Croatia under the excessive deficit procedure

Sandrine Levasseur (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

Less than six months after its entry into the European Union (EU), theexcessive deficit procedure (EDP) has been opened against Croatia. The government of Croatia now has to propose a corrective plan in order to bring the public deficit below 3% of GDP within a few years 2 .It is not the first time that an EDP coincides with entry into the EU. In 2004, six new members (the Czech Republic, Cyprus, Hungary, Malta, Poland and Slovakia) were subject to a similar experience. But times are different. As Croatia entered the EU, the economies of its main trading partners were plagued by more than five years of crisis, and the negative risks for their projected recovery were still significant 3. Economic conditions were comparatively much better in the EU in 2004. As a result, to bring its public deficit below 3% of GDP, a country under EDP could reasonably expect that a significant part of its adjustment would come from higher growth rather than from pure fiscal consolidation (expenditure cuts and/or tax increases). Yet, in 2004, the financial markets were aware of that and, consequently, required only minor additional risk premiums on the public debt of countries under EDP

Keywords: Croatia; European Union

Keywords: Excessive deficit procedure

Domains: Economics and Finance

Sandrine Levasseur. Croatia under the excessive deficit procedure: Which mesasures should be implemented?. OFCE Briefing Paper, 2014, 6, pp.1 - 7. ⟨hal-03470456⟩