Volume 11 Numbers 1/2

Winter/Spring 2002

Constitutional Watch
     A country-by-country update on constitutional politics in Eastern Europe and the ex-USSR

Croatia - Although the present five-party coalition government is only in the middle of its mandate, the recent months have seen much political activity. The major, long-awaited event was the recent convention of the Croatian Social Liberal Party (CSLP). After the retreat of Drazen Budisa, the party's charismatic former leader, and the transfer of power to Minister of Defense Jozo Rados as the acting chairperson, the two main factions in the party have slowly become clear. The main dividing line concerns the position taken toward the issues of so-called national concern: The Hague Tribunal and the international community, with the more nationalist faction headed by Budisa and supported by CSLP's party structures and parliamentarians and the more moderate faction headed by Rados, which is supported by CSLP members in the government who are much more willing to support the government's position in international relations.

At first, it was not clear whether Budisa was simply playing a game or truly intended to leave the party's leadership. After his retreat, many of the party's branches immediately started to push for his return-which seemed like a carefully planned and orchestrated spectacle. Eventually, at the party convention, held in Zagreb on February 2 and 3, the party's two factions began to emerge. Even before the convention, it was clear that Budisa had a great deal of support, particularly in the regions and branches (namely, in Split) that are more nationalistic and even open to cooperating with the Croatian Democratic Union (CDU) as well as to some other right-wing political options. At the convention, Budisa won, for the third time, the position of CSLP chairperson.

Budisa's victory created huge problems for the prime minister, Ivica Racan (Social Democratic Party [SDP]), and his government. Most of the CSLP ministers in the government were not in Budisa's faction and thus are in the party's weaker wing. Budisa himself has said several times that the CSLP government members have lost touch with the party. Deputy Prime Minister Goran Granic was particularly singled out in this respect and CSLP's new party secretary, Dorica Nikolic, has openly stated that whoever does not see eye to eye with Budisa should leave the party and disappear from the political scene.

The possible results of such an outcome in CSLP were unclear. The crisis lasted several weeks, with constant "peacemaking" meetings as well as accusations from both sides. Racan stressed that he would not fight for the government and that early elections might be held. At one point, he claimed that there was a 40 percent chance of new elections, and a 60 percent chance that the government would stay. Yet two or three days later, he stated that new elections were more likely. In any case, Racan stated that he would meet Budisa to discuss cooperation with The Hague, the stabilization and association process with the EU, and, at that point, decide on the coalition's future. Racan and Budisa, as well as political leaders from the parties forming the coalition government, met several times, and it seems the situation has been resolved, at least for now.

The relationships between the coalition parties were reorganized, with changes made in the decision-making process within the coalition, combined with the ouster of three ministers. Minister of Economy Goranko Fizulic, a former close ally of Budisa and a prosperous entrepreneur, who had been labeled by CSLP as inefficient, lost his position. The real reason behind his ouster was probably his support for Rados. Fizulic was replaced by Hrvoje Vojkovic, one of the young generation of CSLP leaders who backed Budisa. Vojkovic was chairperson of the Croatian Privatization Fund, the government agency dealing with privatization, which was rocked with scandals under his direction during the CDU regime. It is obvious that his appointment was the reward for allying with the "correct" forces inside CSLP, since his previous performance was not a model of efficiency. Alojz Tusek, the minister of maritime affairs, transport, and telecommunications, who was expelled from CSLP in early 2001 because of his support for the government, also lost his position. This was clearly backed by CSLP because Tusek had supported the government in its policy of cooperation with The Hague Tribunal, contradicting CSLP's stance on the matter. He was replaced by Mario Kovac, another Budisa ally. Goran Granic, heavily criticized by CSLP, lost his position as deputy prime minister, that is, as first among the vice prime ministers. He managed to retain a government position, as a vice prime minister, only because he is quite popular with the public.

Meanwhile, the Croatian Peasants Party (CPeP) recently held its annual convention as well. Party members claimed that the system of decision making in the five-party coalition was too complex and have asked that it be modified to allow the three larger parties-CSLP, CPeP, and SDP-veto powers, while denying this right to the two smaller parties, the Liberal Party (LP) and the Croatian People's Party (CPP). In addition to claiming that this gives too much power to the larger parties, CPP has stated that it has increased in popularity, since the elections in 1999, and probably has more electoral support now than either CSLP or CPeP.
Serious differences have also occurred in SDP, at least on the regional level. Milan Bandic, chairperson of SDP's Zagreb branch and the mayor of Zagreb, has been involved in a number of incidents. First, it was discovered that the municipal administration had allocated funds to rebuild houses for refugees from Posavina, which is in Bosnia and Herzegovina, and, obviously, this does not fall within the purview of the Zagreb government by any stretch of the imagination. Soon afterward, it was also revealed that Bandic was building a weekend house for himself without any of the necessary permits. After this information was released, he was quickly granted the construction permits, a process that usually lasts several months or even longer. Then, in early January, Bandic fled the scene of a car accident. He was eventually apprehended by the police and was found to be driving under the influence of alcohol. SDP initially supported Bandic, stating that such incidents could happen to anyone and were not a cause for resignation. By the end of January, however, the party stated that he should resign, at which point he did.

The Bandic resignation fueled speculation that SDP is also splitting into factions. Apparently, the Zagreb branch has been very supportive of Bandic, who is from the younger generation that has swiftly appeared in SDP's leadership, while the party's central leadership is the one that eventually succeeded in forcing his resignation. The pro-Bandic faction, which is more nationalistically minded, is fighting to retain its position in the party. The resignation has also fueled some intracoalition power struggles. After Bandic's resignation, Minister of Public Works, Construction, and Reconstruction Radimir Cacic (CPP) stated that the Zagreb administration is plagued by widespread corruption. The Bandic faction is now trying to undermine the SDP-CPP coalition at the Zagreb level by asking for Cacic's resignation if he does not present hard evidence of corruption. This bickering made the talks on a new mayor, to replace Bandic, very difficult; eventually his former vice mayor, Vlasta Pavic, also from SDP, was elected the new mayor. After it seemed that the Zagreb crisis was over, Pavic resigned, accusing CPP of obstructing the formation of a new municipal government in Zagreb. At that point, Prime Minister Racan, head of SDP, intervened and convinced SDP and CPP to form a government in the city council. It seems that SDP, at the Zagreb level, is trying to force early local elections (they were just held in 2001) to question the position of SDP's present leadership. At the end of March, Bandic was elected as Pavic's vice mayor. Regarding his brush with the law, Bandic pleaded not guilty, explaining that he had not been drinking but rather had used an alcohol-based breath freshener.

On December 14, Yugoslav Minister of Foreign Affairs Goran Svilanovic visited Zagreb and met his Croatian counterpart, Tonino Picula, as well as Prime Minister Racan; the parliamentary speaker, Zlatko Tomcic; the deputy speaker, Zdravko Tomac; and President Stipe Mesic. This was the first official visit of a Yugoslav minister to Croatia since the democratic changes took place in Yugoslavia. (Svilanovic was in Zagreb in 2000, at the Zagreb summit, although that was not an official visit to Croatia but a meeting at the European level.) Svilanovic made a first step toward reconciliation, expressing his "sincere regret" for the sufferings of Croatian citizens (both Croatian and Serb) during the last decade. (Most Croatians, however, saw his statement as an excuse, not an apology.) Apart from this, there was some discussion about other issues, and a taxation treaty and a document on foreign-minister cooperation were both signed. Following the visit, moves have been made toward regulating the status of the Croatian minority in Yugoslavia, and a border commission was formed.

This commission was created to deal with, among other things, the disputed issue of Prevlaka, the southernmost peninsula in Croatia, situated at the entrance to Boka Kotorska, a bay on the Adriatic Sea. For the last decade, a UN mission has been controlling the area, which is of great military and strategic importance. Although the region has always been a part of Croatia, Yugoslavia now claims that it is disputed territory. Croatia is willing to discuss only the sea border and the sea traffic in the area but will not discuss any possible border changes. Croatia is now resolute that the UN mission leave at the end of its mandate in 2002 and wants a bilateral demilitarization of the whole region, which Yugoslavia is unwilling to accept. Making the situation even more complex, the area is actually contiguous with Montenegro, yet the latter differs from the official Yugoslav position on this matter and accepts that Prevlaka is Croatian territory.
The two last months also brought some developments in the economic sphere. The budget was adopted only after extensive lobbying and debate because of substantial cuts in social expenditures. If the budget remains unamended, this will be the first year that there is a concrete investment strategy in the form of several new funds: for the development of tourism, the development of small and middle enterprises, and a fund for the employment of young people holding university degrees. The budget was based on the restructuring of the public administration, mainly the ministries of defense and interior. Generally, the economic situation is slowly improving. Industrial production in 2001 increased by about 4.5 percent, and the IMF predicts similar developments for 2002.

The Enron scandal has reached Croatia as well. The company had ties to the former Tudjman regime and also concluded several contracts with the former CDU government. (During 1997 and 1998, there was widespread speculation that Enron-because of these contracts-successfully lobbied for a visit by Tudjman, who at that time was politically isolated, to the White House.) With Enron's bankruptcy and subsequent canceling of the contracts, some feared an ensuing energy shortage in Croatia but the country was spared-mainly because most of the contracts had unfavorable terms, and substitute resources were easily found.
In January, the Ministry of Interior passed a bylaw prohibiting the transport of oil by road through Croatia, purportedly because of high ecological risks and because road transport allowed extensive oil smuggling into Croatia. With the bylaw, the railway was made the exclusive means of transporting oil into Bosnia and Herzegovina. Slovenia and Bosnia immediately threatened to retaliate with vetoes on imports and the transport of Croatian products and also protested to the WTO. They claim the bylaw is intended to protect the Croatian oil business in Bosnia and Herzegovina. Nonetheless, no other country that transports oil through Croatia protested. The government subsequently altered the regulation, allowing road transport, but regulating the particular border crossings and outlining ecologically safe routes. Nonetheless, Slovenia and Bosnia left in place their commercial restrictions on oil coming from Croatia.

Many surmise that there are considerable interests at stake and that the interested parties in Slovenia and Bosnia will suffer because of the immense amount of illegal oil smuggled into Croatia and Bosnia. A number of Slovenian exporters were channeling large quantities of oil illegally into Bosnia or claiming that they were just transporting oil through Croatia but then selling it there at prices much lower than legally imported oil. Slovenia generally retaliates harshly toward Croatia, since the Croatian parliament refuses to ratify an agreement on their border (see Croatia Update, EECR, Vol. 9, No. 4, Fall 2001), and it utilizes other economic and commercial issues-such as the nuclear energy power plant in Krsko and the debt of Slovenian banks owed Croatian citizens-to push Croatia toward ratification. Some even speculate that Slovenia might use its future membership in the EU to press Croatia to ratify the agreement. Slovenia is in the first round of countries slated for EU membership, while Croatia certainly will not become a member for several years after that.

Croatia (and Slovenia) were the first countries among the former Yugoslav republics to conclude stabilization and association agreements with the EU, which will be the model agreements for all of the southeastern European countries (now referred to as Western Balkan). Croatia's agreement, which was signed in January, will come into force as soon as it is ratified in the parliaments of all EU member states. It was supplemented by the Provisional Agreement, which allowed the Stabilization and Association Agreement's commercial and transport regulations to go into effect on January 1. The ratification of the agreement is expected to occur sometime during the next two years, but Croatia will not be a member of the EU until 2010 at the earliest; full membership in NATO is envisaged this year. Many imagine that Croatia will actually be ready for EU membership before 2010 but will be held back, because its admittance will be tied to the other former Yugoslav republics. Already Croatia's economic situation is far better than that of Bulgaria or Romania, and it is close to Slovakia. These countries, however, will not be linked with the former Yugoslav states.

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