A professor of economics and member of the Bridge coalition of independent candidates, Ivan Lovrinovic, said on Friday that Croatia only had the year 2016 to make significant changes in its economic policy and a radical turnaround in reforms, otherwise it risked bankruptcy.
If we do not do something in 2016, there is a danger of certain external shocks such as an increase in interest rates on foreign markets and in a year or a year and a half Croatia could find itself facing bankruptcy, Lovrinovic said at a meeting of economists in Opatija.
If no radical reforms are launched next year in the monetary and tax systems, public administration and public companies, the system will collapse and we will have a situation similar to that in Greece, he said.
Speaking about the need for a monetary reform, he said that he was not in favour of devaluation, but that he was in favour of an acceptable level of depreciation. Devaluation is not an option because it could cause a shock that neither citizens nor others could withstand and they need to be given some time to adjust, he said.
He went on to say that the monetary and credit systems should work in the interest of the economy rather than developing as a self-sufficient entity.
Lovrinovic said that he did not know of any economy whose development was based on the dominance of a foreign currency and that the exposure to the foreign currency risk of the entire economic sector and households was huge. In such a situation, one should launch a long-term process of de-euroisation that should start with deposits, said Lovrinovic.
“We know what should be done and we need political power for that,” Lovrinovic said, adding that his proposals were attacked by interest groups which did not want changes and calling on them to cooperate.
He said that the Croatian central bank (HNB) had been fighting inflation for more than 20 years and that it had ‘killed’ it and caused negative inflation and unstable prices. HNB officials are not trying to deal with deflation which has been present for two years and they are even lecturing the government and political parties, he said.
“The HNB is acting as if it were an institute of political science, instead of dealing with deflation, insolvency and high interest rates,” Lovrinovic said.
Asked if it was possible for political elites to accept reform processes and for the monetary policy to be radically changed, Lovrinovic said that Croatia only had 2016 to implement important reforms, adding that both he and Bridge were advocating such reforms.
“That is why we have gathered and that is what we want, otherwise Bridge’s existence makes no sense,” said Lovrinovic, stressing that Bridge would insist on five key reforms – of the monetary system, the judiciary, the tax system, public administration and public companies.
If these reforms are not implemented, Croatia is likely to go bankrupt in 2017, particularly if interest rates in the US increase and there are indications that that could happen, said Lovrinovic.
Lovrinovic said that the Bridge party would hold a meeting on Saturday. When asked about the possibility of a new parliamentary being held, he said that everything was possible.