Croatia steps up bid amid doubts

Croatia will apply for full membership of the European Union this month, vowing to step up reforms and dispel lingering doubts about its true commitment to democracy.

The decade-long nationalist government of the late president Franjo Tudjman shut it out from the union's first expansion into eastern Europe, due in 2004, but the former Yugoslav republic now hopes to join the second wave, set for 2007.

Progress, according to diplomats and observers, will depend largely on its meeting basic political criteria and the outcome of the next parliamentary elections, due by April 2004.

Croatia plans to hand in its application to the current EU president, Greece, in Athens on February 18. It has lobbied and won support from most EU members, including backing from Italy, which takes over the presidency in July.

European Commission President Romano Prodi yesterday welcomed Croatia's plan and said its bid would help to cement stability in the Balkan region.

"The message is clear. We welcome the decision which you will soon take and we shall start immediately to work together (once the application is filed)," Prodi said after talks with visiting Croatian President Stipe Mesic.

"I expect Croatia will play a stabilising role in the whole region," Prodi told reporters, reiterating his view that all Balkan countries should be allowed eventually to join the bloc.

Damir Grubisa of the Institute for International Relations said Europe was not thrilled at the prospect but supported the struggling centre-left coalition government in the hope of preventing a resurgence of nationalism in the next election.

"This is a crucial moment and lack of goodwill from Europe could destabilise the ruling coalition. Therefore, the lesser of two evils is to encourage pro-Western forces in Croatia and expect this to result in positive changes," he told Reuters.

Ideally, EU ministers will ask the European Commission, the bloc's executive body, at a summit in Thessaloniki in June to draft an "avis" - a political assessment of a country's bid.

Croatia could get the green light in the middle of 2004 and start accession talks at the end of the year. If all went well, it would close the talks in time to catch up with Balkan neighbours Romania and Bulgaria, set to join the EU in 2007.

A Western diplomat said the move was "a sovereign decision and a clear sign Croatia wants to play in a higher category and will therefore be judged according to merits and achievements."

Prime Minister Ivica Racan's centre-left coalition has made substantial progress in economic and political reforms since ousting Tudjman's hard-line HDZ party from power in 2000.

It soon won an associate membership accord and vowed to be ready for full membership by 2007.

Unlike politics, Croatia's economy has been generally acknowledged as doing better than that of Romania and Bulgaria.

The government has maintained a stable currency and low inflation, 2.2 per cent in 2002, while curbing public spending. It aims to reduce the general budget deficit to five per cent of GDP this year, under a stand-by agreement with the International Monetary Fund.

The economy has been growing steadily since the last quarter of 1999, rising 6.5 per cent in the third quarter of last year, although fuelled mostly by household consumption and state-financed construction work.

The only concerns are stagnating exports and rising foreign debt, now topping $14 billion or almost 65 per cent of GDP.

"Croatia is basically a functioning market economy, but it is also essential to undertake a judicial reform, have a functioning judiciary," said a Western political observer.

According to European Commission officials, the Copenhagen criteria - the basic political criteria of democracy and human rights - would be crucial in assessing Croatia's progress.

Although the government recently boasted of having met more than 60 per cent of the obligations laid out in its associate membership accord, an EC official said Croatia's assessment was too optimistic.

The nationalist HDZ, which sacked several hardline officials last year in an effort to transform into a conservative centrist party, has regularly topped local popularity surveys.

It is almost certain to get between 20 and 30 per cent of votes, but not enough to form a government. The party said it would seek an alliance with other centrist parties, rather than a bloc of extreme right-wingers.