WED, 22 AUG 2001 23:51:10 GMT
Curtailing of Social Benefits
AIM Zagreb, August 5, 2001
Recently Racan’s Government announced a set of measures that could be
the death of a greater part of the Croatian population this fall. They
concern a comprehensive, extensive and the most radical cutting of
social benefits. In case this idea is accepted in its present form, as
part of the “rationalisation of social expenditures”, the Government
will impose taxes on the so-called privileged pensions for all
pensioners who receive more than 1,680 kunas, i.e. DM 450. This would
consequently reduce their pensions by some 10 percent. These relates to
pensions of Parliament members, officials, veterans and similar. Also,
this tax would be payable by all pensioners whose pensions are higher
than average wages in Croatia.
>From the current 1,680 kunas payable during the entire maternity leave,
maternity benefits would be reduced so that new mothers would get the
full amount just in the first six months of their leave and in the
remaining six months only 900 kunas. For leaves over one year long,
maternity benefits would not be paid. Since, according to journalists’
calculations, a baby costs over 2,400 kunas a month it is fairly clear
that the current emoluments are far from enough. Child’s allowances
would also be reduced for certain categories of beneficiaries.
The Government still doesn’t have a clear idea where and how to cut
child’s allowances, but presented an example according to which over 50
thousand veterans’ children in Croatia receive ten to twenty percent
higher allowances than other beneficiaries, although their parents have
high, for Croatian circumstances even astronomic incomes – between 10
and 20 thousand kunas. The amount of child’s allowances would be
determined according to the number of children and total family income.
Allowances for civilian victims of World War II, victims of the Homeland
War and first class Croatian war invalids would also be cut.
Croatian veterans’ allowances for some categories might be next for
reduction. Although these are just some ideas, whose implementation
might differ from the above presented scenario, the Government has
already announced that it will start implementing some of these measures
(such as taxation of pensions) already this year, while other planned
cuts would be realised at the beginning of next year.
According to the Government, this rationalisation is just “phase zero in
the reform of social welfare which is intended to restore the confidence
of citizens and make them take care of themselves”. According to these
sources the basic aim of this reform is not to save funds, but to
re-channel aid from a large undeserving privileged group of
beneficiaries to those who truly need that aid in order to survive.
This would prevent some citizens who have as much as 20 thousand kunas a
month, to receive up to 34 additional allowances, in other words to live
off the state better than small-size entrepreneurs in some rich
West-European countries. Pensioners will represent the most important
element of this rationalisation – who get 51 percent of social welfare
funds, with much less being allocated for other items, such as health
care (32 percent). As was to be expected, the public angrily reacted to
President of the Independent Croatian Trade Unions, Kresimir Sever said
that with the latest price increases and curtailing of social benefits
the Government was unconditionally meeting the requests of the
International Monetary Fund and the World Bank, thus making Croatia a
protectorate of the international community. This trade-union activist
made a number of additional claims, which most of his colleagues seem to
share today. According to Sever, the Government is actually incapable of
finding concrete solutions for pulling the Croatian economy out of the
crisis so that - buying time – it is intentionally insisting on some
other problems, such as relations with the Hague Tribunal, thus
diverting attention from the survival issue.
According to him, the Government is fishing in muddy waters. For
example, it recently sold 16 percent of shares in the Croatian Telecom
to German partners (“Deutsche Telecom”) in order to replenish the state
budget. In return, it forgave the Germans the drastic increase of prices
of telephone services thanks to which the Germans will get back all
their investments in Croatia in the shortest possible time.
The reasoning of trade unions in not totally ungrounded. However, the
fact remains that Racan’s Government still has cover for some of its
moves. For example, on the initiative of the Croatian Democratic union –
as part of a broad election campaign - the HDZ Parliament passed the Law
on Maternity Allowances wanting to show the generous social sensitivity
of Tudjman’s party. However, when they put on paper how much that would
all cost, the HDZ officials concluded that the implementation of this
law was unfeasible because its elements were utopian already then.
According to some Ministers, the new Government rather recklessly, and
even foolishly, started implementing it in practice, irrespective of the
price. However, these benefits had to be reduced to realistic
frameworks. Privileged pensions are not a remnant of the HDZ’s times,
they existed even during socialism, but metastasised under Tudjman.
Tudjman was well aware what he was doing. He was buying the support of
the broadest masses, by heavily borrowing all over the world and selling
the national treasures for a pittance, which mostly made it possible for
him to rule during the previous decade. However, during that time
Croatia’s external debt reached the amount of USD 11 billion. Someone
had to put a stop to it as it could simply not go on.
Thus, the former communist Racan was left with a slightly paradoxical
task: to remove all social-parasitic elements from Tudjman’s ideology,
which has infected the entire society (although its foundations have
been laid much earlier). For, the Croatian citizens are not used to
living in liberal capitalism and the scope of social benefits is still
The well-meant Government’s critics do not question these moves, but
think that they have come too late. Namely, already at the beginning of
its mandate – when it enjoyed the strongest citizens’ support - the
Government should have said that some rights which the citizens
inherited from the HDZ, were inviolable.
In this way, the reduction of privileges will occur at an extremely
sensitive political moment when Croatia is facing new indictments from
the Hague, which according to some views, could easily bring down the
Government. On the other hand, along with higher phone rates, the prices
of gas will also go up for 10 percent, after which milk prices will
follow with 15 percent increase, as well as prices of medicines (up to
120 percent) and school textbooks. The employment has stopped at the
figure of 360 thousand and is record high for countries in transition.
Also, by all appearances the tourist season will fall short of
expectations, primarily because of the over-valued kuna exchange rate
and high prices of extra services. Nevertheless, according to estimates
of the International Monetary Fund, even after this rationalisation
public spending will be too high in relation to possibilities and the
growth of social product (from four to five percent) insufficient to
cover the expenditures.
Also, Racan’s Cabinet never showed clearly that it was keeping its
pre-election promises. Everything it does boils down to restrictions,
limitations and sale of national wealth. This drives the nation to
despair so that it is clear that – as every previous year – the coming
fall will be hot even without heating. If, on top of it, new indictments
from the Hague arrive, the mission of the first post-Tudjman Croatian
Government will truly be impossible.
Boris Raseta (AIM)