"The government is committed to reforms and we are implementing them in the way they are possible", Minister Mrsic said after signing a collective agreement with state public servants.

He added that reforms were vital for the labour market and announced that the pension system would be reformed along with reforms in the labour legislation.

Mrsic told reporters that amendments to the Labour Act (ZOR) would occur in the autumn.

A bill could be put into parliamentary procedure for a first reading at the end of October and the law could be passed by the end of the year.

"The government is obliged to make a statement on the effects of the existing Labour Act which will open a discussion on the adoption of a new act. Based on the government's statement and discussions with social partners, we will embark on preparing a new law", Minister Mrsic explained and that he hoped all the problems in the current law would be dealt with.

The fundamental framework of the new law, Mrsic said, would be to protect workers because, as he said, employees are in an unfavourable position on the labour market. He added that on the other hand, it was necessary during crises to enable employers to restructure their companies and that this be as simple, fast and effective as possible.

"Changes will occur with severance pays. We are talking and looking for a model to resolve this issue", said Mrsic, adding that one model was the so-called severance fund where all employees in Croatia would contribute funds to a special account.

That severance (superannuation), he underscored, would follow them throughout their working life and would be paid out when they lose their job or retire.

"That is one way we wish to improve the security of workers, particularly in light of current experience where workers have lost their jobs and not received any severance pay", Mrsic told reporters.

We will also discuss working hours, employment agencies and temporary and casual work in order to simplify procedures to deal with surplus employees, he said.