The slow, painful healing of the Greek economy after
a catastrophic debt crisis raises an interesting question. Which
country now holds the title of No.1 Economic Basket Case of the European
Union?
The answer is surely Croatia. It is a small country (4.3m people, not even 1 per cent of the 28-nation EU’s 506m inhabitants) that did not join the EU until last July. It is not a eurozone member. It has gorgeous islands and beaches where life seems distinctly pleasant. So Croatia and its economic troubles often slip under everyone’s radar.
But Croatia is now in its sixth successive year of recession. During this time it has lost almost 13 per cent of its gross domestic product. Unemployment is about 17 per cent of the workforce, and among young people the rate is close to 50 per cent.
This is a social disaster not very different from what has happened over the past five years in Greece and Spain. In Croatia, as in Greece, there is an inefficient public sector that keeps people in jobs that serve no obvious public purpose beyond disguising true levels of unemployment.
This problem is magnified by a shortage of private sector companies capable of creating jobs by competing successfully in EU markets.
Clearly, the general weakness of the European economy explains some of Croatia’s difficulties. But not all of them. When Moody’s, the credit rating agency, cut Croatia’s sovereign debt to junk status last year, it cited the government’s “reform inertia” as one reason for its action. It was a fair assessment.
Read more: The EU’s new economic laggard | The World
The answer is surely Croatia. It is a small country (4.3m people, not even 1 per cent of the 28-nation EU’s 506m inhabitants) that did not join the EU until last July. It is not a eurozone member. It has gorgeous islands and beaches where life seems distinctly pleasant. So Croatia and its economic troubles often slip under everyone’s radar.
But Croatia is now in its sixth successive year of recession. During this time it has lost almost 13 per cent of its gross domestic product. Unemployment is about 17 per cent of the workforce, and among young people the rate is close to 50 per cent.
This is a social disaster not very different from what has happened over the past five years in Greece and Spain. In Croatia, as in Greece, there is an inefficient public sector that keeps people in jobs that serve no obvious public purpose beyond disguising true levels of unemployment.
This problem is magnified by a shortage of private sector companies capable of creating jobs by competing successfully in EU markets.
Clearly, the general weakness of the European economy explains some of Croatia’s difficulties. But not all of them. When Moody’s, the credit rating agency, cut Croatia’s sovereign debt to junk status last year, it cited the government’s “reform inertia” as one reason for its action. It was a fair assessment.
Read more: The EU’s new economic laggard | The World
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