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Croatia PM: We need Italy to recover

By Oliver Joy, CNN
updated 8:10 AM EDT, Fri April 26, 2013
STORY HIGHLIGHTS
  • Croatia is preparing to enter the 27-nation European Union
  • PM Zoran Milanovic says the country needs its neighbors to be strong
  • He wants Italy to return to being a "powerhouse of Europe."
  • Milanovic, asked about EU membership, says he is a "passionate pragmatist"

(CNN) -- As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."

If the ailing Italian economy were to recover, it would boost the Balkan country's export industry following sluggish growth since the financial crisis, Zoran Milanovic told CNN.

Milanovic's calls for Italy to revive its industrial sector come as Croatia's economy lingers in the doldrums.

Europe's statistics agency Eurostat has recorded a provisional 2% contraction for 2012 while forecasting a 0.4% contraction for this year.

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But while Croatia may be looking for external solutions to invigorate its economy, one expert on southeast Europe from the London School of Economics told CNN the country must also overcome internal hurdles.

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Every year, Croatia relies heavily on its sun-kissed Adriatic coast to draw Italian tourists, who make the short journey through Slovenia to the Balkan holiday resorts such as Split and Dubrovnik.

"Croatia depends about 20%, directly or indirectly, on tourism," Will Bartlett, a senior research fellow in the political economy of South East Europe at the LSE, told CNN.

And, beyond the impact of Europe's crisis on tourism, Croatia faces difficulties within its own borders, Bartlett said. A high budget deficit, rising national debt and a lack of competitiveness has resulted in stagnating growth.

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Unemployment peaked at 18.7% for February, behind only Greece and Spain, according to Eurostat.

But, unlike eurozone nations, Croatia does not have the bailout safety net which has been tapped by ailing countries in the common currency.

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In December, Standard & Poor's -- one of the three big credit rating agencies -- downgraded Croatia to the lowest investment status, known as "junk."

But Milanovic rebuffed suggestions that Croatia would need a bailout from the International Monetary Fund.

The country will join the European Union in July, marking the end of more than ten years of campaigning to enter the region's single market and join the continent's elite club.

When asked about the prospect, Milanovic said: "I'm a passionate pragmatist."

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