Merkel, who arrived in Zagreb for a day-long official visit, was welcomed outside the government headquarters with full military honours.

Addressing a news conference with Kosor after the talks, Merkel said she was impressed by what Croatia had achieved in the 20 years of its independence, particularly with its completion of EU entry talks, which she said was a huge success considering obstacles in that process, such as Croatia's border dispute with Slovenia, the very demanding EU accession criteria, and the fight against corruption and organised crime.

Speaking of one of the central topics of Croatian-German relations, the economy, Merkel said that legal security was important for economic relations and that German business people expected transparency and reliability.

She said that trust in Croatian institutions was growing among German business people and that tourism and the successful investments made so far were a guarantee of good future cooperation.

We are looking forward to Croatia as the 28th EU member, Merkel said, praising what she described as ambitious plans for Croatia's economic stability.

Croatia's EU accession also sends a signal to others, the German chancellor said, recalling that all Western Balkan countries had a prospect of joining the EU. Referring to Croatia's example, she said that no one would be given any privileges but that no one's accession would be obstructed either.

Thanking the German chancellor for her country's support to Croatia, Prime Minister Kosor said that she and Merkel, as well as delegations of the two governments, discussed today how the two countries could strengthen their economic cooperation. She added that she and Merkel would talk about that some more at a formal dinner she was to give later in the evening for her guest.

Economic relations will be a topic of future contacts between the two countries' officials, Kosor said, underlining as particularly interesting areas of possible cooperation the energy sector and infrastructure. In that context, she mentioned the continuation of cooperation in building wind farms, such as the Vratarusa wind farm near the coastal town of Senj, an investment worth some 70 million euros. She also mentioned construction work on the EUR 236-million Gazenica port in the coastal city of Zadar.

Kosor underlined the efforts Croatia was investing to strengthen fiscal responsibility, which she said represented support for the efforts Merkel was investing in that regard at EU level.

Kosor informed Merkel of her government's plan to reduce the general government deficit to 1.8 percent and the budget deficit to 1.6 percent of GDP by 2014.

The two officials expressed satisfaction in particular with the Croatian tourism industry, to which German tourists contribute significantly. The number of Germans vacationing in Croatia has increased by 14 percent in relation to 2010 and the number of their overnight stays in the first six months was 27 percent up from last year, Kosor recalled.

She said that Croatia, once it joined the EU, would continue supporting its eastern neighbors in their development and integration with the EU.

Speaking of the economic segment of Croatian-German relations, Merkel said a lot would depend on economic development.

We can see that Croatia has made good efforts to overcome the economic crisis. German investors are ready, Merkel said, announcing the continuation of concrete investment talks for this autumn.

Speaking of cultural ties between the two countries, the German chancellor recalled the big Croat community living in Germany, describing them as a bridge between the two countries.

Kosor and Merkel also discussed Croatia's relations with its neighbours, the situation in Bosnia and Herzegovina and the Serbia-Kosovo dispute. These topics were also to be discussed at the formal dinner later in the evening.

Merkel said she was looking forward to cooperating with Croatia in the EU. It lasted very long, but it ended well, she said in a comment on Croatia's EU talks, expressing hope that Croatian citizens would confirm in a referendum the wish to join the EU.