"I am heading off to a meeting of the European Semester Task Force to define the framework and key areas within which to shape a set of new measures and responses to specific recommendations that the European Commission (EC) set a little less than a year ago," Regional Development and EU Funds Minister Grcic said at the offices of the water management operator, Hrvatske Vode where he presented an application for water management projects.
In late February the EC once again concluded that excessive macro-economic imbalances still existed in Croatia and that they required resolute political action and specific monitoring. Based on the National Reform Programme and other obligations regarding structural reforms that will be announced before May, the EC will decide whether to activate the Macroeconomic Imbalance Procedure (MIP) for Croatia or not.
The MIP is a surveillance mechanism that aims to identify potential risks early on, prevent the emergence of harmful macroeconomic imbalances and correct the imbalances that are already in place.
Speaking on Croatian Radio, Lalovac too said that planned reforms could soon see the light of day.
"Ten days ago we finished the final analysis of the health system and agencies as well as tax expenditure, salaries and subsidies ... It is up to the government to incorporate the recommendations made, into the new National Reform Programme that will be presented in Brussels in May. We still have to wait about five to ten days for the prime minister and cabinet to meet to see what measures to take and that is a political decision to reduce expenditure," Lalovac said.
"The EC said it was satisfied with what was done in 2014 but that in 2015 it doesn't want to see figures but policies translated into laws which will in the long-term impact the budget in the years to come and not just short-term cuts," Lalovac said.
Speaking of the latest borrowing of 1.5 billion euro with a 10-year benchmark at a 3% interest rate and yield of 3.25%, Lalovac said that the budget was burdened with the obligation of repaying between HRK 50 billion and HRK 60 billion each year.
The question is how to replace compulsory bonds on the market with cheaper borrowing. There is no quick way out because investors want to see where we stand with our deficit and how we plan to stop public debt but they also want to see reforms and our investment rating, he said.
He added that Croatia was already in the Excessive Deficit Procedure (EDP) and that if the government submitted "good documents" to the European Commission with clearly defined schedules to implement reforms, that could contribute to rescheduling expensive loans with cheaper borrowing.
"If the market can see that the deficit is being reduced and the public debt is stabilising, there is a large possibility of opening up the market," he said.
"We have to actively manage public debt. If we could reschedule loans and reduce interest rates from six to three percent, we would automatically come out of the EDP," Lalovac concluded.