Croatia economy in 'dangerous situation'

Croatia's prime minister-designate Zoran Milanovic warned Friday that his country faced a "dangerous situation" and vowed to fight the economic crisis as he presented his cabinet in parliament. "Croatia is not in chaos ... but in a dangerous situation and at a turning point," Milanovic said, referring to the serious economic malaise in the country which is set to join the EU in 2013. "Every crisis has an element of threat but there is also an element of opportunity, we want to turn this crisis into an opportunity ... we have a chance to make a U-turn," the Social Democrat leader told the deputies before his swearing-in. Milanovic said that an austerity budget will be the first big challenge of his cabinet. "Public finances are overstrained... Croatia has to limit public spending (and) consolidate the budget," the 45-year-old emphasised. The new parliament was inaugurated on Thursday after a centre-left coalition led by Milanovic's SDP ousted the scandal-plagued ruling conservatives. In the December 4 vote, the four-party Kukuriku coalition won 80 seats in the 151-seat parliament while the conservative HDZ has 47 seats. The new government faces the difficult task of bringing the country out of a deep economic crisis, in a fragile European environment. Croatia's Adriatic tourism-oriented economy gradually recovered after the 1991-1995 war of independence from the former Yugoslavia. But, with the onset of the global financial crisis the country has mostly been in recession since 2009. Slowing export growth, weak credit growth, low investment and persistent unemployment -- now standing at almost 18 percent --- have all contributed to a sluggish recovery. The central bank sees a modest 0.5 percent growth and a fiscal deficit of 6.2 percent for this year. The World Bank Predicted a 1.0 percent slump of gross domestic product (GDP) in 2012. Later on Friday the assembly was expected to set the date for a referendum on EU entry. President Ivo Josipovic announced recently that the vote would be held on January 22, but the decision has to be approved by the parliament. Earlier this month Croatia signed an EU accession treaty, paving the way for Zagreb to formally joins the bloc on July 1, 2013. The treaty has to be ratified by all 27 member states and Croatia will hold a referendum over the issue. The latest survey showed that some 60 percent of Croatians would say 'Yes' in the referendum. Meanwhile, a dozen NGOs and five main trade unions called for a delay in the vote. They argue that the legal framework surrounding Croatia's first referendum since independence has some weaknesses which could compromise its validity. They also say voters lack information about consequences of joining the bloc to make an informed decision. Of the six republics that formed the former socialist Yugoslavia -- Bosnia, Croatia, Macedonia, Montenegro, Serbia and Slovenia -- only the latter is an EU member, since 2004. The former federation collapsed in a series of bloody wars in the 1990s.