EUROPEAN COUNTRIES IN TRANSITION ON THE EVE OF THE 21ST CENTURY QUO VADIS CROATIA

At the beginning of the ninetieth Croatia belonged to those countries which were (beside Slovenia) best prepared for transition. Russia belonged to the least prepared countries for transition. At the end of the ninetieth both Croatia and Russia were included into countries with least transitional achievements, burdened with hard social distortions of maffiacracy character. Causally-consecutive relations completely differ in Russia and Croatia. Central European countries completely approached (the Czech Republic) or considerably exceeded development level which they had at the beginning of transition. Croatia is the only exception. It will come up with this level in the first decade of new millenium. Hard and deep economic, moral and any other crisis that Croatia passes through, is the result of extremely great economic, political and social distortions which accumulated in Croatia during the ninetieth. The central place of these distortions belongs to privatization by means of tycoonization. Consequences are reflected in numerous deviations of macroeconomic and macropolitical environment. Deviation occurences in macroeconomic environment especially refer to low level of production, employment, exports, productivity, accumulation, profitability, management, investments, inadequate stabilization level, continuous increase of external debts, unbalanced production and (exaggarated) consumption relations, high illiquidity, as well as relations of domestic currency price (interest) and foreign currency (exchange rate), as well as to relations of exchange rate and purchasing power parity rate (exchange rate deviation indexes). Deviations in macroeconomic environment relate to all other occurences correlated to this. Deviations in macropolitical environment especially refer to the lack of function of law-based state and the rule of right to organized crime and maffiacracy occurences at all levels of economy and science. Cumulated mistakes of economic and entire policy during the ninetieth greatly restricted the space for efficient activity of measures of new economic policy. Conditionally speaking, new economic policy fell in a kind of blockade and captivity in the environment which was the result of previously made mistakes. Altogether, the complex of privatization by tycoonization which was during the ninetieth in the centre of all distortions, must be in the focus of new economic policy. The new government of the left centre which was elected after democratic changes at the beginning of 2000 has two very difficult tasks: (1) control of economic and moral crisis, (2) establishment of law-based state, the rule of law and breakup of maffiacracy. The realization of these tasks is underway. The control of economic crisis is directly connected with increase of production and employment on the basis of exports expansion, what is in correlation with increase of competitive (domestic and foreign) capability. Certain measures of fiscal and tax policy directed to reduction of government expenditure and gross labour costs are already underway. Corresponding improvements of macroeconomic and macropolitical environment with the purpose of initiation of new investment cycle which is indispensable for the beginning of process of more intensive restructuring and based on that improvement of competitiveness, are in progress. The important role here will have foreign direct investments for which (thanks to essentially improved international position of Croatia), preconditions have been already realized. The reare also underway certain activities in monetary sphere which should bring to decrease of existing difference between the price of domestic and foreign money, what is an essential presumption for stronger expansion of new entrepreneurial, investment and development initiatives. From the very beginning, the new government of the left centre started realizing cooperation with economic science. The work on scientific bases of the conception and strategy of development has been underway. It seems that economic science could preparethese scientific bases in more (two at least) scenarios. The first scenario should deal with presumptions of maintenance of monetary sovereignty. The second scenario should be prepared on presumptions of abandoment of monetary sovereignty. Both scenarios must adequately evaluate all aspects of cooperation in South-East Europe. That especially refers to Stability Pact and Stability and Integration Agreement. It may be expected that these elaborations which are directed to active economic (and industrial) policy, taking into consideration all these relevant segments (of fiscal and monetary policy and policy of restructuring), will answer the questions about conditions and presumptions of maximal possible real growth rate of production and employment in the forthcoming years.