Prime Minister Milanovic Dismisses Health and Education Ministers

Monday, June 16, 2014
UNDERSTANDING GOVERNMENT DECISION-MAKING IN CROATIA
GOVERNMENT RESHUFFLE
Prime Minister Milanovic Dismisses
Health and Education Ministers
VOL. 03, ISSUE 89
LPJ INDEX
Weekly Top Headlines
■■ GOVERNMENT RESHUFFLE: Prime Minister Milanovic
Dismisses Health and Education Ministers
■■ ECONOMIC OUTLOOK: Croatian GDP Falls 0.4% in Q1
of 2014
■■ SHIPBUILDING: Dutch Jumbo Shipping Cancels Contract
with Brodosplit, May Trigger State Guarantees
■■ INVESTMENT: Austrian Wollsdorf Opens Plant in Croatia
■■ EXPORTS: HS Produkt Expands Arms Exports to Iraq
Legislative & Regulatory Monitoring
Laws to Watch:
■■ Interest Rates Act
■■ Air Traffic Act
Government Decisions:
■■ Decision on Real Estate Assessment
■■ Declares Piskornica Regional Waste Management Centre
Strategic Project
■■ Decision on Hydrocarbons Exploration/Exploitation Fees
■■ State-owned Companies to Pay Profits into State Budget
■■ Hospital Master Plan (2014-2016)
Regulatory News:
■■ HAKOM: Subsidies Provided for Broadband Construction
on Islands
■■ AZTN: HT Did Not Abuse Dominant Position
■■ HNB: Approves J&T Acquisition of Vaba Bank
■■ HNB: Approves New Bank CEOs
From left to right: former Health Minister Rajko Ostojic and former Education Minister Zeljko Jovanovic
On 11 June, Prime Minister Zoran Milanovic
(SDP) dismissed Minister of Health Rajko
Ostojic (SDP) and Minister of Sport, Science and Education, Zeljko Jovanovic
(SDP). Ostojic will be replaced by the
current Director of Croatian Health Insurance Fund (HZZO), Sinisa Varga (SDP).
Former Dean of the Faculty of Electrical
Engineering and Computing, University
of Zagreb, Vedran Molnar will take Jovanovic’s place as Education Minister.
The Sabor is scheduled to give Varga and
Molnar a vote of confidence on 16 June.
The decision was announced after the
government’s cabinet session, which was
switched from Thursday to Wednesday.
The latest reshuffle came only four days
after the ruling SDP ousted former Finance
Minister Slavko Linic from the party, upon
Milanovic’s request as SDP President. In
a secret ballot, the SDP Council voted
50-47 (1 abstention) to expel Linic after a
12-hour debate. Though Milanovic won,
the thin margin exposed a deep divide in
his party, which is still reeling after losing
the May 25 vote for the European Parliament. Among those who publicly disagreed
with Milanovic’s request to expel Linic and
voted against his expulsion was Ostojic.
On 29 May, Linic held a press conference
where he accused Milanovic of corruption and abuse of office (see LPJ 087).
Milanovic said there were no concrete
personal or professional reasons for Jovanovic’s and Ostojic‘s dismissal; only
that they were taking charge of very difficult sectors where opposition to reforms
is large.
He underlined the reshuffle
would not bring any radical changes in
policy. “We cannot expect radical moves
at this point of our term, but the continuation of on-going reforms,“ added the PM.
Furthermore, local media reported that
Milanovic had offered Governor of the
Croatian National Bank (HNB) and his
close friend Boris Vujcic the position of
Deputy Prime Minister for Economic Affairs
to replace Regional Development and EU
Funds Minister Branko Grcic (SDP). The
PM denied offering Vujcic that position,
even though on Tuesday Grcic hinted that
he would be “relieved” by such a decision.
With only a year and half (at most, before
upcoming parliamentary elections), Vujcic’s
hesitancy to accept such a cabinet position is
understandable from a personal and professional position, but his refusal is also simultaneously a cautionary message to the PM.
Political analyst Zarko Puhovski said the
government reshuffle will not result in policy
change. Puhovski stated, “Milanovic removed one minister who is bad (Jovanovic)
and one who is trying to do something
(Ostojic), but it does not indicate a change
Legislative & Policy Weekly Briefing
Understand the real-life implications of government decision-making
Sabor Weekbook:
■■ The Sabor debated the following legislation: Interest Rates
Act, Croatia and IBRD Loan Act, EGTC Act, Law Confirming Contract between Croatia and Luxembourg on Mutual
Protection of Classified Data
Person of the Week
■■ Sinisa Varga, Minister of Health
Weekly Commentary
■■ New European Commission Measures to Support PCIs
in the direction of the government, but
to the prime minister it was important to
initiate an action before he went to the
World Cup“. In contrast, President Ivo
Josipovic said the government had apparent problems with achieving results, and
that he would like to think that the reshuffle could be a new impetus for change.
Since Milanovic did not give a convincing
explanation for the dismissals, one could
not escape the impression that these shifts
in the government cabinet were a result of
the above-mentioned session of the SDP
Council, which disclosed a deep division
within the party. It appears that Milanovic
has sacked Ostojic from his cabinet, as
one of his main opponents in the SDP,
while Jovanovic was ‘sacrificed’ in order
to avoid possible accusations of revenge
by the SDP Rijeka fraction. Realistically, it
is implausible to expect Varga and Molnar
will achieve better results than their predecessors, especially with only 18 months
of the government’s four-year term left.
June 24, 2013 / Page 1
www.legislative-journal.com
WEEKLY TOP HEADLINES
DZS: Croatian GDP Falls 0.4% in Q1 of 2014
On 10 June, the Croatian Bureau of Statistics (DZS) reported
that Croatia’s GDP fell by 0.4% compared to the same quarter
of 2013. Overall, exports of goods rose to the tune of 6.1%,
while services exports declined by 2.5%. Despite a decline in
both household consumption and government consumption by
0.5% and 1.9%, respectively, imports of both goods and services
increased by 2.5%. The fall in consumption and spending follows
the government’s commitment to reducing the deficit below
the EU mandated 3% of GDP, as the state goes through the
Excessive Deficit Procedure (EDP). The World Bank forecasts
a contraction of 0.5% in the Croatian economy throughout 2014
Dutch Jumbo Shipping Cancels Contract with Brodosplit,
May Trigger State Guarantees
On 11 June, the Dutch shipbuilding company Jumbo Shipping
cancelled a shipbuilding contract with the Split-based shipyard
Brodosplit. Under the contract, Brodosplit was to build two heavy
cargo ships. The first vessel’s deadline was 31 May, while the
second was due to be completed Q3 2014. Brodosplit overran
the first vessel’s deadline, and, in response Jumbo has terminated the contract. According to local media, because the ships
were commissioned in 2011 while Brodosplit was a state-owned
enterprise, state guarantees for advance payments may still
apply. These guarantees reportedly amount up to €33 million.
Austrian Wollsdorf Opens Plant in Croatia
On 10 June, Austrian-based industrial leather manufacturer Wollsdorf announced its plans to invest €8.5 million in its Croatian
plant planned to start operations in September near the northern city of Varazdin. The company produces leather for the
transportation industry and luxury furniture. Its clients include
major car manufactures such as BMW, VW, and Lamborghini,
the airline industry, and maritime vessel manufacturers. The
plant is initially expected to create 250 new jobs, down from
the 300 Wollsdorf announced in last year’s June press release.
HS Produkt Expands Arms Exports to Iraq
According to the news site Defender.hr, in the period April-May
2014, the Karlovac-based armament manufacturer HS Produkt
exported 30 tonnes of combat handguns HS Produkt and assault
rifles VHS to Iraq. The order was placed by the Iraqi Ministry
of Defence together with the regional government of Kurdistan.
HS Produkt exports its entire production (95%) to the US market. On the domestic market, the company is the leading supplier to government law enforcement agencies, as well as civilians. Therefore, expanding its presence to other markets (i.e.
Iraq) is a positive step for this successful Croatian company.
Zagreb County Court to Try MOL CEO Hernadi in Absentia
On 10 June, the Zagreb County Court decided to try CEO-Chairman of the Hungarian petrochemical and gas company MOL,
Zsolt Hernadi, in absentia. Hernadi is accused of bribing former Croatian Prime Minister Ivo Sanader to gain control over
management rights of INA in 2009 (see LPJ 052). In 2012, the
Zagreb County Court found Sanader guilty in the same bribery
case and sentenced him to 10 years in prison. On 13 June,
the Supreme Court confirmed the county court’s decision ending
the appeals process, but modified the original verdict to eight
years and six months. The ruling will not automatically annul the
disputed INA shareholder agreement, but may serve as a legal
basis for the government to initiate new proceedings to render
it null and void. Undoubtedly, the final judicial verdict validates
and strengthens the government’s position in the negotiations.
Qatar Airways to Launch Doha-Zagreb Flights
Starting from 3 October 2014, the airline company Qatar Airways
will operate non-stop flights from Qatar’s capital Doha to Zagreb
Legislative & Policy Weekly Briefing
Understanding government decision-making in Croatia
By Nikola Zubalj / Damir Vucic
three times a week (i.e. Mondays, Fridays and Saturdays); the
company announced in a press release published on 8 June. The
flights will be serviced by an Airbus A320. Qatar Airways CEO
Akbar Al Baker said: “In the two years since we began flying to Zagreb, we have watched it grow into one of our most popular destinations in Europe. This is why I am so pleased that we are now able
to provide our passengers with a new and more convenient option
by offering a direct flight to this beautiful city direct from Doha“.
World Bank and Croatia Sign €75 Million Healthcare Loan
On 10 June, the World Bank Central and Eastern Europe and Baltic States Director, Mamta Murthi and Croatian Finance Minister,
Boris Lalovac (SDP), signed a loan for improvements to Croatian
healthcare services. The €75 million loan will support projects in
line with the state’s healthcare development strategy for 20122020. The new funding will be distributed among various healthcare related agencies through principally the Ministry of Health
and under the oversight of the Ministry of Finance. The World
Bank loan will be used to improve service access, organisational and management process improvements, as well as equipment procurement and advanced technology implementation.
Danilo Wind Farm Opens Providing 44 MW Power
The Danilo Wind Farm, located 5km from Sibenik on the Adriatic,
came online on 10 June. The project is owned by RP Global,
a private Austrian energy producer, costing approximately €70
million to construct. The 43.7 MW farm is expected to annually
produce 100 gigawatt hours of energy, enough to supply 22,000
households with clean energy. The World Bank’s International
Finance Corporation, the Italian bank Unicredit, and Zagrebacka
Bank (owned by Unicredit) financed the project. A total of 19
German Enercon turbines make up the wind farm, and RP Global intends to construct another 34.2 MW farm near Dubrovnik
in partnership with the domestic company Adria Wind Power.
Bulgaria Halts Construction of South Stream
Following increasing pressure by the EU to suspend construction on the Russia-backed South Stream Pipeline, Bulgaria announced on 8 June that it had complied with EU demands and
had halted construction. The European Commission (EC) initiated infringement procedures against Bulgaria last week claiming
that contracts for construction favoured Bulgarian and Russian
companies, in opposition to EU procurement rules. On 10 June,
the opposition leaders in the parliament advocated for new elections and the ousting of the current government in response to the
South Stream decision. Additionally, Serbia’s (EU candidate state)
construction of the pipeline has been called into question; on 9
June, the Deputy Prime Minister, Zorana Mihajlovic, announced
Serbia would halt construction. The same day, Prime Minister
Aleksandar Vucic denied the decision, stating that the government has not made such a decision and that the future of the
project depends on “an agreement between Russia and the EU”.
EC Approves Croatia’s Regional Aid Map 2014-2020
On 11 June, the European Commission (EC) approved Croatia’s
Regional Aid Map for the 2014-2020 period, which determines the
amount of state aid available to businesses in the NUTS II (Nomenclature of Territorial Units for Statistics) regions. In April, the
Croatian government submitted the regional aid map to the EC for
evaluation. According to the document, Croatia is divided into two
regions. In the Adriatic Region, which has a GDP per capita of 60%
of the EU average (Eurostat), grants for large, medium-sized and
small enterprises may be awarded in the amount of 35%, 45% and
55% of the total project value, respectively. In the Continental Region, which has a GDP per capita of 61.67% of the EU average, the
available aid to large, medium-sized and small businesses amounts
to 25%, 35% and 45% of the total project value, respectively.
June 16, 2014 / Page 2
www.legislative-journal.com
LEGISLATIVE & REGULATORY MONITORING
LAWS TO WATCH:
❹❹ Interest Rates Act
Proposed by: Ministry of Finance
The proposed legislation prescribes the maximum allowed contractual interest rate for contracts between businesses at 12.25%,
and the maximum interest rate for contracts with households at
11.35%. This is significantly less than the current maximum contractual interest rate of 18% allowed by the Contractual Relations
Act. The legislation also enables businesses to agree among
themselves a different default interest rate. The maximum allowed interest rate on current account overdrafts is 10.35%, instead of the current rate of 11%.
Note: The legislation passed the first Sabor reading.
❶❶ Air Traffic Act
Proposed by: Ministry of Maritime Affairs, Transport, and Infrastructure
The proposed legislation extends the deadline for the transfer of
security services (i.e. search of travellers and luggage) authority from the police to security services companies to 26 March
2015. The existing legislation from 2011 defines the deadline to
be 36 months from ratification of legislation, meaning that the
deadline would expire 28 July 2014. The organisations involved
in the process (i.e. airports, police and security companies) have
not make the adequate preparations for the quality transfer of
authority. Therefore, the deadline has been extended by another
8 months.
The proposed legislation expands the authority of the Agency
for Civilian Aviation, which will be given State’s Attorney authority whereby they are allowed to issue a minor offence warrant
against offenders. They will also be authorised to rescind second-level administrative decision, in offences deemed illegal.
Note: The public debate is open until 20 July.
❼❼ Legislation ratified by Sabor:
••
••
••
••
••
••
Croatia and IBRD Loan Act (see LPJ 087)
European Grouping of Territorial Cooperation (EGTC) Act
(see LPJ 088)
Law Confirming Contract between Croatia and Luxembourg on Mutual Protection of Classified Data
Areas of Special State Care Act
Cooperatives Act
Law Confirming Double Tax Treaty between Croatia and
India
GOVERNMENT DECISIONS:
❻Decision
❻
on Real Estate Assessment
Proposed by: Ministry of Construction and Physical Planning
The government issued a decision that defines the manner, conditions, and methodology for real estate assessment, in order to
avoid large discrepancies by authorised assessors. The decision foresees 3 methodologies: comparative, earnings, and cost
Legislative & Policy Weekly Briefing
Understanding government decision-making in Croatia
By Ivan Vukovic
component that are chosen according to type of real estate, taking into account all circumstances. The choice of methodologies
must be explained in detail. The market value is determined by
chosen methodology, taking into account the general market value, the real estate condition, the specific conditions of the property, and the statistical processing of all these factors.
The decision will be used to assess the value of property during the expropriation process and in all real estate transactions.
After analysing all possible negative repercussions of this decree
in practice, this sector will be particularly regulated by a new Real
Estate Assessment Act by the end of the year.
❻Declares
❻
Piskornica Regional Waste Management
Centre Strategic Project
Proposed by: Ministry of Economy
The government declared the Piskornica Regional Waste Management Centre to be of strategic interest to Croatia, which will
eliminate administrative and other obstacles to the realisation of
the project; it also allows for the expedited expropriation of needed property. The centre services 4 counties in Northwest Croatia
and is valued at €100 million to be co-financed by EU funding.
❻Decision
❻
on Hydrocarbons Exploration/
Exploitation Fees
Proposed by: Ministry of Economy
The government amends the previous decision for the payment
of fees on exploited oil and gas to be paid monthly, as opposed
to quarterly, which was the previous practice (see Government
Decisions LPJ 077). The changes are effective as of 1 July 2014.
❻State-owned
❻
Companies to Pay Profits into State
Budget
Proposed by: Ministry of Economy
In accordance with the state’s ownership shares, the government
decided that state-owned companies and companies in which
the state owns shares must pay a portion of their 2013 profits
(after taxes) into the state budget. Therefore, 8 companies must
pay 100% of their profits, 34 companies 60%, and one company
50% by 15 July 2014. Fourteen companies are exempt from this
decision.
❻Hospital
❻
Master Plan (2014-2016)
Proposed by: Ministry of Health
The national hospital development plan (so-called Master Plan)
foresees four health services regions and the merging of 31 hospitals into 21 hospitals. The plan foresees the reduction of total
(beds) capacities by 11.02% by 2016 in the central/northern regions, 19.2% in the eastern region, 8.62% in the southern region,
and 12.89% in the western region. The plan intends to reduce
beds for acute (long-term stay) patients, while increasing beds
for day stays, which intends to increase the turn-over of patients
and reduce hospital care. The plan forecasts a savings of 5-7%
of the total healthcare budget.
June 16, 2014 / Page 3
www.legislative-journal.com
LEGISLATIVE & REGULATORY MONITORING
REGULATORY NEWS:
services and eliminating defects in services, thereby abusing its
dominant position. The AZTN determined that the accusations
do not have elements of abuse of dominant position by HT.
Croatian Post and Electronic Communications
Agency (HAKOM)
■■ Subsidies Provided for Broadband Construction on Islands
After the fifth tender for subsidies for the construction of broadband
internet networks on Croatia’s islands, HAKOM provided €263,000
to Croatian Telecom. During the previous 4 tenders for broadband
construction in areas of special state care, mountainous regions
and islands, HAKOM provided €4.7 million in state aid.
Croatian Competition Agency (AZTN)
■■ HT Did Not Abuse Dominant Position
The AZTN has suspended its investigation against Croatian
Telecom (HT), after accusations by H1 Telekom that HT used their
database to advertise their services to H1 users; H1 is required to
provide its database to HT, in order to realise wholesale services.
H1 also claimed that HT was late in providing its wholesale
SABOR WEEKBOOK:
Parliamentary Committees: Current and Future Event Listings
The Sabor debated the following legislation: Interest Rates Act
(1st Reading), Croatia and IBRD Loan Act (urgent procedure),
European Grouping of Territorial Cooperation (EGTC) Act (urgent
procedure), Law Confirming Contract between Croatia and
Luxembourg on Mutual Protection of Classified Data (urgent
procedure).
Parliamentary Activities:
June 10: President of the Sabor Josip Leko (SDP), Environmental
Protection Committee Deputy Chair Damir Mateljan (SDP) and
Foreign Affairs Committee Deputy Chair Frano Matusic (HDZ)
met with the Lithuania-Croatia Inter-parliamentary delegation
headed by Emanuelis Zingeris.
June 12-13: (Barcelona) – Member of the Sabor delegation to
Legislative & Policy Weekly Briefing
Understanding government decision-making in Croatia
Croatian National Bank (HNB)
■■ Approves J&T Acquisition of Vaba Bank
The HNB approved the Czech J&T submission for the acquisition
of Vaba Bank, after paying €10 million to Vaba, ensuring the
appropriate level of capital adequacy. The is J&T’s second
attempt to enter the Croatian market; in 2013, they attempted to
acquire Centar Bank, but the transaction was not approved by
HNB and Centar Bank ended in bankruptcy.
■■ Approves New Bank CEOs (Hypo & Raiffeisen Banks)
At the request of the Hypo and Raiffeisen Supervisory Boards,
the HNB approved their new banks’ CEOs. The new CEO for
Hypo Alpe-Adria-Bank is Christoph von Gleich, replacing Marcus
Ferstl. The new CEO of Reaiffeisenbank Austria is Michael
Georg Muller, replacing Zdenko Adrovic.
the Mediterranean Union Ante Babic (HDZ) participated at the
meeting of the Committee on Energy, Environmental Protection
and Water of the Parliamentary Assembly of the Mediterranean
Union.
Announcements:
June 15-17: (Athens) - EU Affairs Committee members Ingrid
Anticevic Marinovic (SDP) and Peda Grbin (SDP) will
participate at the meeting of the Conference of Parliamentary
Committees for Union Affairs of Parliaments of the European
Union (COSAC)
June 16-17: (Bucharest) - Foreign Affairs Committee Chair
Milorad Pupovac (SDSS), committee member Damir Mateljan
(SDP) and Head of the Croatian-Romanian inter-parliamentary
group Jaksa Baloevic (independent) will visit the Romanian
parliament.
June 16, 2014 / Page 4
www.legislative-journal.com
PERSON OF THE WEEK
By Nikola Zubalj
Sinisa Varga, Minister of Health
On 11 June, Prime Minister Zoran
Milanovic (SDP) proposed current Director of Croatian Health Insurance
Fund (HZZO) Sinisa Varga (SDP) as
the new Minister of Health, replacing
Rajko Ostojic (SDP). The Sabor is
scheduled to give Varga a vote of confidence on 16 June (see Cover Story
p.1). According to local media, the
new minister is a close confidante of
PM Milanovic.
In addition to personnel changes,
Varga told reporters that one of his first
moves would be to propose amendments to his predecessor’s 2014-2016
Master Plan for hospitals in Croatia,
Sinisa Varga
which the government adopted last
week (see Government Decisions
p.3). The purpose of the plan is to remove long-standing deficiencies in the
functioning of the hospital system, and
help save €52.2 million over the next
three years.
Varga, on the other hand, said his
predecessor’s plan would actually increase total health care expenditures
by up to €264 million. The new minister added that he was also against
outsourcing of hospital administrative
services, and said such a policy would
not achieve the desired savings in
healthcare.
Regarding the HZZO, the new
Health Minister stated the institution
would be separated from the state
budget by 1 October, at the latest. As
a result, the state-owned health insur-
Legislative & Policy Weekly Briefing
er would have more autonomy over
its finances, as well as significantly
reduce interference of the Health Minister in its business activities. The issue of HZZO’s financial autonomy was
a point of contention between former
minister Ostojic and Varga, while the
latter was HZZO Director.
Sinisa Varga was born in 1965 in Zagreb. He graduated from the School
of Dental Medicine, University of Zagreb, in 1990. During the Homeland
War (1991-1995) Varga served in the
Croatian Armed Forces as a member
of field surgical teams. From 1993 to
1997, he specialised in prosthodon-
tics at the Clinical Hospital Centre
Zagreb. Varga conducted part of his
specialisation at Branemark Implantology Clinic in Gothenburg, Sweden.
He also received a certificate in Quality Management for the International
Norm ISO 9001:2000 from the European Organisation for Quality
In the period of 1997-2012, Varga
worked as a prosthodontics specialist
at the Clinical Hospital Dubrava. From
2000 to 2002, he was a World Bank
consultant in a project for overhauling the Croatian healthcare system.
Next, he was appointed Assistant Minister of Health in the cabinet of late
Prime Minister Ivica Racan (SDP) in
the 2002-2004 period. The government named Varga as Director of the
HZZO in 2012. He is married with two
children.
Understanding government decision-making in Croatia
LPJ INFLUENCE
■■ Kolinda Grabar Kitarovic, Presidential
Candidate (HDZ)
On 12 June, the president of the Croatian Democratic Union (HDZ), Tomislav Karamarko, announced his party’s nomination of Kolinda Grabar
Kitarovic as presidential candidate. Presidential
elections are set to take place late this year (official dates not yet released). Grabar Kitarovic is
NATO’s Assistant Secretary General for Public
Diplomacy and has held the position since 2011.
Grabar Kitarovic’s extensive foreign affairs experience is likely to make her a formidable opponent
to incumbent Ivo Josipovic. Previously, she held
the position of Foreign Minister (2005-2008) and
served in diplomatic posts in Canada and the
United States, including Croatian Ambassador
to the US. Elected to the Sabor in 2003, Grabar Kitarovic led Croatia’s EU membership bid.
She has additionally held visiting scholar and fellow positions at Harvard Kennedy School, Johns
Hopkins School of Advanced International Studies, and George Washington University. (NZ)
■■ Tomislav Mazal, CEO, Djuro Djakovic
The Supervisory Board of the state-owned metal
manufacturer and engineering company Djuro
Djakovic (DD) Holding, dismissed CEO Vladimir
Kovacevic, who was replaced by Management
Board member Tomislav Mazal. A lawyer by vocation, Mazal will head a company that conducts
business activities in areas of defence, transport,
construction and infrastructure, industry and energetics, and renewable energy. In 2013, DD’s
total consolidated revenue was €31 million, while
the consolidated loss of the group was €16.4 million. The company declared that revenue growth
in 2014 was planned through the opening of new
markets with the existing product range (i.e. defence and transport, and in part industry & energetics) and with an entry into new operational
segments (i.e. industry & energetics, renewable
energy and construction & infrastructure). (NZ)
LPJ Influence chronicles the personalities in the world of
business, politics, media and lobbying, working to shape policy,
legislation and business.
ANNOUNCEMENTS
■■JUNE 16: Croatia-Korea Business Club,
organised by Korean Embassy, Zagreb
■■JUNE 17: Round Table “How to Restore
Economic Growth of Croatian Economy - the
Role of Knowledge”, organised by Economic
Institute Zagreb, Zagreb
June 16, 2014 / Page 5
www.legislative-journal.com
Weekly Commentary
By Damir Vucic
New European Commission Measures to
Support PCIs
With global and local headlines preocup to 100% of the funding gap on
the basis of a large set of eligible
cupied with the World Cup, the Croatian
costs.
PM’s cabinet reshuffle (see LPJ Cover
• Allowing aid for the first industrial
Story, p.1) and continued conflict in
deployment of an R&D project, i.e.
Ukraine and Iraq, the importance of the
during the up-scaling of the pilot faEuropean Commission’s (EC) regulatory
cilities and the testing phase.
decision on 13 June to support Important
In
short,
the new rules allow for member
Projects of Common European Interest
states,
and
the EU as a whole, to more
(IPCEI) fell under the radar.
easily
financially
support the realisation
According to an EC press release: “The
European Commission set out criteria of IPCEIs without being in breach of EU
under which Member States can support competition and state aid restrictions.
transnational IPCEI projects
and for the achievement of Europe 2020 objectives, in line
with EU state aid rules. This is
part of the Commission’s State
Aid Modernisation (SAM) initiative, aimed at fostering growth
and competitiveness in the EU.
The communication enters into
force on 1 July 2014.”
On the surface, the EC statement appears to be just another
EC/EU bureaucratic and administrative measure to symbolically support important EU
level projects. However, taking
into account the decision within
a wider global geo-strategic
policy of the EU and the US’
efforts to strengthen the EU’s
foreign policy position towards
the confrontational policies of
President of the EC, Jose Manuel Barroso
Russian President Vladimir Putin, especially in regards to his
Aside from the intention of easing reaggressive policies towards Ukraine and
the leveraging of the supply of Russian striction on project development of IPoil and gas to Ukraine and EU member CEIS, meaning projects that have been
states.
identified to be of common EU interest,
why would the EU bypass its own comKey Features of New Rules
petition and state aid regulations that are
The key features of the new rules include: normally aimed at promoting free market
• Extending existing provisions on competition and market access across
IPCEIs to any sector of the econo- member states? Because it is actually a
my. EU state aid rules on research
matter of expediting its new policy of inand the environment already contained some provisions on IPCEIs. creasing the EU’s energy diversification
The new provisions are neutral such that it (and its member states) are
as to the sector where the IPCEI less dependent upon Russian energy
project is realised. This will make supplies.
it much easier to support important Decision in Line with EU Council
projects with a clear European diThe new rules are also completely in
mension in areas such as R&D,
line
with the 20/21 March EU Council
cross-border transport, or energy
that would otherwise have needed conclusions that instructed the EC to conto be assessed under several dif- duct an in-depth study of EU energy security to be presented at the next meeting
ferent sets of rules.
• Diversifying forms of support. of the EU Council on 26/27 June, where
Member States may grant repay- the Council will also decide upon the new
able advances, loans, guarantees EC Commissioner after the May Europeor grants to IPCEIs.
an Parliament election.
• Increasing aid intensity. Where
In March, the Council also concluded
justified, public support may cover that “in order to pursue the objectives set
Legislative & Policy Weekly Briefing
Understanding government decision-making in Croatia
out above (energy diversification), implementation of relevant projects of common
interest should be speeded up and available EU resources, including the CEF,
and the EIB financing capacity, should be
swiftly mobilised.”
Therefore, the new rules must be
viewed in this light, since previous EU
regulatory restrictions are now removed
and that EIB financing has been announced by present EC President Barroso a few weeks ago.
strategy.
Strategic Croatian Projects LNG & IAP
In Croatia, there are 6 IPCEI
projects including: (1) Electrical power line network between
Croatia and Bosnia-Herzegovina; (2) electrical power line
network Croatia-Slovenia-Hungary; (3) the LNG terminal on
the island of Krk; (4) natural gas
pipeline interconnections with
Slovenia; (5) the Ionian Adriatic
(gas) Pipeline (IAP), connecting
to the Trans Adriatic Pipeline
(TAP); (6) the JANAF oil pipeline reconstruction/modernization, connecting island of Omisalj through Croatia to Hungary.
It is evident that Croatia’s
strategic oil and gas projects
(i.e. the LNG terminal and IAP)
will also play a strategic role in
the EU’s energy diversification
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June 16, 2014 / Page 6
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