Attendees at the FMRS in Zagreb had the opportunity to hear three engaging presentations and panel discussions, deliberating Croatia’s post-covid economy, considerations concerning joining the Euro and ultimately, a debate about the country’s future.
The first panel concerned Croatia’s post-covid economic situation and the potential for reform. The panel agreed that the current COVID monetary and fiscal policy responses further inflated many of the problems European economies faced long before the COVID shock. Panellists put forward that Europe has been living at the expense of future generations for too long, and action to take liquidity out of the market is urgently required. While Croats are struggling with a decrease in purchasing power, they may have to accept a reduction in real wages for the country to regain a competitive advantage and increase productivity.
There are ultimately no perfect solutions to complex problems; there are merely a variety of trade-offs with respective consequences, which must be carefully considered.
As Europeans, we should rely on our history and tradition of competition and make use of the information conferred to us through prices. These mechanisms are ultimately what made our societies so great. It is important to remember that, as Mr Anker put it, “we are all equal in the eyes of God, but not equal in the eyes of the market”.
The second panel discussed the implications for Croatia should the country decide to join the Eurozone.
Joining the Eurozone appears attractive for countries. It opens the door to borrowing more money at reduced interest rates and a chance to better the nation’s credit rating, says Dr Harris of the Croatian Centre for Cultural Renewal. However, the trend of heavy borrowing at low cost resulted in the ECB being faced with countries at risk of default, which in turn gives the ECB grounds to interfere with a sovereign nation’s fiscal decisions.
A study by the centre for European Policy in Fribourg showed that the biggest benefactors of the 20-year-old Eurozone are its strongest members, such as Germany and the Netherlands, which benefit from interest rates and policy decisions made in Brussels. Other countries such as Portugal and Spain, however, are worse off.
By introducing the Euro, Croatia renders control over its currency to Brussels. This lack of control, paired with the country’s inefficient systems, low productivity levels and corruption, will make it even more difficult for Croatia to compete with its outputs on the international market.
Dr Harris also pointed out that most historically productive economies, including Poland, Hungary and the Czech Republic, use their own currencies.
In addition to the loss of control over its currency, Dr Vidaković provided a financial analysis of the Eurozone and concluded that the Eurozone is financially unsound. In his comparison, Dr Vidaković suggested that entering the Eurozone would not be dissimilar to running into a burning building or boarding a sinking ship.
With Croatia’s future in mind, Dr Kolm stressed the need for structural reform. The natural interest rate, r*, the real price for money, has been on a downward trend for years. Through reform, Croatia can regain its competitiveness and become more productive and innovative.
The positive impacts of reform have been demonstrated by the conservative leadership in Greece in recent times, which led the country back to a surplus.
Fundamentally, there is a lack of discourse in Croatia about the Euro decision. Dr Harris appealed to the English liberal tradition and suggested that it would be best to ask the Croatian people whether they wanted to join the Eurozone.
The last panel discussed topics of corruption, why young Croats are leaving the country and solutions to shape Croatia into an economic and social success story by 2030.
Croatia’s big government is beset with inefficiencies and corruption, which stifles innovation and economic efficiency. In light of this dilemma, Mr Vanđelić advocated for measures to reduce the size of government, create transparency to fight corruption and cronyism and rely on technology to enhance the efficiency of government services. As an example, Mr Vanđelić pointed to the lengthy process of registering a business in Croatia. He suggested that by the time an entity can legally operate, the opportunities are gone, or the company was set up in a country nearby with less restrictive bureaucratic processes and corruption.
These inefficient and restrictive practices have further negative consequences, namely that young, talented and ambitious Croats see their future in Western Europe or the USA, says Mr Gašparac. Thus, drain on human capital will have significant repercussions for the country in the future. Great Croatian ideas and successful businesses move overseas and do not reinvest in Croatia or create skilled workplaces.
He sees tremendous opportunity in the technological advances the country and its workforce are undergoing. Both businessmen believe that technology could improve government service efficiency, and digital systems would make government transactions more transparent and thus combat corruption.
Lastly, Mr Biddle discussed the moral implications of large, corrupt and coercive government forces and advocated for a shift in the individual’s mindset. People have the moral right to be free to voluntarily create, store and trade the fruits of their work and should advocate for these liberties.