The people of Croatia may be headed into the EU, but not without uncertainty. Croatia will have several years of time to adopt the euro, giving the troubled currency a chance to regain some of its sparkle. Even if it does not, however, Croatia is on its way to joining the financial quagmire of the EU. It isn't just the political and economic troubles of Europe that concern many Croats, though. Small business owners do not want more regulation and fishermen do not want Italians to be free to fish in their waters. The nationalists of Croatia fear that they will lose their state sovereignty, a prize that many living Croat soldiers fought for when Yugoslavia broke up two decades ago.
"Croatia will not lose its sovereignty or natural resources, nor will it be ruled by the EU," President Ivo Josipovic said in a written statement. "Europe will not solve all our problems, but it's a great opportunity."
There is a price to pay for joining the EU. Hungary, Romania, and Bulgaria have all had tussles with Brussels over economic policy and reform, not to mention corruption in the former Communist states. The EU recently threatened to hold back a loan to Hungary over the country's reluctance to accept new laws that govern it media, courts, and central bank.
"Croatia joining is certainly positive for the EU, but people see that the benefits of membership may have been overstated," says Pawel Swidlicki, an analyst at London-based think tank Open Europe. "They see the current situation with the eurozone crisis and the fiscal pact and worry that they may lose out. After the war, they are reluctant to give up sovereignty. The fisheries policy has been a disaster, and Croatia is a maritime nation, while the EU places a heavy burden on SMEs [small and medium enterprises] in particular. But overall, people in Croatia do see the benefits of membership."
Benefits include greater access to EU funding, more freedom of movement across Europe, and improved employment opportunities for Croats. Croatia's economy has suffered like most of Europe and a cash infusion is hoped to help, besides the symbolic value EU entrance would have for the once war-torn country.
Even while Croatia is in a position to receive some benefit from the union, neighboring Bosnia fears an economic hit as a result of Croatia's EU entrance. Because of stricter EU rules on food quality, Bosnia could lose out on exporting almost 200 million euros' worth of food and goods if it cannot live up to the EU's quality control standards.
"If Bosnia does not set up a quality control that complies with European standards between now and January 1, 2013 (six months before Croatia is due to formally enter the European Union), we will not be able to export animal or vegetable-based products like milk, eggs, meat and honey," warned Duljko Hasic an economic expert with the Bosnian chamber of commerce.
In the meanwhile, the crisis of Greek debt continues. EU finance ministers want to ensure that the proposed restructuring of Greece's private-sector debt will get the country back on its fiscal feet. Greece has to make the deal by the end of January so that Greece can offer a bond exchange in a bit of quick-footwork to avoid a default on a major bond redemption. The political leaders of Greece must be able to convince the country's major lenders that the country will stick to strict reforms regardless of what happens in upcoming elections. The country is in danger of default on loans coming due in March if it doesn't get another bailout, officials have warned, but even under strict economic guidelines, Greece's growth and recovery will take some time. A Greek default would seriously destabilize the eurozone.
Greece is working to keep its newly issued bonds below 4 percent, which does not please bondholders, but will help keep future Greek debt down.
New EU rules force governments with high debt levels to reduce that debt along a timeline. Countries with debt larger than 60 percent their GDP will have to chop off five percent of that debt per year. New Italian Prime Minister Mario Monti said the rules have "elements of flexibility", but are still a "burdensome constraint." Since Italy is almost 900 billion euros in debt over that limit, it would have to reduce its debt by 45 billion euros per year, a daunting requirement.
Monti said, however, there appeared to be signs of improvement in Europe's financial situation, and "contours of a way out from the euro crisis are starting to take shape."
Croatia certainly hopes so.
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