ZAGREB Croatia's trade unions, representing both public and private sector employees, staged a nationwide two-hour strike on Tuesday, firing a warning shot against the government's plan to make labor rules more flexible.
The unions said the strike, which began at midday, was a signal to the two-year-old Social Democrats-led government that it had to change its economic policy or step down.
It is unclear how many people joined the stoppage, but the unions earlier said they expected at least 100,000 people to down tools for two hours.
As a sign of solidarity, the public transport in the capital Zagreb halted at midday for five minutes. Local trains across the country were stopped during the strike.
The unions have threatened to step up industrial action, including calling a general strike and demanding an early election, if the government does not withdraw the proposals and focus more on growth than austerity measures.
Croatia's economy has been in a downturn since the global financial crisis hit in 2008, dented by slow structural reforms and a poor investment climate. Output has fallen by more than 12 percent in that period.
Battling an unemployment rate that has topped 22 percent and reached the highest in more than a decade, the government envisages the labor rules will provide for more flexible and longer working hours and make it easier for companies to hire and fire staff.
Inflexible labor rules, a high tax bite and too much red tape have been criticized by investors and analysts as major obstacles for the private sector to thrive.
The unions say that it is not just the labor rules, but a lack of consistent policies to bring back growth and the government's focus on how to patch up budget gaps, that make Croatia, the newest and one of the economically weakest European Union member, unattractive for investors.
"Croatia's labor law is outdated, doesn't pave way for new jobs and must be amended. However, the government's faux pas is not putting it in a package of reforms which would address considerable public sector inefficiencies," said Damir Novotny, an independent analyst.
The government forecast a meager growth of 0.2 percent for this year, but many analysts say another contraction is possible.
(Reporting by Igor Ilic; Editing by Alison Williams)