Croatia parliament approves new centre-right government

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The Croatian parliament on Thursday approved the new centre-right cabinet led by Prime Minister Andrej Plenkovic whose Croatian Democratic Union (HDZ) won the most parliamentary seats in the general election held on July 5.

Plenkovic’s new coalition government is supported by two smaller liberal parties and the representatives of the national minorities. Plenkovic also headed the former HDZ-led coalition over the last four years.

Despite a tiny majority of 76 votes in the 151-seat parliament, Plenkovic’s government is expected to receive steady parliamentary support.

“Our key task is to secure welfare for our citizens … to preserve their health and the jobs at these times of the (COVID-19) pandemic,” Plenkovic said in parliament.

Most of the ministers from Plenkovic’s previous cabinet remained in office, including Finance Minister Zdravko Maric who is seen as pivotal to keeping public finances on track for Croatia’s bid to adopt the euro by 2024.

This month Croatia entered the European Exchange Mechanism (ERM-2), a waiting room of at least two years before the euro adoption.

Plenkovic said his government would work on raising living standards, vowing to increase an average wage by the end of the four-year term to 7,600 kuna ($1,171.14) from the current 6,655 kuna.

His government plans to reduce the income tax rates to 20% and 30% from the current 24% and 36%, respectively, and reduce the profit tax to 10% from 12% for companies with annual earnings of up to 7.5 million kuna.

The value-added tax for food products is planned to be cut to 13% from the current 25%, one of the highest VAT rates in the European Union.

Boosting the business climate and investments in a tourism-dependent economy and keeping public spending under control will be among the key challenges in the efforts to restore growth after an economic downturn of around 10% expected this year due to the COVID-19 pandemic.

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