Croatia’s budget deficit will widen past the European Union’s ceiling this year and next as slow growth and rising borrowing costs hamper efforts by the bloc’s newest member to consolidate its public finances.
Europe’s sovereign-debt crisis has shown that blindly following austerity prescriptions leads to failure, said the premier of Croatia, the former Yugoslav republic that joins the European Union on July 1.
Croatia should resist rushing to adopt the euro after it joins the European Union as a feud over bailouts dims the currency’s appeal, said the head of the party that leads opinion polls before the December elections.
Croatia will begin the sale of a minority stake in national flag-carrier Croatia Airlines d.d. in a process that favors bringing in a strategic partner over price, Transport Minister Sinisa Hajdas Doncic said.
Croatia’s government will push to change the law on consumer lending, even after the central bank said it will cost more than double earlier estimates and the banking association called the move “unconstitutional.”
Junk-rated Croatia will borrow more than $1.5 billion on the U.S. market at yields that may top 6.5 percent to finance its budget without help from the International Monetary Fund, Finance Minister Slavko Linic said.