Croatian Public Sector Employees Strike on Announced Budget Cuts

Croatia’s recent austerity measures sparked a single day strike on Thursday, as thousands of nurses and teachers went on strike. This marked the first major protest action against the austerity measures taken recently in anticipation of the country’s joining the European Union in July 2013. Croatia’s credit rating was affirmed by Fitch, but the rating agency downgraded its outlook of the country.

According to spokespersons of the unions, the strike was honored by more than 70,000 of the approximate 100,000 workers in the nation’s hospitals, schools, and universities. The strike was called to protest reductions in wages and bonuses scheduled to take effect in the coming calendar year. Croatia’s left-center ruling party had suspended the collective bargaining agreements that had been in effect with the unions representing public employees earlier this year, in an attempt to go back to the bargaining table. The government announced that it would cut 2.3 billion kuna ($393 million) in wages during 2013. Croatia’s continuing recession has gone on for four years now, and the government is attempting to do a consolidation of public finance and revive the country’s economy.

Under the current year budget, the nation’s deficit will be reduced to 3.5% of GDP. This is a reduction from the previous year, when the deficit stood at 4.4% of GDP. But the nation is currently on track for a deficit of 3.8% in 2013, due largely to the costs of joining the EU. The growing deficit is also blamed on higher costs of repayment of current loans, and the restructuring of the country’s shipbuilding industry.

More potential strikes have been threatened. The teachers have called for additional strikes at the end of the current academic year if the government goes forward with the education budget reductions.

Croatia has managed to preserve its investment rating, due largely to the country’s public finance consolidation measures. The country’s current rating is only barely above speculation status.

The Thursday Fitch downgraded the country’s outlook to negative. The outlook had previously been seen as stable. The change was blamed on a more mild fiscal consolidation than had been previously anticipated. The other rating agencies concur on the country’s negative outlook.

Note: The current exchange rate is 5.8475 kunas to one U.S. dollar.