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12/16/12

Prime Minister: Rating downgraded because gov't didn't do what investment agencies expect



Prime Minister Zoran Milanovic said on Sunday the situation in the country was not disastrous and that Croatia's credit rating was downgraded because it had not done everything investment agencies expected of all governments, to cut left and right.
Speaking to reporters in Koprivnica, he said that when the credit rating had been upgraded "somewhat unexpectedly," he expected a stagnation and that the downgrade "isn't unexpected" because the government did not "cut left and right," which he said investment agencies expected of all governments. "I understand them."

Milanovic said there was another side of the story, "Croatian society, social rights, those that are necessary and which we can talk about." He said the government was in "a very intensive dialogue" with the unions, managing to agree with some and failing with a small number. He said that after his visit to Brussels earlier this week, "they understand the situation a little better", adding that there was no reason to raise the alarm. "The situation isn't disastrous."
He said it made no sense that a short time ago Croatia's state bond ranked so that its yield was below four per cent, yet now the credit rating was downgraded. He said this indicated that there were no concrete reasons for the downgrade but the expectations had been to cut salaries and lay off 20-25 thousand people.
"Those are the structural reforms some agencies are thinking about. We aren't. We are thinking about bringing order to doing business, to land books, we are thinking about strategic investments, about rescinding some levies for the economy. And we are doing it. We didn't raise (taxes) for the economy, except there is more order. If someone thought they were entitled not to pay taxes, they shouldn't be in business, and we will see that taxes are paid and are not too high," Milanovic said.
He thanked the Croatian people for being the only ones to pay a higher VAT this year, saying this was done to make it easier for the economy. "We will continue to do that, not burden people but facilitate doing business."
Milanovic went on to say that the government respected the rating agencies but would continue to do things its way.
Asked to comment on "the harsh press release" by the Croatian People's Party following the rating downgrade, he said he talked a lot with the coalition partners.
Asked about the Social Democratic Party's candidate for Zagreb mayor, Milanovic said his party would nominate the best people.
(Hina)