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Croatian parliament approves new centre-right cabinet, focus on economy

ZAGREB (Reuters) - The Croatian parliament on Friday approved a new government formed by the centre-right alliance and led by the technocrat Prime Minister Tihomir Oreskovic.

Croatia's Prime Minister-designate Tihomir Oreskovic (C) seeks approval for his government in parliament in Zagreb, Croatia, January 22, 2016. REUTERS/Antonio Bronic

The principle tasks of the cabinet in the newest European Union member will be to stem rising public debt, reduce high unemployment and spur meagre growth that emerged in 2015 after six consecutive years of recession.

The government received the support of 83 of 151 parliamentary deputies.

Addressing the parliament before the vote, Oreskovic said his government’s goal would be to reduce the budget gap to within the EU’s 3 percent of gross domestic product ceiling from around 5 percent and hoped to secure an investment-grade credit rating.

“Our goal is to reach growth of above 4 percent by 2020 and to reduce public debt to below 80 percent of gross domestic product. We want to reduce the budget gap to below 3 percent of GDP in 2017 and to lift our credit rating next year,” he said.

“All I ask is time and results.”

Croatia’s economy is among the EU’s weakest although growth of around 1.5 percent is projected for 2015 after six years of recession. Public debt is equivalent to 87 percent of GDP and rising while the unemployment rate stands at 17.9 percent.

The country is rated at BB+ or equivalent, just below investment grade, by the three major credit rating agencies, albeit with a negative outlook.

Oreskovic, a 49-year-old technocrat who was born in Zagreb but raised and educated in Canada, was nominated as premier by the conservative HDZ and small reformist Most parties after weeks of talks following an inconclusive Nov. 8 election.

“This government will be ready to take tough decisions,” Oreskovic said. “We want to make the public administration more efficient, cut red tape, ease doing business and reform the health and educational sectors.”

He said the government would invest in energy, tourism and infrastructure, partly by drawing on around 1 billion euros (US$1.08 billion) a year of EU development funds, and that it plans to privatise non-strategic assets and tax unused property.

“We also need stability in taxation and monetary policy,” said Oreskovic, who was formerly financial officer at an Israeli pharmaceutical company. He met a number of investors holding Croatia’s debt in Austria last week, telling them that the government’s goal was to reduce debt and the deficit.

Croatia must adopt a 2016 budget by the end of March.

“It is evident that the key tasks awaiting the new cabinet are stabilising public debt and improving the investment climate,” said economic analyst Damir Novotny.

“For that the government must show political will, and we’ll soon see in the 2016 budget if that will exists.”

Some analysts questioned the long-term stability of the government and said there was a lack of details on other policies, like welfare, education or civic rights.

“This government has not emerged as a result of a coherent political and economic programme, but is rather a group of individuals which has yet to put forward its agenda. In that context, it is difficult to say if they will make a good team,” said political analyst Berto Salaj.

Reporting by Igor Ilic; Editing by Toni Reinhold