Croatia’s entry exposes decline in the EU

By Darrell Delamaide

WASHINGTON (MarketWatch) – Although they sang Beethoven’s “Ode to Joy” in Zagreb to mark Croatia’s official entry into the European Union Sunday night, there was little to be joyful about either there or in other EU capitals.

As Croatia limped to the finish line battered by five years of recession, it was far from certain that the former Yugoslav republic’s accession as the EU’s 28th member was an untarnished blessing for either party.

The country immediately became the third-poorest nation in the bloc, and if it were able to join the euro, it would almost certainly be the next in line for a bailout.

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Croatia has joined the European Union as its 28th member, but Europe is hardly celebrating.
For the EU itself, the prospect of another poor peripheral country seeking refuge (Bulgaria and Romania, the last two to join in 2007, are the poorest nations) was hardly a vindication of European integration’s tonic effect on small economies.

Opponents of EU membership charge that just getting ready for EU entry has crippled Croatia in the same manner as Brussels’ neoliberal ideology has damaged other peripheral countries like Greece and Spain.

“Croatian governments,” Srecko Horvat and Igor Stiks, organizers of the annual Subversive Festival in Zagreb, wrote this week in an op-ed for the Guardian, “have followed obediently the EU’s austerity advice, even before the accession.”

They rattle off a litany of complaints about the resulting state of the economy in Croatia — an unemployment rate of 20%, with a youth jobless rate topping 50%; foreign debt that has mushroomed from $3 billion when the country gained independence in 1991 to more than $60 billion now; and a decline from being the most prosperous republic in Yugoslavia to now having virtually no industry and relying more heavily on tourism, which accounts for only 20% of gross domestic product.

All this, Horvat and Stiks say, means that “Croatia has not actually joined only the EU; in reality, it has become a fully fledged member of the EU periphery.”

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The European Union is growing.
For the dubious benefit of being exposed to the German economy, Croatia is cutting itself off from other former Yugoslav republics — Bosnia-Herzegovina, Serbia and Montenegro — as it becomes the EU border raised against these other Balkan nations.

One of the EU’s longest external land borders at 1,300 kilometers (800 miles), Horvat and Stiks write, “will, by the mere functioning of its police apparatus, necessarily cut Croatia off from its immediate and natural surrounding and bring further isolation from its neighbors.”

The Slovenian daily Delo said that the Balkan countries may be the only ones that still believe in the EU, even though they are “the periphery of the periphery.” Read summary in German press review (in German).

Meanwhile, Iceland has ended its negotiations to join the EU, Sasa Vidmajer writes, while Ukraine is dithering and public opinion in Turkey has turned against the EU.

Even though Croatia cannot immediately join the euro EURUSD -0.1277% , it is maintaining a fixed exchange rate with the common currency to qualify for joining, effectively depriving it of the chance to devalue and make its tourism industry more competitive, blogger Alen Mattich points out this week on the Wall Street Journal’s Moneybeat.

As it is, the country’s tourist infrastructure can hardly compete with more developed countries like Italy or Spain, and even Greece.

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