Study Slams Croatia’s Failing Public Sector

Government commissioned ‘Clean Start’ project uncovers huge financial holes in ministries and public sector companies and lists a catalogue of systemic shortcomings.A government commissioned study of Croatia’s public sector has uncovered massive hidden debts and a poor culture of management.

Croatia paid the international advisory firms KPMG and BDO 2.3 million kuna (300,000 euro) to analyse the financial and organisational state of 22 government bodies and public enterprises.

The results were “catastrophic”, revealing “huge debts and no signs of reform”, project manager Denis Petrovic said, presenting the results of the “Clean Start” project to the public.

The exact size of the public sector debt was not calculated because of different possible calculating methods.

However, several ministries are now known to owe billions in previously unknown debts, Petrovic said.

The worst offender, the maritime, traffic and infrastructure ministry, has accumulated a debt of 69 billion kuna (about 9.5 billion euro), the project revealed.

“The data explain why Croatia’s public debt rose to 65 billion kuna (9 billion euro) over three years,” the minister of regional development and EU funds, Branko Grcic, commented.

“There’s no easy solution for such a huge debt; Croatia has to lower public spending anyway,” Grcic said, warning of further measures aimed at fiscal consolidation and debt reduction in coming years.

Petrovic said that the former government, led by the Croatian Democratic Union, HDZ, “did nothing to start reforms to stop such a huge debt from growing”.

Lack of transparency, disorganisation, decentralised public tenders and separated information systems were common systemic failings in the public sector, Petrovic added.

The opposition HDZ criticised the findings of the Clean Start project, calling them a “dirty start”.

“It’s silly to talk about a ‘clean start’ one year after this goverment took power,” the HDZ’s Domagoj Milosevic said, referring to the centre-left government led by the Social Democratic Party, SDP, under Zoran Milanovic.