President Ivo Josipovic said on Saturday that Standard & Poor's downgrade of Croatia's credit ratings was a big and important warning to the entire Croatia, including the government, that reforms must be carried out.
Standard & Poor's Ratings Services on Friday lowered its long- and short-term sovereign credit ratings on Croatia to 'BB+/B' from 'BBB-/A-3', citing insufficient reforms. The outlook is stable.
"There are no structural reforms, and this is what the policy must focus more on, which will turn our economy to bigger output, export and employment," the president told reporters.
Asked if the downgrade could result in the International Monetary Fund coming to Croatia, given that it is difficult to change something in negotiations with unions, he said the IMF "isn't some bogeyman circling around with us waiting to see if he will grab us or not."
It's a rational decision. If we assess that it's worth it and that we can do better with the IMF than without it, it's a normal business and logical decision. If we don't make the assessment, we will remain without the IMF, said Josipovic.
Commenting on negotiations with unions, he said there were various interests in society that were not always compatible and were difficult to align, but Croatia must remain a welfare state.
He added that "we must be more selective in spending money because nobody will give us money that doesn't exist. In terms of social measures, we have to focus on those who need help the most."
Asked about the consequences of the credit rating downgrade for Croatia, the president said borrowing would be more expensive, which would be a problem. Perhaps, he added, "a different approach may be generated among creditors through certain new policies and reforms."
Asked to comment on the harsh criticism of the government made by the chief of his Economic Council, Boris Cota, Josipovic said those were Cota's positions and that he would never tell anyone what to say.
Asked if he concurred with Cota's criticism, Josipovic said he concurred with his argument about the need for reform. "The government must always get encouragement and support for reforms and it must feel this support. When it comes to reforms, implementing the economic policy, finding investors, and creating jobs, this government has my full support," he said.
