"Not only the economic recovery but also Croatia's economic survival hinges on the proposed reforms," Kosor said adding that the seriousness of the present-day turning point was similar to the watershed at which Croatia had been in early 1990s when it had to fight for its independence and sovereignty.

Highlighting the economic recovery measures as an important pillar for the country's prosperity, the premier said that the structural reforms had been applauded by the best experts in the country an abroad.

However, they can be implemented only with the full support of all citizens and all relevant political protagonists, she said.

"Citizens' rights cannot be and will not be protected through the blockade of reforms. Quite contrary, once all of you became aware, it would be evident that the entire burden of the crisis would be shifted onto the backs of those who really live off their work," the premier said.

She said that therefore it was necessary to consistently implement the entire reform package and that the government would be firmly committed to the economic recovery programme.

"I believe that these reforms are necessary and that they will take us out of the crisis. I believe in the Croatian people and in their love towards the Homeland. I believe in a successful and prosperous European Croatia," she said at the session which was also attended by President Ivo Josipovic and Parliament Speaker Luka Bebic.

Kosor described the cooperation between her cabinet and the President as a guarantee that hard tasks could be done.

She went on to say that from the very first day when she took the helm of the government a year ago, she had insisted on strengthening the rule of law in which there were no untouchables, adding that she enjoyed support from the former President Stjepan Mesic in that anti-corruption drive.

I highly appreciate the backing from Ivo Josipovic to the government and me as Prime Minister in stepping up the rule of law," Kosor said.

Reiterating his support to the government's economic measures, President Josipovic stressed that Croatia was also a social state with social justice incorporated in its political tradition.

Josipovic pointed to the importance of social justice in times of crisis, and expressed his conviction that implementing reforms and calls for social justice did not rule out each other.

He reiterated his opinion that a great number of signatures collected by trade unions to get a referendum on the labour legislation clearly showed that the people wanted social justice.

Addressing the government's special session Parliament Speaker Bebic said that on 25 June 1991 the Croatian people recognised a historic opportunity for its future and that the parliament then adopted two decisions which served as constitutional and legal pillars of the present-day Croatia.

Bebic said that the amended constitution adopted by the parliament last week showed that members of parliament gave preference to the common good.

After the government's session, top state officials left for Vukovar where central ceremonies in observance of Statehood Day will take place.

On Thursday morning they held wreath-laying ceremonies at the grave of the first Croatian President Franjo Tudjman, at the Wall of Pain and other memorial sites at Zagreb's main cemetery of Mirogoj.

In the government's building Kosor also bestowed awards to war veterans for their contribution to the development of the homeland. On that occasion she paid tribute to the dead soldiers and the first Croatian president.