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Viewing cable 07ZAGREB664, CROATIA: SCENESETTER FOR CODEL BEAN

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Reference ID Created Released Classification Origin
07ZAGREB664 2007-07-11 10:36 2011-08-25 00:00 UNCLASSIFIED Embassy Zagreb
null
UNCLAS        ZAGREB 00664

SIPDIS
P 111036Z JUL 07

FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC PRIORITY 7916
INFO RUEHBW/AMEMBASSY BELGRADE 1961
RUEHVJ/AMEMBASSY SARAJEVO 0251
RUEHPS/USOFFICE PRISTINA 0583
UNCLAS SECTION 01 OF 02 ZAGREB 000664 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV HR
SUBJECT: CROATIA: SCENESETTER FOR CODEL BEAN 
 
 
1. You are coming to Croatia at an exciting time, as this young 
nation prepares to take its place among democratic, free-market 
members of the Euro-Atlantic community with a level of freedom, 
security, and prosperity that were unimaginable fifteen years ago. 
Croatia will very likely receive an invitation to join NATO next 
spring, is currently in accession negotiations with the EU and is 
proving itself an important ally in advancing the USG's regional and 
global interests. 
 
GLOBAL CONTRIBUTOR TO STABILITY AND SECURITY 
-------------------------------------------- 
 
2. Just a decade ago, Croatia was a consumer of international 
security resources, with U.N. forces ensuring the peaceful 
reintegration of the eastern Slavonian region after the 
disintegration of the former Yugoslavia.  Today, Croatia is an 
exporter of stability, both in the region and globally: 
- as a strong, active partner in the Adriatic Charter, an initiative 
including Albania and Macedonia to promote democratic and defense 
reforms on the road to NATO integration; 
- as a provider of soldiers and police to 11 UN peacekeeping 
missions from Kosovo to East Timor, with plans to contribute to five 
more; 
- as a significant contributor to NATO operations, with a 172-troop 
ISAF contingent in Afghanistan (set to grow to 200 by the end of 
2007 and 300 in 2008), and liaison officers involved in Operation 
Active Endeavor, NATO's counterterrorism mission in the 
Mediterranean; 
- as a host of NATO exercises, including the largest NATO civilian 
disaster response exercise ever held in a non-member state last May. 
 
 
3. Croatia's constructive engagement within the region continues to 
be one of its greatest contributions to stability.  Croatia just 
hosted a high-level meeting on Southeast Europe in Dubrovnik and 
concluded its successful chairmanship of the South East European 
Cooperation Process in May with the formation of a permanent 
Regional Cooperation Council.  In the past four years Croatia also 
has concluded several key regional agreements.  For example, it 
signed the Central European Free Trade Agreement in 2006, bringing 
together the former Yugoslav republics (excluding Slovenia), 
Albania, Moldova and Kosovo together in an effort to bolster free 
trade relations among members and to strengthen WTO commitments and 
EU trade practices.  We have also had an increasingly productive 
dialogue with Croatian leaders on Southeastern Europe's "unfinished 
business" in Bosnia and Herzegovina and Kosovo. 
Relations with Serbia remain sensitive, but President Stjepan Mesic 
and Prime Minister Ivo Sanader both have good relations with their 
counterparts in Belgrade and firmly support Serbia's future in 
Europe and NATO. 
 
COMMITMENT TO DEMOCRATIC VALUES 
------------------------------- 
 
4. Croatia has come a long way since the 1990s, and the Government 
has focused particularly on democratic reforms, recognizing they 
have a significant impact on NATO and EU accession.  Croatia has 
achieved concrete progress on key areas, with the majority of 
OSCE-related issues largely resolved.  While judicial reform remains 
an area for further reforms, significant progress has been achieved: 
court backlogs are shrinking, and Croatian courts are trying war 
crimes by people of all ethnicities in a fair manner, including 
high-profile war crimes cases and cases transferred from The Hague 
Tribunal.  Many countries have recognized this progress, most 
recently with the OSCE Chairman in Office calling for the closure of 
the OSCE mission by the end of the year. 
 
5. On refugee returns, Croatia has welcomed back more than 125,000 
refugees of Serb ethnicity and the Government has largely completed 
its programs of home repossession and reconstruction, infrastructure 
development, and has begun housing programs for former tenants of 
socialized apartments.  In addition, it has agreed to meet by the 
end of 2007 specific benchmarks in consultation with the 
international community on outstanding issues relating to its 
housing program and to pension credit for years worked under the 
Serb administration. 
 
6. Croatia is preparing for parliamentary elections this fall, with 
all major parties supporting platforms of Euro-Atlantic integration, 
increased anti-corruption initiatives, and continued market reforms. 
 The two major parties, the ruling center-right Croatian Democratic 
Union (HDZ) and the left wing opposition Socialist Democratic Party 
(SDP) are roughly even in the polls, signaling a tight race to 
decide who will form Croatia's next government. 
 
STEADY GROWTH, BRIGHT FUTURE 
---------------------------- 
 
7. Croatia, together with Slovenia, was the economic engine of the 
ex-Yugoslavia, accounting for a large portion of the industrial 
output and hard currency revenues generated by its tourism sector. 
Damage and dislocation from the war, the ensuing collapse of the 
manufacturing and tourism sectors, combined with a mismanaged 
privatization effort during those years, crippled Croatia's economy. 
 Political changes in 2000 brought with it economic reforms, with 
the first years of this decade showing increasingly positive 
economic trends. 
 
8. Croatia's economy has enjoyed steady growth since 2000, led by 
strong tourism receipts (tourism makes up 20% of GDP), a buoyant 
construction industry and growing mortgage and consumer lending. 
Although Croatia has grown at a slower rate than other economies in 
Central and Eastern Europe, 2006 growth came in above expectations 
at 4.8 percent.  New figures for the first quarter of 2007 show the 
economy growing at a brisk 6.9 percent.  Unemployment, although 
still quite high, has trended steadily downward, dropping under 12% 
for the first time in 2006.  The average monthly gross salary in 
early 2006 was about $1,159.  Although Croatia's per capita GDP of 
$9,000 is high by regional standards and is reflected in a 
relatively high standard of living, faster growth rates will be 
essential to closing the gap between Croatia and its wealthier 
western European neighbors. 
 
9. The opening of EU accession talks in 2005 brought new confidence 
in Croatia's economic future, particularly as the Government has 
been forced to implement long-overdue reforms.  Nevertheless, some 
significant problems still remain.  Corruption, lack of 
transparency, an inefficient judiciary and an overly-large state 
role in the economy continue to hamper Croatia's growth.  Croatia 
has made important improvements in its business climate in recent 
years, but more remains to be done to realize the Government's 
strategy of boosting foreign investment and quickening the pace of 
economic growth. 
 
BRADTKE