Croatia pursues EU membership despite turmoil

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Britain is considering pulling out, Cyprus probably wishes it never got in and Greece might be expelled. But there's one country that can't wait to join the European Union and start using the euro: Croatia.

The former Yugoslav republic cleared the final hurdle this week in its long quest to join the EU and it is now on track to become its 28th member on July 1. Inclusion in the euro zone, which has 17 members, and adopting the euro could come by 2017.

It's hard to believe any country would want to join the EU and take on the euro given the recent economic turmoil that has caused near financial collapse in Greece, a banking crisis in Cyprus and prolonged recession in Spain, France and Britain. But Croatians have been pressing to get into the EU for decades, seeing membership as a way to boost the country's economy and modernize its government institutions.

"It is better to be a part of the club than to stand alone – even if the club is perhaps having problems at the moment," the country's Prime Minister Zoran Milanovic told German magazine Der Spiegel recently. "For 10 years, we will receive twice as much money from Brussels as we pay in. We will have an entire generation of time to catch up with the rest of Europe."

Croatia's entry also gives the EU something of a public relations coup, said Dimitar Bechev, a senior policy fellow at the London-based European Council on Foreign Relations. "The EU wants Croatia as it has met the conditions and also as a demonstration that enlargement is still afloat, regardless of the ongoing crisis," Mr. Bechev said from his office in Sofia, Bulgaria.

Acquiring membership hasn't been easy. Croatia has always considered itself a part of Europe and the country's leaders hoped to join the EU when they declared independence from Yugoslavia in 1991. But that move triggered a four-year war with the Serbian-led Yugoslav army and a broader conflict across the Balkan states as Yugoslavia came apart. Croatia formally applied for membership in 2003, signed an Accession Treaty in 2011 and held a referendum in 2012, with 66 per cent of those voting to approve membership. But sorting out the details of membership has been tricky and made more difficult by the EU's economic troubles, which led EU officials to put the country through a vigorous review process.

Some EU members have been leery about expanding the union at all and many have expressed concern about Croatia's weak judicial system and history of corruption. The EU has also been pushing Croatia to do more to tackle war-crimes cases and to work more closely with Serbia. "The EU membership is an additional incentive to carry on with reforms," Stefan Fule, the EU's commissioner for enlargement said this week. "Croatia is expected to continuing developing its track record in the field of the rule of law, notably in the fight against corruption." Croatia has made some progress, including locking up a former Prime Minister on corruption charges and introducing changes to the criminal code to make it easier for specialized courts to take on war crimes cases.

EU leaders hope Croatia's entry will encourage Serbia and other former Yugoslav republics to also adopt the reforms needed to join. Serbia is a candidate for membership but it has run into trouble over its refusal to recognize Kosovo, a former province that declared independence from Serbia in 2008. Kosovo is recognized by Croatia, most EU members and dozens of countries around the world, including Canada. Of the former Yugoslav republics only Slovenia is an EU member at present. Montenegro began talks last year and is much farther along than Macedonia, Bosnia or Kosovo.

Another concern for EU countries, and the euro zone in particular, is Croatia's struggling economy. The country of 4.5 million people was hit hard by the economic downturn in 2008 and its economy has shrunk four years in a row, by 10 per cent in total. Unemployment is around 20 per cent, the annual deficit is climbing, labour costs are high and government departments are strangling in red tape.

"Croatia had four years of economic recession – and has taken a serious hit because of the crisis paralyzing the euro zone," said Mr. Bechev. "The average Croat is a euro-realist, not euro-skeptic or euro-enthusiast. Better to be inside the EU, but mainly because that's the only option."