Josipovic was asked by reporters whether he thought that Croatia needed an arrangement with the IMF or not. He said that the difficult economic situation in the country did not begin yesterday, and that greater determination was needed to carry out reforms and encourage programmes that would lead to recovery.

"It's not enough just to warn about the difficult situation, but it's necessary to take action," Josipovic said when asked to comment on a statement by the head of the European central bank, which was quoted by Croatian National Bank Governor Zeljko Rohatinski.

Rohatinski was quoted in Croatian media as conveying the message from European Central Bank President Jean-Claude Trichet that, with the present rise in the unit cost of labour and the fiscal deficit combined with the stable foreign exchange rate, Croatia was heading straight into a catastrophe.

Rohatinski said that catastrophe was perhaps too strong a word, but that the direction of movement was clear, and that Croatia could endure like this for a year.

Josipovic said the government should change the recovery measures if they failed to produce results.