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UPDATE 2-Croatia parliament approves new conservative-led cabinet
October 19, 2016 / 7:57 PM / a year ago

UPDATE 2-Croatia parliament approves new conservative-led cabinet

(Adds more details, background)
    By Igor Ilic
    ZAGREB, Oct 19 (Reuters) - The Croatian parliament approved
on Wednesday a new government led by the conservative HDZ party
leader Andrej Plenkovic whose main task will be to boost growth
and sort out fragile public finances in one of the weakest
European Union economies.
    The new government was formed by the HDZ and its junior
centre-right reformist partner Most ("Bridge") after several
weeks of negotiations following a Sept. 11 snap election.
    The government got support of 91 out of 151 parliamentary
    "We will be the government that knows how to bring about
changes," Plenkovic told the parliamentary deputies while
presenting his cabinet.
    He said that spurring growth and improving the business
climate would be his government's priorities.
    "We will ease conditions for doing business and implement
tax reform to make the taxation system simpler and ease burden
for citizens and businesses," Plenkovic said.
    In the past many investors have largely shunned Croatia due
to red tape, high taxes, frequently changing regulations and a
slow judiciary.
    Plenkovic said that the 2017 budget, which is expected in
November, will clearly reflect efforts to reduce the fiscal gap
and public debt which now stands at around 85 percent of gross
domestic product.
    Tentatively, the government wants to reduce the gap to two
percent next year from some 2.5 percent expected this year.
    Among the main challenges for the new government will be
disputes with Hungary's MOL over decision-making in
jointly owned Croatian energy group INA, with public
sector trade unions over wage hike promise, and with local banks
over the forced conversion of Swiss franc loans into euros.
    Disputes over the promise of higher wages, dating back to
2009, and CHF loans, whose conversion cost was entirely imposed
on the banks, could potentially inflict costs worth billions of
kuna and undermine fiscal consolidation plans.
    Analysts widely believe that without measures to
significantly improve the business climate, the country is
unlikely to surpass the 2.5 percent growth figure in the coming
    HDZ won most parliamentary seats in the snap election
following a collapse of the previous HDZ-Most government in
June, after just five months in power, due to a row over a
conflict of interest case involving a former HDZ leader.
    Analysts believe the new government, led by the new HDZ
leader, has a good chance of completing the four-year term.

 (Reporting by Igor Ilic; Editing by Angus MacSwan)

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