much of Croatia was free of Turkish control.

In 1868, Croatia gained domestic autonomy while remaining under Hungarian authority. Following World War I and the demise of the Austro-Hungarian Empire, Croatia joined the Kingdom of Serbs, Croats, and Slovenes (the Kingdom of Serbs, Croats, and Slovenes became Yugoslavia in 1929). Yugoslavia changed its name once again after World War II. The new state became the Federal Socialist Republic of Yugoslavia and united Croatia and several other states together under the communistic leadership of Marshall Tito (born Josip Broz).

After the death of Tito and with the fall of communism throughout eastern Europe, the Yugoslav federation began to unravel. Croatia held its first multi-party elections since World War II in 1990. Long-time Croatian nationalist Franjo Tudjman was elected President, and one year later, Croatians declared independence from Yugoslavia. Conflict between Serbs and Croats in Croatia escalated, and one month after Croatia declared independence, war erupted.

The United Nations mediated a cease-fire in January 1992, but hostilities resumed the next year when Croatia fought to regain one-third of the territory lost the previous year. A second cease-fire was enacted in May 1993, followed by a joint declaration the next January between Croatia and Yugoslavia. However, in September 1993, the Croatian Army led an offensive against the Serb-held Republic of Krajina. A third cease-fire was called in March 1994, but it, too, was broken in May and August 1995 after Croatian forces regained large portions of Krajina, prompting an exodus of Serbs from this area. In November 1995, Croatia agreed to peacefully reintegrate Eastern Slavonia, Baranja, and Western Dirmium under terms of the Erdut Agreement. In December 1995, Croatia signed the Dayton peace agreement, committing itself to a permanent cease-fire and the return of all refugees.

The death of President Tudjman in December 1999, followed by the election of a coalition government and President in early 2000, brought significant changes to Croatia. The government, under the leadership of Prime Minister Racan, progressed in implementation of the Dayton Peace Accords, regional cooperation, refugee returns, national reconciliation, and democratization.

On November 23, 2003, national elections were held for Parliament, and the HDZ, which had governed Croatia from independence until 2000, came back into power. The HDZ government, headed by Prime Minister Ivo Sanader, was narrowly re-elected in a November 2007 ballot, and the new government assumed office on January 12, 2008. The Sanader government's priorities included membership for Croatia in the European Union and in NATO; Croatia joined NATO in April 2009.

Presidential elections were held in January 2005. President Mesic, having defeated the HDZ candidate in that election, was inaugurated for a second term on February 18, 2005. Presidential elections will next be held in January 2010.

Population (July 2008 est.): 4,491,543.
Growth rate (2005 est.): -0.02%.
Ethnic groups: Croat 89.6%, Serb 4.5%, other 5.9% (including Bosniak, Hungarian, Slovene, Czech, and Roma) (2001 census).
Religions: Catholic 87.8%, Orthodox 4.4%, Slavic Muslim 1.28%, others 6.52%.
Language: Croatian (South Slavic language, using the Roman script).
Health (2005 est.): Life expectancy--male 70.79 years; female 78.31 years. Infant mortality rate--6.84 deaths/1,000 live births.

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