"I believe that the arrest of former Hypo Alpe Adria Bank CEO Wolfgang Kulterer did not worry him in the least," Kajin said.

Kulterer has been in custody in Klagenfurt on suspicion of embezzlement and of granting risky loans worth millions of euros.

Speaking of Hypo Alpe Adria Bank, Kajin said that the bank was built in the 1990s with Croatian money intended for the purchase of weapons for the country's defence.

"Hypo Bank entered the Croatian market in the mid 1990s by injecting fresh capital into Slavonska Banka from Osijek, and before that the Foreign Ministry got a loan from that bank in the amount of 20 million German marks for the renovation of our embassies. Hypo Bank arrived in Istria in the late 1990s through investments in the hotel complex... at Crveni Vrh in (the northern Adriatic bay of) Savudrija," Kajin said.

The IDS official believes that efforts to rehabilitate Hypo Bank were the reason for the "spectacular" departure of former Croatian Prime Minister Ivo Sanader and that it was the reason why current PM Jadranka Kosor was talking about a "festering boil".

"I guess she has all information from Austria and Germany regarding bank accounts in Hypo Bank, as well as in other banks," Kajin said.

He went on to say that according to information available to him, Hypo Bank did business in Croatia not only with citizens, the government and local self-government units, but also with "chosen generals, (former President Franjo) Tudjman's advisors, ministers and media authorities, and some of their investments were financed with loans on collateral worth millions of euros, and they in return would get millions of euros for construction projects in Croatia".

Kajin said that he was sure that Hypo Banka also corrupted people in Croatia, possibly in Istria as well.