Friday, May 26, 2017
The governing coalition of the right-wing Croatian Democratic Union (HDZ) and its junior partner, the centrist Bridge (Most) of Independent Lists, has collapsed. With 56 seats in Croatia’s 151-member parliament, HDZ needs 20 votes for a working majority, recruited from the smaller parties, independents and minority representatives. For the moment, HDZ is clinging on as a minority administration, but is unlikely to survive for long. Instead, fresh elections and further institutional instability are likely.
- The absence of a proper government will delay the implementation of essential fiscal and structural reforms.
- Renewed political uncertainty will affect investor confidence, slowing FDI and recruitment and raising the risk premia on government bonds.
- A political leadership vacuum will also complicate the urgent task of restructuring Agrokor, especially if it requires a government bailout.