Social Democrat member of parliament and former economy minister Boris Lalovac said on Thursday in a parliamentary debate on a draft budget for 2020 that in the event of a new economic crisis, the government did not have any financial instruments to stabilise the economy, apart from possibly introducing a property tax.

“Value Added Tax (VAT) has been maximised to 25% and is among the highest VAT rates in the EU, excise taxes on tobacco and alcoholic drinks are in ‘the grey zone’, income tax is a ‘squeezed lemon’ and the monetary policy cannot be used as an instrument because interest rates are almost at zero,” Lalovac said.

He recalled that the economic growth rate in 2015 was 2.4% and in 2019 a mere 2.5%, noting that this meant stagnation.

Lalovac added that the decision to keep the standard VAT rate at 25% and give up the plan to reduce it to 24% was a political decision and that the 1% of what was yet to be earned would be used next year for an increase in public sector wages.

The proposed tax reliefs for young people are discriminatory and not good because they single out one group according to the age criterion, Lalovac said.

Speaking of the second pension pillar, the SDP MP warned about a drop in bond yield, which now ranges from 0.5 to 1%, noting that there was a threat of pensions being lost because the costs of pension funds exceeded their revenues.

As for the use of EU funds, Lalovac said that that money was being used mostly to pay foreign companies operating in Croatia and that the competitiveness of the national economy was not supported, which, he said, was the only right path.