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Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia [email protected] The impact of the global financial crisis on the industrial sectors of Eastern European countries / Industrial change in Croatia Zagreb, Croatia, 27-28 April 2009

Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia [email protected] The impact of the global financial

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Page 1: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Scenarios about EU accession of Croatia

Darko Šeperić

Union of Autonomous Trade Unions of Croatia

[email protected]

The impact of the global financial crisis on the industrial sectors of Eastern European countries / Industrial change in Croatia

Zagreb, Croatia, 27-28 April 2009

Page 2: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Croatia and EU perspective

• 1991 – better starting position than most of CEE countries

• 1992 – 1995 – war

• 1995 – 2000 – quiet international isolation

• 2000 – Zagreb summit – start of negotiations on SAA

• 2001 – SAA signed

• 2003 – membership application

• 2004 – candidate status

• 2005 – start of accession negotiations

• 2012 – objectively-optimistic date of EU membership

Page 3: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Problems and halts in negotiations

• postponements & blockades:– ITCY cooperation (2005)– Fisheries and Ecological Protection Zone (2008)– border dispute with Slovenia (2008-?)

• real problems of EU accession– judical reform; corruption and organised crime– public administration reform– lack of long-term economic policy and budget planning– high state subsidies (2005 2.1% BDP, EU-15 0.6%)– slow implementation of structural reforms – questionable

implementation of adopted legislation

Page 4: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Fulfilling membership requirements• by mid-2008 20 chapters opened but only 2 provisionally

closed• by April 2009 22 chapters opened, 7 closed

• progress reports from EC mostly positive, but certain critics appearing every year in the same form– lack of serious engagement in judical and public administration

reform– slow return of refugees, cooperation with the ICTY

• 2008 – “5th speed”– rapid process of legislation harmonisation with no studies of

impact or costs/benefits– around 140 laws and 300 other legal documents harmonised in

2008 – 40% of total legislation harmonisation since 200.

Page 5: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Macroeconomic indicators• average GDP growth rate 2010-2025 0.6 points higher

(around 14% of GDP growth rate)

• GDP 2025 up to 9% higher than outside EU– 1,1% effects of common market– up to 7,8% effect of institutional reform

• overall price increase 1,4% (services, energy, housing)– lower shock than with NMS, because price level is already more

harmonised with EU(2005 62% EU25, purchasing power 48%)

• prices of real estate increase 4% (NMS around 30%)• positive balance to the EU budget (0.2% GDP in first 3 years)• no effect on unemployment rate, but positive effect to

employment rateInstitute for Economics Zagreb, 2007.

Page 6: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Problems with macroeconomic indicators

• difficult to distinguish effects of membership from other effects (NMS accession in times of favourable global economic trends, effects of transition...)

• impossible to estimate full long-term effects

• aggregate data hides real social impact– increasing differences in income and social status– some groups of population benefit, but some lose from EU

membership

+ threat of social dumping inside EU

Page 7: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Effects for the EU

• neglible positive impacts on macroeconomic indicators of the EU due to small size of Croatian economy– population increase 1%– total output increase 0.3%– Croatia = 0,3% of EU export

• EU demands transitional period for road transport

Page 8: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Value added across sectors, 2001

Netherlands Bureau for Economic Policy Analysis, 2007

• contribution of most manufacturing sectors low

• contribution of services substantially bigger than in NMS

Croatian economy vs. NMS

Page 9: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

goods & services goods services

EU-25 37,0 29,4 7,6

EU-15 36,4 28,9 7,5

NMS-10 54,7 44,4 10,3

CROATIA 49,3 22,8 26,5

Export of goods and services as % of GDP (2005)

Croatian economy vs. NMS

• services count for 45% of Croatian export, while world average is 20% (EU-25 20.5%)

Page 10: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Sectoral impacts

• increase in productivity and output as result of eliminating non-tariff barriers easier in manufacturing than in services– overall impact will depend on further liberalisation of

services

• most developed sectors in Croatia are the ones with low potential for causing effects to common market– transport, services

• most export increase expected in sectors with low productivity and low share in total exports– textile, clothes

Page 11: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Sectoral impacts on production

sector Hrvatska EU-15 EU-12

textile 66,4 0,0 -0,1

clothes manufacturing 30,2 0,0 -0,2

metal 9,2 0,0 0,1

chemistry and nonmetal

7 0,0 0,0

food production -3,1 0,0 0,1

Change of production level in % until 2025. as effect of common market

Netherlands Bureau for Economic Policy Analysis, 2007

Page 12: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

sector Croatia

textile 89,2

metal 67,2

transport equipment 48,8

machinery and equipment 34,9

chemistry and minerals 37,8

other services -15,6

bussines services - 3.9

Change in level of production in % until 2025 as result of institutional reforms

Netherlands Bureau for Economic Policy Analysis, 2007

Sectoral impacts on production

Page 13: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Sectoral impacts

AGRICULTURE• problems: high fragmentation + war effect (mines)• on short term costs higher than benefits• final result depends on results of accession negotiations and

reforms undertaken before accession

FISHERIES• high costs of harmonisation with EU standards and regulations• fleet modernisation needed• on short term costs higher than benefits

ENVIRONMENT PROTECTION• costs: 5,5 – 10 billion EUR until 2023

Page 14: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Foreign direct investments

• 2005 cumulative FDI 2800 EUR per capita (40% GDP)– relatively high comparing to most transition countries

• problem: most of FDI in services (60%) and in already existing companies (privatisation)– banking sector, commerce, telecommunications– privatisation incomes spent for filling holes in budget– low share of green-field FDI

• causes: non-existence of clear strategy of economical and especially industrial development– The Industrial Policy of the Republic of Croatia in Preparation for

Accession to the EU (2008)

Page 15: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Flexibilisation of labour legislation?

Portugal 3,7

Slovenija 3,5

Italija 3,4

Hrvatska 2,76

Švedska, Njemačka, Estonija 2,6

Slovačka 2,4

Češke 2,1

Velika Britanija 0,9

SAD 0,7

Employment Protection Legislation Index 2004.

Page 16: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Conclusions

• overall impact of EU membership depends much more on results of institutional reforms than exact date of accession

• lack of long term economic policy and sectoral costs and benefits analysis undermines chances of benefiting from accession

• as trade unions, we are more interested in overall impact on social picture of Croatia than macroeconomic indicators

Page 17: Scenarios about EU accession of Croatia Darko Šeperić Union of Autonomous Trade Unions of Croatia darko.seperic@sssh.hr The impact of the global financial

Thank you for attention.