Little joy in Croatia as it enters the EU

[June 18, 2013]  ZAGREB, Croatia (AP) -- There will be festivities and fireworks, but Kata Secic can't muster much enthusiasm for Croatia's historic entry into the European Union.

The 53-year-old Croatian textile factory worker has a more immediate worry: The underwear manufacturer she works for went bust and she hasn't received her 300-euro ($400) monthly wage in months.

A decade back when Croatia started negotiating EU entry, the once war-torn country was overjoyed at the prospect of becoming a member of the European elite. But people like Secic have since changed their minds. With the EU in deep financial turmoil and Croatia's own economy in recession for five consecutive years, the excitement has dimmed as the Balkan country gets ready to officially become the 28th EU member on July 1.

Production at her factory has nearly stopped, but Secic and the factory's roughly 100 other workers are technically employed -- and on strike. She has been marching daily for a month together with dozens of her co-workers in their light blue uniforms on the streets of Zagreb, the Croatian capital, drawing muted support from disgruntled pedestrians.

"EU membership won't bring us workers anything good," Secic said, as a column of whistle-blowing protesters crossed the city's main square. "It can only get worse, especially for the textile industry," which has already been hit hard by cheap Chinese products and now faces further competition from Europe.

Her employer DTR -- or Domestic Factory for Undergarments, once among the biggest textile producer in the Balkans -- is now in the legal process of declaring bankruptcy after a botched privatization last year, one of many that have hit the Croatian economy in recent years as the ex-Yugoslav country struggles to shed the institutions of its communist days to meet EU requirements.

The pro-EU voices focus on the prospects that Croatians could find jobs in more prosperous EU countries, that their country could attract more foreign investments and that the EU's leadership in Brussels could keep widespread corruption and economic mismanagement in check. But people like Secic worry that the already plunging living standards will further decline, with increased taxes that could result in rocketing prices. They also fear that the opening of the labor market will result in other EU citizens occupying their jobs.

According to recent surveys, support for Croatia's entry is at some 60 percent, but only 49 percent of Croatians believed their country will benefit from the membership. When Croatia started negotiating the entry ten years ago, the pro-EU support stood at 85 percent.

With an unemployment rate hovering around 20 percent, plunging living standards, endemic corruption among its political elite and a declining international credit rating currently reduced to junk, many Croats are not in the mood to celebrate.

Things aren't looking so great in the EU either, which is in the grips of a recession, with many countries struggling stimulate growth while grappling with a debt crisis that's led governments to slash spending and raise taxes. The EU countries account for 60 percent for Croatian exports, which has sent the economy into a steady decline.

"Croatia is in a hectic economic situation," said prominent Croatian economy analyst Davor Gjenero. "Croatia is entering the EU when the EU is not at its best. The fact that the EU is in crisis is helping that ... lack of any optimism."

On a wall in downtown Zagreb, a scribble of graffiti says "Young ones, leave Croatia" -- a reflection of the gloom even as state officials prepare fireworks and other lavish entry celebrations starting a night before the entry. But with youth unemployment rates high in most of the EU -- as high as 50 percent in Greece and Spain -- that escape route may not be possible within the EU either.

Croatia, a country of some 4.4 million people, will only become the second former Yugoslav nation to join the EU, in many ways a positive reflection of just how far the country has come from the ruins of the bloody breakup of the former federation in the 1990s. Slovenia, itself in deep economic crisis, joined the bloc in 2004. Croatia will be the first ex-communist country to join after Romania and Bulgaria which became members in 2007.

Like them, it struggles with corruption. Corruption-tracking Transparency International ranked Croatia below Rwanda, Jordan and Cuba in its graft index for 2012. Croatia's former Prime Minister Ivo Sanader, who had played a major role in negotiating the EU membership, is in jail after being found guilty of taking multi-million-dollar bribes from foreign companies.

"Corruption is Croatia's main problem, it has entered all segments of our society," said Neven Luketa, an investment consultant in the northern Adriatic peninsula of Istria, adding that traditional bureaucratic hurdles for foreigners doing business in Croatia could also hamper investments. He is hopeful that EU entry will help clean it up.

Croatian companies exporting their goods to the neighboring Balkan countries will also suffer as customs duties will rise on exports to non-EU states. Some have shifted production over the borders to Bosnia and Serbia to try stay competitive.

Officials counsel patience.

"Croatia will feel the benefits of EU entry in three to five years," said Croatia's National Bank governor Boris Vujcic. "In the short term, nothing major will change." Because of the EU crisis, much needed foreign investments will be slow in coming in the next few years.

Even EU officials admit that the membership won't bring immediate positive results.

"So what will the EU bring to Croatia? Well, do not expect dramatic changes overnight," said EU's Enlargement Commissioner Stefan Fule. "Croatia will not be a different country on 1 July than it was on 30 June."

"For the EU, having Croatia as a member means, first of all, extending the area of political stability in a strategic European region that was torn by conflict not so long ago," Fule said. "It also means expanding the EU's internal market, creating new opportunities for EU business and customers."

Some Croats are less optimistic, if pragmatic.

"It can't be worse," said fisherman Davor Skoric, who will now face competition from much better equipped Italian and Slovenians who were previously banned from fishing near the Croatian Adriatic coast. "It can only get better."

[Associated Press; By DARKO BANDIC and DUSAN STOJANOVIC]

Marko Drobnjakovic contributed to this report.

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