Prime Minister Ivo Sanader expressed satisfaction with his cabinet's fulfillment of the obligations towards retirees.
"This trauma of Croatian society has been lasting since 1993 and not any previous government had enough courage to deal with it," Sanader said.
The Croatian government and pensioners' representatives have agreed about the establishment of a fund for the return of the debt to pensioners. Under the agreement on the fund, which is to start working by 5 August, 423,000 persons are entitled to indemnification. The debt is estimated at 13.8 billion kuna.
Pensioners will be able to claim their money in two ways -- over a period of two years, namely during 2006 and 2007, in which case they will receive 50 per cent of the sum claimed, or over a period of eight years (two years of grace period plus six years for the repayment), in which case they will be paid back the entire amount.
Those pensioners who opt for the former possibility will receive the first of four installments in the second quarter of 2006, and those who opt for the latter will receive the first installment in late 2007.
Under proposed amendments to the pension insurance law, the adjustment of pensions will now be carried out according to the so-called Swiss formula which means that pensions will be adjusted twice a year to the figure calculated as a half of the sum of the growth of salaries and living costs.
Pensioners' representatives said they opposed this model for pension indexation as they fear this would mean lower pensions.
The Government explained that it was abandoning the current formula as it would require even 25 billion kuna in funds for pensions in 2014.
The Swiss formula, which is going to be reinstated in February 2006, will also be applied to pensions of Homeland Defence War veterans.
The Government on Thursday decided to cut the support for housing savings from 25 percent to 15 percent which means that the saving of 5,000 kuna for this purpose would be supported by 750 kuna annually instead of 1,250 kuna.
Finance Minister Ivan Suker explained that this and some other amendments to the housing savings law were aimed at cutting interest rates on loans approved by savings banks which he said were now higher than interest rates on loans granted by commercial banks.
The new minister of the interior, Ivica Kirin, introduced himself to the Sanader cabinet at today's session.
At the very start of the session, government members observed two minutes' silence in tribute to the victims of the London terrorist attacks.