A Shaky Partnership for Development

AIM Zagreb, December 27, 2001

What was "the most wonderful piece of Christmas news in Croatia?" That, with much pomp, a document establishing the Partnership for Development was signed, according to which the cabinet, employers and trade unions agreed to reach a consensus on basic development priorities and long-term modalities of mutual relations. What was the worst news last Christmas in Croatia? That the trade unions said only two days after the document was signed that they would ignore it. And what then should be considered the actual truth? Probably the certainty that Croatia will celebrate next Christmas in a similar vein.

The Croatian cabinet spent two years preparing this document in cooperation with trade unions and employees. The road to consensus, allegedly, was not an easy one. The cabinet, most of all, wanted to ensure that its social partners, employers and trade unions, agreed in regard to social and economic reforms. This concerns, first of all, a set of social and labor rights. It seems that in 2002 another 30,000 people or so will lose jobs in state administration, mostly in the Defense Ministry. The layoffs will not end there. After the largest public companies, INA and HEP are privatized, redundant workers will also lose jobs. The state will have to reduce various social benefits whose burden is too heavy on the faltering economy. It will also be necessary to reduce severance pay for redundant workers. The package of reform measures aimed at tightening the belt, should have been passed without much conflict, without street protests, general strikes or anything similar. According to official forecasts, Croatia needs at least two more stable years to pass from the instability of transition into successful capitalism. The success of social reforms, however, depends on the strength of the agreement between social partners, which the aforementioned document regulates, but also on the unity of the ruling coalition, which has been shaken for quite some time now.

The Partnership for Development seems to guarantee the cabinet a safe voyage. Among other things, the paper says that the partners will do their best "to restructure and revitalize the economy," resolve the unemployment problem," strengthen the economy's competitiveness, provide for the stability of prices and pursue tax reforms. The agreement specifically stipulates that all disputes that arise will be resolved through dialogue, mediation and arbitration, without the use of force. The spirit of consensus, therefore, seems to have prevailed, maybe because the agreement uses rather abstract language.

This rosy vision of future was drenched in champagne and accompanied by elated statements. "There can be no development without stability," said Prime Minister Racan after the signing, calling on all parties, non-government organizations and economic factors to help it to materialize. President Stjepan Mesic also showed his enthusiasm. "Croatia must reach a consensus on strategic trends in its development," he said adding that agreement was what he had been advocating all along. "We have defined our development priorities and concluded that Croatia stands a chance of success only as a stable country," said Deputy Prime Minister Goran Granic. And Davor Juric, head of the largest Croatian trade union, SSSH, called on the independent trade unions, the sole major group that did not join the partnership, to do so.

The first serious challenge immediately destroyed this idyllic atmosphere. Only two days after the paper was signed, the Croatian cabinet announced changes in labor laws. From what has leaked to the public, severance notice will be limited to three months, the highest severance pay will not exceed six salaries, flexible work contracts will be legalized, and numerous workers' privileges, which some enjoy only on paper, will be reduced. The changes should be ready by the end of March, and should be put to a vote in Parliament in June 2002. This is no whim on the part of the cabinet; these are the conditions imposed on Croatia by the International Monetary Fund. All five Croatian trade unions immediately threatened to launch a general strike if these changes are made!

The same Juric who on Saturday put his signature on the document and called on all his other colleagues to do the same, on Tuesday said "there are no valid arguments to make such changes," and that, under such conditions, "the idea of taking World Bank loans should be abandoned." "If the cabinet keeps insisting on such changes, the social contract will be questioned," Juric said. The head of the Association of Workers Trade Unions of Croatia, Boris Kunst, sided with him, describing government proposals as "Drakonian," adding that their implementation would "give trade unions sufficient reason to oppose the government together."

The agreement lost its significance soon thereafter and became ridiculous. That same week, the cabinet and its social partners vowed eternal love and then turned against each other like the fiercest enemies. What is important here is to know whether the Racan cabinet, which must have been aware of the conditions required by the IMF, had deluded the trade unions and presented them with a fait accompli, or did the trade unions delude their membership, fully aware of what the cabinet knew? Since the largest and most powerful Croatian trade union, the Alliance of Independent Trade Unions, is closely tied to Racan's Social Democratic Party, it is hard to believe that Davor Juric knew nothing of the IMF conditions. It is probable that the sides were playing a double game: assisted by trade union threats, Racan will pass slightly looser changes to the labor laws (causing a possible breakup of the ruling coalition and massive social unrest), whereas the trade unions will accept further reduction of labor rights, comforting its members that they at least tried to do something, and lost less then originally planned.

It is hard to believe that any radical solutions will be enforced. This is why next Christmas could also be marked by similar debates, if the ruling coalition does not fall apart under the burden of other issues. The Partnership for Development still appears to be a tenable project.

Boris Raseta

(AIM)