Noting that over the last two years Croatia had seen economic decline and a rise in public expenditure, Social Democratic Party (SDP) leader Zoran Milanovic said the government's budget review proposal was not harmonised with its economic recovery programme, which he added were "organically related processes".

Milanovic was dissatisfied that the government had proposed a budget review only now, saying that in April "the government came out with a programme of economic recovery as if it were something financed from lottery winnings and not organically related with the budget".

Milanovic said that Prime Minister Jadranka Kosor "is talking about painful cuts all the time, but cannot even conceive them and implement them". He asked Kosor how she would compensate for the negative growth rate, citing predictions that the government would try to bridge the projected negative growth rate of one to two per cent by borrowing more money.

Davor Huska of the ruling Croatian Democratic Union (HDZ) responded to Milanovic by saying that a reduction of civil servants' salaries and of privileged pensions showed that the prime minister was implementing the painful cuts.

"But you expected a reduction of salaries and pensions and abolishment of agricultural subsidies, you expected to see workers, pensioners and farmers in the streets, you expected a Greek scenario, but to your regret it won't happen," Huska said.

Damir Kajin of the Istrian Democratic Party (IDS) said the proposed budget would destroy Croatia, adding that the purpose of the budget review was to buy votes. "Why must Croatia go bankrupt so you can stay in power?" he asked, predicting that Croatia would "hit rock bottom" around Easter next year.

Vesna Pusic of the Croatian People's Party (HNS) said the only remaining sources of budget revenue were the economic sector and EU funds, urging the government to strengthen the economy by reducing contributions employers had to pay for each employee.

Stressing that Croatia could secure EU funds for projects in the areas of energy, environment, transport, tourism and regional development, Pusic said the government was either doing nothing towards that end or was making the situation difficult.

"The budget review doesn't provide for funds for efficient people who would prepare such projects. About a billion kuna is required for that purpose, and we could get 25 billion kuna in 2012 and 2013," she said.

The ruling coalition parties insisted that the proposed budget review "charts a way out of the crisis and shows that there'll be no extra taxes on labour".

HDZ deputy Andrija Hebrang said that with the proposed budget revision "the government opted for social peace, which necessarily led to higher expenditures." He praised the government's courage to freeze the budget for the next two years.

Hebrang said that "the pension system, which is the single largest budget consumer, will need to be changed, but we won't do it through a budget revision but with a political consensus."

Milorad Pupovac of the Independent Democratic Serb Party (SDSS) said the proposed budget review "draws the line after which clear steps will need to be taken." He said it was untenable that 40 per cent of the budget should go towards pensions and intergenerational solidarity, proposing that the burden of the economic crisis be equally spread among all economic entities and that steps be taken to encourage investment.

Croatian Peasant Party (HSS) leader Josip Friscic said the proposed budget review "sends out a positive response to the main question of whether there will be money for the payment of pensions and salaries until the end of the year."

"We in the HSS are aware that a different budget could have been drafted, but we as the coalition partners would not have supported it," Friscic said, adding that they opted for a realistic presentation of all revenues and expenditures.

"It also sends out a message that there will be no break-down or collapse as recently predicted by some," Friscic said.