He recalled that the agreement had been signed 13 years ago, that it had been discussed at the diplomatic level and that the border between the two countries had been determined until 2005 when the agreement was legally ripe for ratification, but was not ratified for political reasons.

"Two months ago we came to the conclusion that we should discuss this issue with our neighbour, and this whole business came from me in a way, in consultation with Mrs Pusic (Croatian foreign minister). There's nothing new here," Milanovic told the public broadcaster HRT in its prime-time news programme.

He said that Croatia believed in international law and that it wanted the same criteria to be applied both in its relations with all its neighbours and with international organisations.

"The fact is that we signed an agreement at the highest level and that such a signed agreement produces certain legal effects," the prime minister said, citing the possibility of totally withdrawing from the deal before its ratification, in which case "we would have to start all over again - go through the thousand kilometres of border and deal with a series of new issues that have not been resolved over the past 20 years."

"We are looking at the situation in a wider context, in the interests of Dubrovnik," Milanovic said, adding that he was "not bowing to the pressures of daily politics and various outcries" because he could see various motives behind them.

"It is our idea and our initiative. It is very important to emphasise this because our country and some politicians in it are used to acting only under foreign pressure, and this government is not like that. When we are abroad, we are fair and square, we are not servile and submissive. In Croatia, we are rational and we make our decisions on our own, as much as that is possible in this integrated world. It's not Brussels or any third centre, but Zagreb and Sarajevo, and we shall see where it will take us," Milanovic said.

When asked if this was in any way connected with renewed consideration of the idea to build a bridge between the mainland and the Peljesac peninsula, Milanovic said it was all very closely related, but that it was important that it was all done on Croatia's initiative -- talks with the European Commission on the possible financing of the Peljesac bridge and the initiative to reconsider an agreement that was signed 13 years ago.

"I'm not mentioning Tudjman nor am I criticising him, and I don't want this story to be used in the basest of daily political recriminations. Neither was Tudjman selling Croatian territory, nor am I, nor Racan (the late SDP leader) was," Milanovic concluded.

When asked to comment on the publication by the Finance Ministry of the tax defaulters' list, Milanovic said that it was not meant as a pillory. "It's not a shame to owe taxes. It's a debt, not tax evasion, and whoever has not paid it will do so," he said, adding that the purpose of this measure was to restore order and raise public consciousness. He noted that he did not the list because it was the job of the tax authorities.

When asked if it was a just society in which big businesses and monopolies had been allowed for years to avoid payment of taxes, while ordinary people were burdened with high taxes, the prime minister said that it was wrong. "I'm not sure that those who allowed it to happen meant to do injustice, but it was wrong and inefficient. I believe that what we are now doing is right," he added.

On the subject of foreign investments and administrative barriers to them, Milanovic said: "We have just entered the second eighth of our term in office. Things can't change overnight, but we've been working hard from day one and investments will come to Croatia -- and in a planned fashion," mentioning the thermal power plant Plomin 3, Croatian Railways, and the Port of Rijeka.

Milanovic said that state investments should provide impetus, but that Croatia could not be forever dependent on them. "The private sector needs to perk up and our role is to create an environment for it," he stressed.