Just a decade separates present-day Croatia from a turbulent history marked by war and international isolation. From that time, what remains is the perseverance and conviction of being a great nation with much to offer and say. Frane Krnic, Croatia's ambassador to Spain, refers to all this effort and its positive results in establishing a productive relationship between the two countries.
Since gaining its independence in 1991, the Republic of Croatia has suffered difficult times, both because of an imposed war and because of the international community's lack of understanding of the events that shook that part of Europe in the nineties.
Faced with a Serbian minority rebellion and the occupation of nearly a third of its territory by the former Yugoslav army, Croatia did not achieve sovereignty over its entire territory until 1997, and when it finally did, it was thanks to a combination of negotiations and military pressure. Despite the efforts of international mediators and numerous, but ultimately unsuccessful, conferences, Croatia practically had to fight alone.
The terrible consequences of the war—a devastated economy and infrastructure, towns and cities in ruins, cultural monuments destroyed, and hundreds of thousands displaced from Croatia and Bosnia and Herzegovina—set the country back at least twenty years. These unfortunate events did not provide a suitable environment for the normal development of democracy, which was emerging at that time in other countries undergoing transition. The vengeance of certain sectors of the population, as well as that of some members of the police and the army, and some improper actions by the previous government were the main cause of Croatia's international isolation, which prevented its entry into European and Atlantic integration programs, which, had it not been for the war, it surely would have joined along with other countries in transition.
Most of Croatia's material and human resources were used after the war to rebuild the country and help displaced people return to their homes. It cannot be said that international institutions provided significant assistance, as they only covered 5% of Croatia's reconstruction costs (a significantly lower percentage than that invested in other neighboring countries devastated by the war). At the same time, efforts were underway to integrate Croatia into at least some European integration programs.
After many sacrifices, the country joined the Council of Europe in 1998 and the WTO in 2000. Negotiations with the EU and NATO stalled almost immediately, and it was necessary to wait for the change of government in 2000 for those two institutions to begin serious negotiations with Croatia.
The center-left coalition, led by Prime Minister Ivica Racan, who has been in power since January 2000, and the new President Stipe Mesic, have helped to change Croatia's international image, making it an acceptable partner and, at the same time, a good example that should be followed by other countries in the region.
Although this idyllic relationship was hampered by some missteps from the new government, as well as by the exaggerated and unrealistic expectations of the international community, particularly regarding cooperation with the International Court of Justice in The Hague, Croatia has managed to maintain its position as a reliable partner. This was the reason why, after signing the Stabilisation and Association Agreement with the EU in 2001, Croatia submitted its formal application for EU membership in February 2003, hoping to begin accession negotiations by autumn 2004. Given the strong economic indicators and the significant reforms being implemented rapidly across all sectors, in accordance with a national consensus, Croatia believes that EU accession could take place in 2007, along with Bulgaria and Romania. In parallel, though perhaps behind the scenes, negotiations are underway for the country's accession to NATO.
Regarding the economy, the main objectives of the current Government are: to maintain economic stability, stable prices, low inflation and the other macroeconomic aspects that should lead to economic growth, increased employment, production and exports.
Although Croatia lagged behind other transition countries, mainly due to the war, it has achieved significant economic progress and become one of the most prosperous economies in that part of Europe. For example, in 2002, GDP growth reached 5,2%, and its current value is $22,4 billion, while per capita GDP stands at $5.056. Over the last five years, Croatia has managed to maintain a stable exchange rate and inflation, the latter at around 3% annually, thus achieving results significantly higher than the average of other transition countries. By creating a favorable investment climate, foreign investment has increased, reaching $7,5 billion between 1993 and 2002.
Croatia's economy is clearly market-oriented, and its economic ties with the EU are particularly close. More than 50% of Croatian exports end up in the EU market. However, the ever-increasing trade deficit and low export volume, coupled with a high unemployment rate, represent the weakest aspects of the Croatian economy. The Croatian government will soon seek an efficient way to enhance the competitiveness of the domestic economy in order to boost exports.
Relations between Croatia and Spain largely follow the policies of the rest of the EU, without major ups and downs, but also without significant momentum. Political relations are adequate, though not particularly intense. This is especially true regarding high-level visits—to date, no Spanish head of state has visited Croatia, and other visits are infrequent. Given Spain's growing interest in Central European countries, it is reasonable to expect that Spanish political circles will show greater interest in Croatia, and that this will generate similar interest in Croatia.
The two countries should feel a strong connection, especially given that Croatia is not only a Central European country, but also, and perhaps even more so, a Mediterranean one. Their shared Mediterranean culture and civilization could lead to much more intensive cooperation. With the EU's enlargement, primarily northward, its Mediterranean presence will be weakened. Therefore, Spain, the main advocate for a European security policy in the Mediterranean and a close relationship between both shores of the Mediterranean basin, should further support Croatia's accession to the EU. Indeed, Mediterranean policy, and not only within the Barcelona Process, could become the cornerstone of bilateral cooperation, especially since this cooperation is not recent, but rather has a centuries-old tradition, particularly rich between Spanish Mediterranean cities and the former Republic of Dubrovnik.
Economic cooperation between the two countries remains unsatisfactory, despite year-on-year increases. Trade increased by 30% last year, reaching a current value of USD 216 million. However, Croatia maintains a significant trade deficit with both Spain and other EU countries. The most sought-after products are timber, vehicles and auto parts, machinery, and fruits and vegetables.
Traders from both countries are beginning to get to know each other and are taking some important first steps. Spanish investors are cautiously entering the Croatian market, expressing apprehension about potential surprises inherent in a country in transition. Despite a few unpleasant experiences, foreign investors are mostly satisfied, primarily due to the creation of an excellent legal framework that guarantees their security.
The sector that could generate the most interest among Spanish investors is undoubtedly tourism, the most prosperous branch of the national economy. Croatia, as an emerging destination, is increasingly becoming a respectable competitor for Spanish tourism, which is yet another reason to transplant successful Spanish experiences to Croatia.
More and more Spanish tourists are discovering Croatia as a magnificent destination, thanks to its well-preserved natural resources, pristine nature, and a rich and unexpected cultural and historical heritage, closely related not only to Italy but also to Spain. With the ambitious highway construction project currently at its peak, Croatia could become in the coming years what Spain was to Europe in the 1970s. It is precisely at this point that Spanish investors might find their long-term interest, sometimes assuming the risks that this necessarily entails.
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