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Viewing cable 09ZAGREB678, PM KOSOR DRAWS IN OUTSIDE EXPERTS AND ELEVATES OLD

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Reference ID Created Released Classification Origin
09ZAGREB678 2009-11-18 10:04 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Zagreb
VZCZCXRO1288
PP RUEHIK
DE RUEHVB #0678/01 3221004
ZNR UUUUU ZZH
P 181004Z NOV 09
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC PRIORITY 9660
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
UNCLAS SECTION 01 OF 02 ZAGREB 000678 
 
SENSITIVE 
SIPDIS 
 
EUR/SCE FOR CATHERINE WESTLEY 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PREL HR
SUBJECT: PM KOSOR DRAWS IN OUTSIDE EXPERTS AND ELEVATES OLD 
GUARD FOR NEW ECONOMIC TEAM 
 
ZAGREB 00000678  001.2 OF 002 
 
 
1. (U) SUMMARY: Croatian PM Kosor announced on November 13 
the appointment of Croatian Employers' Association (HUP) 
Executive Director Djuro Popijac as Minister of Economy, and 
Health Minister Darko Milinovic and Finance Minister Ivan 
Suker as Deputy Prime Ministers in addition to their current 
positions.  Additionally, Kosor named three prominent local 
economists to an advisory council. With a total of five 
deputy prime ministers, the new government structure could be 
unwieldy.  But Kosor's decision helps to simultaneously 
silence critics in the business community and reassure the 
upper leadership of the HDZ of her support.  The new, smaller 
economic council could serve her even better, as they are all 
respected economists who are mostly apolitical and likely to 
give very frank advice.  END SUMMARY 
 
EMPLOYERS ASSOCIATION PRESIDENT NAMED AS MINISTER OF ECONOMY 
 
2. (SBU) Djuro Popijac, head of the Croatian Employers' 
Association (HUP), is the new Minister of Economy, replacing 
Damir Polancec, who resigned two weeks ago over alleged links 
to an ongoing corruption investigation.  As HUP president, 
Popijac was one of the GoC's loudest critics on the 
introduction of VAT increases and a "crisis" income tax.  He 
has also made frequent public calls for lowering public 
expenditures and the overall tax burden on businesses.  As 
Minister, Popijac will be responsible for GoC policy and 
oversight on trade, energy, insurance, labor, investment, and 
export promotion.  He will notably not carry the simultaneous 
title of Deputy Prime Minister that his predecessor carried. 
Given Popijac's previous position on the employers' side in 
negotiations with labor unions, it is no surprise that unions 
are generally unhappy with the appointment. 
 
3. (SBU) Prior to his tenure as HUP Executive Director, 
Popijac was President of the Croatian Financial Agency 
(FINA), Croatia's payments clearinghouse, where he spent the 
majority of his career. He is credited for the work that 
established the financial payment systems in Croatia 
following independence from the former Yugoslavia. 
 
MINISTERS OF HEALTH AND FINANCE PROMOTED TO DEPUTY PRIME 
MINISTERS 
 
4. (SBU) In addition to the new Economy Minister, Minister of 
Health Darko Milinovic and Minister of Finance Ivan Suker 
were named as Deputy Prime Ministers. These appointments will 
bring to five the number of Deputy PMs in the 20 member 
government. Milinovic will now be number two in the 
government under Kosor, which reflects his position as deputy 
president of the HDZ. Suker's position as Deputy PM for 
Economy will entail only limited expansion of his authority, 
but he will bear political responsibility for the actions of 
the new team. Since the other three Deputy PMs are all from 
coalition allies, the elevation of Milinovic and Suker, both 
old guard loyalists of the ruling HDZ party, appears to be a 
gesture by Kosor to the HDZ inner circle to reassure them 
that the party still forms the backbone of the government. 
 
NEW ECONOMIC COUNCIL: EXPERTS READY TO TACKLE THE BUDGET 
DEFICIT 
 
5. (SBU) Kosor's November 13 announcement also established a 
new council of experts to advise her on economic questions. 
The economic council is comprised of private equity investor 
and former finance minister Borislav Skegro, Head of the 
Zagreb Institute of Economics (EIZ) Sandra Svaljek, and EIZ 
analyst Zeljko Lovrincevic.  According to Kosor, the 
council's immediate task will be to advise her on how to 
manage or reduce Croatia's budget deficit as well as the 
potential removal of some politically appointed executives 
from supervisory boards of public companies.  Croatian media 
and financial analysts praised the appointments.  All of the 
members are seen as 'outside' the political sphere and are 
locally respected experts well familiar with Croatia's 
economic problems. 
 
COMMENT 
 
6. (SBU) Kosor's announcement serves the dual purpose of 
satisfying some of her loudest critics from Croatia's 
business community and maintaining HDZ harmony. She was under 
heavy pressure to name a new team to jump start economic 
reforms even before former Economy Minister Polancec was tied 
up in the Podravka scandal.  She needed to name an economic 
policy maker to the Deputy PM post to reflect her seriousness 
in tackling economic problems.  However, the party hierarchy 
dictated that Milinovic be named as well, resulting in the 
unprecedented number of deputy prime ministers.  She will 
 
ZAGREB 00000678  002.2 OF 002 
 
 
need to skillfully manage this somewhat unwieldy structure to 
move forward on key reforms in the economy and health care. 
She may have better luck with the new, smaller, council of 
economic experts.  Previous efforts to cull outside economic 
advice suffered from soliciting too diverse a cross-section 
of experts, resulting in muddled recommendations, or even no 
recommendations at all.  In the new body, two of the three 
people named (Svaljek and Lovrincevic) are part of the same 
economic research organization, and the third (Skegro) has 
benefited from many years in the private sector where he has 
been outspoken in his criticism of Croatia's business and 
investment climate.  The advice she will get from these three 
will likely be apolitical and very frank.  It will then be up 
to Kosor, Suker and Popijac to figure out whether they can 
implement it.  END COMMENT. 
FOLEY