Prime Minister Jadranka Kosor said that the signing of the agreement was a good signal to continue social dialogue, which she added was even more important than the savings made by the trade unions abandoning their demands for this year's Christmas bonuses and coverage of transport costs.

"The most important thing is that we created a good framework and opened dialogue, because a debate on a 2011 state budget is coming up, and Parliament has decided that the budget may not be increased over the next two years," Kosor said, recalling that a law on fiscal accountability would be adopted along the budget.

Kosor said that the government found it important that dialogue on tough economic issues should continue within the Economic and Social Council.

Both the prime minister and the union leaders described the agreement as good, saying that it brought certain improvements, such as medical checkups every wo years for all employes above the age of 50 and every three years for the rest.

This year, public-sector employees will receive holiday grants and presents for their children, but will forgo a Christmas bonus of 1,250 kuna per employee. Funds intended for the Christmas bonuses will be redirected into the Unemployed Fund.

The government will continue cooperating with the trade unions in implementing the economic recovery programme, bringing EU accession negotiations to completion, and fighting corruption.