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 I M P R E S SUM STAFF Managing Editor: Natko Vlahovic Deputy Managing Editor: Damir Vucic Legislative & Regulatory Affairs: Ivan Vukovic Research Assistant: Nikola Zubalj Marketing Director: Filip Lugovic CONTACT Vlahovic Group, LLC Fabkoviceva 3, 10 000 Zagreb, Croatia Tel: +385 1 7898 640 Fax: +385 1 7898 642 Subscriptions: [email protected] Events & Advertising: [email protected] LEGAL NOTICE Legislative & Policy Journal is a paidsubscription electronic weekly briefing and website published by Vlahovic Group, LLC. Routine or systematic forwarding or photocopying of this publication or portions thereof is a violation of copyright laws. June 16, 2014 / Page 6 www.legislative-journal.com
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