"We are surprised by the fact that despite announcements that state spending would be reduced by close to five billion kuna... the final budget proposal envisages a much more modest reduction of only 3.4 billion kuna," the HUP said in a statement.

The reduction of budget spending should have been more significant because the proposed cuts expose the country to the risk of the projected budget deficit exceeding the desired rate of 2.8 percent, the HUP says, adding that this could be treated as bad news by credit agencies and financial markets.

The HUP also objects to short deadlines for adjustment to the proposed tax changes. For example, the new VAT rate of 25 percent will have to go into force already in two weeks.

The HUP also warns that the new tax on dividend payment will de facto be applied retroactively, which significantly increases costs for enterprises and disrupts their business plans and calculations.

The employers believe the fact that tax obligations have been changed at such short notice and without appropriate adjustment deadlines is sending a bad message to investors.

Also, new taxes on the business sector have not been harmonised with some tax benefits, for example the reduced health insurance contribution rate will take effect on May 1, while the abolishment of taxes for re-invested profit is envisaged for 2013, says the HUP.

"The HUP can only reiterate once again that we need more radical cuts, implementation of reforms that have been delayed for a long time, and even more significant tax benefits and assistance to the economy. Without that, despite the good course of government measures, the crisis cannot be overcome and there can be no economic growth."