Prime Minister Andrej Plenkovic said on Monday the European Stability Mechanism was an anchor of stability and resilience for euro area member states, while the finance minister and the central bank governor said the advantages of membership lay in a higher credit rating and a lower risk premium.

Addressing a conference on Croatia as the 20th member of the ESM, organised by the Finance Ministry and the ESM, Plenkovic said Croatia would mark ten years of EU membership in July, that it was the only EU member state to join the euro and Schengen areas the same day, this past 1 January, and that in two and a half months it also joined the ESM.

The ESM’s goal is to help euro area member states avert and overcome financial crises and maintain long-term financial stability and prosperity, Plenkovic said, adding that since 2012 the ESM has provided €295 billion in financial support to those which lost access to the financial market.

Membership gives Croatia the right to utilise additional financial instruments in case of necessity, and it also brings added value in stronger cooperation within the Economic and Monetary Union.

The time we live in, notably the circumstances since the brutal Russian aggression on Ukraine, which has resulted in an energy and food crisis as well as inflationary pressures, is a time in which the significance of membership in the euro area and the ESM is additionally emphasised, Plenkovic said.

Croatia still aspires to join only the Organisation for Economic Co-operation and Development, and accession negotiations have begun, he added.

The ESM is an intergovernmental organisation established by euro area member states in 2012, during the great financial crisis. The ESM approves loans and other forms of financial assistance to the member states in or at risk of financial difficulty. The ESM played a key role in maintaining the euro area’s integrity during the European debt crisis. Under the Treaty establishing the ESM, all euro area member states join it.

The ESM should be viewed as a safety net and as insurance in the event of a crisis or difficult financial situation, in which it rests on solidarity, said its managing director, Pierre Gramegna.

The money is there in the event of a crisis, but everyone always hopes it won’t have to be used, he added.

ESM membership benefits

Croatian Finance Minister Marko Primorac said the direct and clear benefits of ESM membership manifested with the very announcement that Croatia would join, resulting in an upgrade of its credit rating by the main agencies.

He is confident the benefits will continue in future also and hopes that Croatia won’t need to utilise the possibilities and protection the ESM provides.

Croatian National Bank governor Boris Vujcic said the ESM gave Croatia additional credibility and that a fall in the premium risk was one of the membership benefits thus far.

This fall is reflected in lower interest rates for Croatian households and enterprises, he said, adding that this membership also increases investor confidence.

Croatia’s GDP up €20bn during Plenkovic’s two governments

Speaking of the seventh year in office of his two governments and the ten years of Croatia’s EU membership, the prime minister said the fundamental guideline of the government’s policy was a modern sovereignism. It includes the strengthening of Croatia’s international standing and reputation as well as facilitating the achieving of strategic national goals, he added.

Plenkovic said the government’s policy focused on political stability, a pro-European orientation, and a considered economic policy.

Another goal is balanced regional development, he said, adding that 22 Croatian towns/cities will get €680 million for development from the new Multiannual Financial Framework.

That and the next round of the tax reform show that this government is for decentralisation and that it gives money to local government units, Plenkovic said.

The government has also pledged that the average net pay will be €1,000 by the end of its second term, Plenkovic said. National statistical office data for March show that it amounts to €1,130 already, which shows how fast the government is achieving its goals, he added.

Also, Croatia has 1.66 million people in employment and less than 100,000 jobless, the prime minister said, adding that this is the highest number of employed persons and the lowest number of those unemployed since 1982.

Ten years ago, the employed-unemployed ratio was 4:1 and now it is 16:1, he said.

According to Eurostat, Croatia is at 73% of average EU development, while GDP per capita has increased by €5,900 to €17,200 since 2016, he added.

As for the overall GDP, it has increased by €20 billion during Plenkovic’s two governments, including by €2 billion from 2010 to 2015. Those trends can and must continue, despite all the challenges we are facing, he said.

Maintaining internal cohesion, despite the challenges caused by the pandemic and Russia’s aggression on Ukraine, and achieving strategic goals at the same time is, Plenkovic said, “a great skill. To move on while fighting against something on which you have no influence.”

Croatia also has a net surplus of €10.5 billion when it comes to the European funds it has absorbed and the money it has paid into the European budget, he said.

Because of the 1990s war, he added, Croatia lost ten years and must now “catch up” with the countries of central and eastern Europe.

He is fully confident that “the final balance” will be drawn up only in 2030, when Croatia will have been 17 years in the EU and eight in the euro and Schengen areas. In all of that, he added, the European funds at its disposal will be the driver of economic growth.