The fading star pupil: ten years of Croatia’s membership in the European Union
A decade ago, on 1 July 2013, the Republic of Croatia became a member of the European Union. Despite being the newest EU member, it is one of the countries in Southeastern Europe that have made the most headway in the integration process.
In 2023, it was admitted to both the Schengen area and the eurozone, a feat that has eluded both Bulgaria and Romania, even though they joined the EU a few years earlier. Membership in the EU has brought some economic benefits to Croatia, such as stable economic growth, a gradual rise in living standards and a drop in unemployment, but its poor absorption of EU funds, the inefficiency of its state institutions and structural problems in its national economy have prevented it from taking full advantage of these opportunities. Moreover, the free movement of people has exacerbated negative demographic processes. Nevertheless, Croatia has to some extent benefited from its membership in the EU. Thanks to the EU-funded LNG terminal on the island of Krk, it has an opportunity to become an important player in ensuring energy diversification in the region. Croatian officials have successfully used their presence in the EU institutions to raise the issue of their compatriots who live in Bosnia and Herzegovina to the level of transnational debate. However, it appears that Croatia has failed to take full advantage of its leverage in the Western Balkans.
From Eurosceptics to moderate Euro-optimists
Croatia’s integration with the EU began a decade after it gained independence in 1991. To reach this milestone, it was necessary to democratise the country. This process picked up speed after 1999, following the death of President Franjo Tuđman, the father of the country’s independence but also a politician with authoritarian tendencies. Initially, public attitudes towards the country’s potential membership in the EU were rather negative. At the heart of this Euroscepticism was the reluctance to cede the competences of a newly established state. Opponents of accession to the EU also believed that Croatia was too small to have real clout on the European arena. In addition, the issue of cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY), one of the political conditions for closer ties with the EU, was highly controversial. The capture and The Hague tribunal’s 2011 conviction of retired generals Ante Gotovina and Mladen Markač heightened discontent among the public, which saw them as national heroes rather than war criminals. In that year, only 23% of Croatian people expressed support for the country’s EU integration.[1] In 2012, these two men were acquitted.
The escalating territorial dispute with Slovenia added to the Eurosceptic sentiment. Slovenia made its agreement to Croatia’s further progress in European integration conditional on a favourable delimitation of the two countries’ maritime border in the Bay of Piran. Fearing the outcome of the accession referendum, the Croatian government abolished the requirement for a 50-percent turnout. Although 66% of citizens eventually voted in 2012 in favour of joining the EU, the scant enthusiasm for accession was reflected in the low turnout of only 43% – one of the lowest in the EU’s history. However, the Croatian people have gradually gained confidence in the EU and its institutions, mainly due to the disillusionment with their own political class. According to a survey conducted in 2013, the year of the country’s EU accession, 36% of them trusted EU institutions, while confidence in their own government and in the unicameral parliament, the Sabor, stood at just 16% and 12% respectively.[2] In the same survey conducted a decade later, 52% expressed trust in the EU while only 23% had confidence in both the government and the national parliament.[3]
Tourism-dependent economy
A good economic performance in the post-accession period, popular EU-funded projects and the success in joining the Eurozone and the Schengen area (especially when compared to Romania and Bulgaria, which remain outside these integration circles) have likely contributed to the positive assessment of the country’s EU membership. However, Croatia has so far failed to use its accession as an impetus to overcome the main challenges facing the country, such as low productivity, pervasive corruption (the country ranks fourth from the bottom in the EU in terms of perceived corruption)[4], a shortage of educated workforce and emigration.
Chart 1. Dynamics of Croatia’s economic growth compared to the countries of the region
Source: author’s own compilation based on data from Eurostat.
Croatia entered the EU while still suffering the consequences of the 2008 global financial crisis in the form of a prolonged recession. Access to the single market and EU funds allowed it to return to the path of stable (albeit not very high) growth, which averaged 2–3% of GDP between 2015 and 2020. This, in turn, led to an increase in GDP per capita in purchasing power parity relative to the EU average – from 61% in 2013 to 73% in 2022. However, Croatia started from a higher level than many other countries in the region: when it joined the EU, it already had a higher GDP per capita (around €10,500) than the EU member states from the region (including Hungary, Poland, Romania and Bulgaria); in 2022, it stood at €14,500, slightly lower than Poland’s. The country grew more slowly than neighbouring Hungary and Poland, but at a comparable rate to non-EU Serbia[5] (see Chart 1). The most visible success in this period was the decrease in the number of the unemployed. In 2013, the unemployment rate was 17.25%, before falling to only 6.75% in 2022 (one of the best results in the history of independent Croatia; see Chart 2). However, the 10-point decrease over that decade is not only attributable to the good economic situation, but also to negative demographic trends and the emigration of the workforce.
Chart 2. Unemployment rate in Croatia in 2008–2022
Source: author’s own compilation based on data from Statista.
Map 1. The share of tourism in the GDP of EU countries in 2019
Source: author’s own compilation based on data from Landgeist, landgeist.com.
The service sector has been the backbone of the Croatian economy for a decade: its share of the country’s GDP is as high as 74%. Industry (including construction) accounts for 23% of GDP, and agriculture makes up 3%. The main problem is the country’s continued dependence on tourism, which generates 25% of its GDP (see Map 1).[6] This makes it extremely vulnerable to external shocks. As an example, Croatia’s GDP fell by 8.5% in 2020 during the COVID-19 pandemic. This is the Croatian variant of the so-called ‘Dutch disease’ – an economy’s heavy dependence on one fast-growing industry. The dependence of Croatia’s GDP on this sector is much higher than in the case of European tourism giants such as Spain and Italy. Moreover, this exacerbates the disparities in development, unemployment rates and living standards between the country’s coastal and mainland parts, which the redistribution of budgetary resources has only marginally reduced. Such a heavy emphasis on the development of tourism also contributes to the neglect of the other sectors of the economy and to the deepening deindustrialisation of the country, which has led to a negative foreign trade balance (-€11 billion in 2021).
Map 2. GDP per capita of Croatia’s individual regions in 2020
Source: Croatian Bureau of Statistics, dzs.gov.hr.