Timing of Croatia’s EU Membership Suspect

Croatia recently celebrated its status as the newest member of the European Union. This is something it had worked hard for, implementing changes required for membership so that it could gain access to the support and broader market offered by becoming a part of the group. But there are questions about whether Croatia chose the right time to join a group that is itself in trouble, beset by recessions in many of its 27 other member states. There’s also the matter of whether the EU itself may have rushed the process before its newest member demonstrated itself to be fully committed to reform—or even to be economically capable of taking advantage of all that membership has to offer.

Until July, there hadn’t been a new member admitted to the EU since 2007, when Bulgaria and Romania joined. These countries, Croatia, Slovenia, which became a member in 2004, and other nations formerly part of Yugoslavia are in one of the poorest regions in Europe, and the economic boost they hope for in joining the EU may or may not materialize.

Croatia went through a lot to gain its coveted membership, including trying to shed its authoritarian past. But problems remain, some of which it has in common with other countries in the region that have been unable to effectively weed out corruption in both their politics and their economies. And now that it is a member, with its prize already in hand, there are concerns that it may not hold quite so strongly to the goals set for it by the European Commission as it did when its goal was still out of reach.

That has certainly proved to be the case for Bulgaria and Romania, which hold rankings of 75 and 66, respectively on Transparency International’s Corruption Perception Index. Croatia itself stands at 62—but, to be fair, Greece and Italy don’t do all that well on the Index either, with the former ranked at 94 and the latter at 72.

Croatia’s economy, however, may prove to be its single biggest obstacle to successful integration into the EU. It has an unemployment rate hovering around 20%; youth unemployment is double that. While it’s made enough progress to get into the EU, most of its state monopolies are still alive and well; that, together with the fact that small companies have to fight their way through substantial bureaucratic barriers, has kept the country’s economy from growing. And in December, S&P dropped Croatia’s sovereign debt rating to junk.

Michele Napolitano of Fitch Ratings has categorized the country’s long-term foreign currency issuer default rating (IDR) as having a negative outlook. Napolitano said in research that the Croatian economy “suffers from high public and external debt ratios, high euroization, and poor economic performance since 2009. These factors create an unfavorable background for debt dynamics, making Croatia vulnerable to adverse shocks.”