Global Independent Analytics
Radostina Schivatcheva
Radostina Schivatcheva

Location: Bulgaria

Specialization: Sustainable development, International relations, Comparative European politics, European integration, Eastern European politics and EU-Russia relations

Croatia and Erdogan – Deus ex machina

Erdogan’s visit to Croatia was an unqualified success for Turkey’s soft power. At the same time, Croatia will continue to be as poor as ever, if it keeps on waiting on investments Deus ex machina while being lulled by blind faith in the invisible hand of the market.

Turkey’s soft power, both economic and cultural, was poignantly demonstrated during the latest high-level visit of a Turkish delegation to Croatia at the end of April. The red carpet was ceremoniously rolled out to receive the guest of honor - Turkish President Recep Tayyip Erdogan, and his wife - first lady Emine Erdogan. The visit came as a result of an invitation by the Croatian President Kolinda Grabar-Kitarović.

Erdogan arrived at the helm of a large and very high-profile official delegation. Six ministers and 150 businessmen, some of whom were senior officials in leading Turkish companies, took part in an economic forum with some 450 Croatian counterparts. Among the most prominent Turkish officials who accompanied Erdogan on his visit to Zagreb were the ministers of Justice, European Affairs, Economy, Energy, Culture, and Tourism. The visit did not have purely economic goals, however. Erdogan opened a Turkish Cultural Center in Zagreb and attended events marking the 100th anniversary of the formal recognition of the Islamic faith in the Austro-Hungarian Empire. “As of today, there is a total of 45 Yunus Emre Turkish Cultural Centers in 37 countries,” Turkey’s top official stated contentedly. Yes, Turkey has been very successful in projecting its soft power around the world.

The visit was a success for Turkey’s foreign policy and raised the country’s standing in the eyes of the Muslim community of the Western Balkans. At the same time, the Croatian political elites wasted another opportunity to improve the host country’s economy and gain much needed foreign investments in industries.

The visit also demonstrated the cracks in the European economic model as Croatia, a member-state of the European Union (EU) - supposedly the most successful trading block in the world - has to court ardently Turkey’s economic investment to revive its ailing economy. Investments and prosperity – that was the promise of European accession which Croatia accomplished in 2013 amidst much celebration. Optimism regarding economic growth after joining the EU has proved fleeting, as Croatia has been transformed into something akin to a banana tourist republic, with the active participation of its political elites.

Croatia’s troubled economy

Azure waters, red roofs, ancient fortresses... The magic of the Croatian Adriatic coast has bewitched many visitors, even striking a cord with the creators of the epic fantasy series “Game of Thrones”. Millions of fans yearn to visit the fascinating locations of their favorite show, and Croatia seems destined to be a land of prosperity, milking the tourist cash-cow. In a dark twist, worthy of the pen of Richard Martin, there is trouble in the Adriatic paradise.

Today Croatia - the pearl of the Adriatic - is another land mired in “Euro-prosperity,” characteristic of the Balkan periphery. In 2014, Croatia’s economy contracted for the sixth year in a row. In 2015, GDP growth was 1.8% - i.e. woefully insufficient to compensate for the lengthy recession.

The long-term growth potential of the Croatian economy lies below 1% growth of the GDP, according to the most recent European Commission (EC) country report on Croatia that was published in 2016. A growth potential of 1% would render an economic convergence with the wealthy West European countries impossible. Such a trajectory will result in Croatia becoming a permanent periphery to the EU. As early as February 6, 2016, Euro-economists projected GDP growth for 2016 and 2017 at 2.1%, which the EC saw as “growth above Croatia’s potential.” EC considers the main growth driver to be internal demand. Since households and government already bear the burden of high debt, the EC report admits that the anticipated 2.1% growth outlook will not develop as projected.

The World Bank reports that Croatia showed 16.3% unemployment in 2015. According to the EC, long-term unemployment accounted for 35% and 40% of all Active Labour Market participants in 2014 and 2015, respectively. For the general period of 2011-2015, the World Bank estimated an average youth unemployment rate (ages 15-24) of above 40%. In 2014, the proportion of people at risk of poverty and social exclusion was 29.3%. 70% of the country’s GDP is generated by services, most notably tourism. In addition to the seasonal nature of the tourism industry, over-reliance on this industry only makes the country even more dependent on European economic cycles.

Croatians are in danger of becoming service staff in foreign-owned hotels while important industries are being closed down. The Croatian political elites did not properly negotiate the EU accession process, and thus pushed the Croatian economy into a downward spiral of deindustrialization. During Croatia’s EU accession process, the European Commission required that the country cut subsidies to its four largest shipyards to meet the fair competition standards. Croatia complied with EC competition rules by limiting its production capacity. As a result, the nation’s oldest shipyard, Kraljevica, was left to flounder into bankruptcy. The privatizations process was considered to be “rife with errors and misjudgments,” according to Ozren Matijašević, President of the Croatian Association of Trade Unions. “Mistakes have dampened any hopes for a real, immediate turnaround,” he said, adding that the Croatian Trade Unions are being choked amidst lawlessness.

In a startling example of modern “European solidarity,” rather than Chancellor Merkel coming to the rescue of suffering Croatia, offers for help came from the European South-East. At the same time as Merkel was visiting refugee camps - built with European aid in Turkey - Erdogan arrived in Croatia on an official 2-day visit, with the glowing promise of millions of cold cash in investment.

Deus ex machina

The somber numbers that characterize Croatia’s economy, while firmly being kept in mind, were temporarily pushed into the background, as the dashing Croatian president Kolinda Grabar-Kitarović, her ample forms attired in a fine black-and-white costume, rushed to greet Erdogan. After taking the oath as president, Grabar-Kitarović, the former ambassador to Washington and ex-assistant to the NATO secretary general, promised that she will work on making Croatia “a rich state.” So far the promise has failed to materialize. Thus, the arrival of the high-profile political and business delegation from Turkey prompted a frenzied-hopeful reaction.

Erdogan’s arrival was timed to events marking the 100th anniversary of the formal recognition of the Islamic faith in the Austro-Hungarian Empire. “Today Muslims in Croatia feel free to practice their religion and are not exposed to any discrimination and marginalization,” Erdogan said, adding that this fact has contributed significantly to close cooperation between the Turkish and Croatia.

Representatives of Bosnia and Herzegovina (BiH) also participated in the discussions. Guests were addressed by the Chairman of the Presidency of BiH, Bakir Izetbegovic, who said that “Croatia is a shining example of how to establish a relationship between the religious community and the state.” The Mufti of the Islamic Community in BiH, Reis-ul-ulema Husein Effendi Kavazović, affirmed that modern societies should foster cooperation and not a clash of civilizations and that it is wrong to interpret differences in religion on the basis of painful historical events. One should be looking at great examples of “co-existence” instead.

Erdogan skilfully used the visit to promote Turkey’s soft power by opening a Yunus Emre Turkish Cultural Centre in Zagreb. He stated that the Centre will provide free Turkish courses to Croatian citizens and promote Turkish culture and arts, thus stepping up a cultural exchange and consolidating friendship between Turkey and Croatia.

‘A rocky vineyard does not need a prayer, but a pick axe'

However, religious tolerance is not a substitute for economic development. The Native American Navajo proverb rightly argued that “a rocky vineyard does not need a prayer, but a pick axe.” In matters concerning religious tolerance and freedom, the Zagreb meeting has clearly demonstrated cross-cultural and cross-denominational concord. However, absent economic development all citizens of Croatia risk turning into beggars in their own country or joining the ranks of economic migrants abroad.

Erdogan sees tourism, energy, and financial and agricultural sectors as areas where economic cooperation between Turkey and Croatia could be stepped up. “I think that we will soon triple our investments in the Croatian tourism sector; privatisation projects worth 500 million dollars are under way in Croatia and those projects are of interest to us. Of particular importance are ecological agriculture, irrigation projects, and Croatia's great advantages such as fertile land, good infrastructure, a well-educated labour force and the country's proximity to Europe,” he explained.

Unfortunately, this is scarcely the investment Croatia needs to diversify its economy and reinvigorate its industries. On the other hand, it is hardly the job of the Turkish president to chart the best development course for the Croatian economy, as the Croatian elites have markedly failed at this very task. Grabar-Kitarovic called on Turkish companies to invest in Croatia, citing tourism, agriculture, energy, banking and modern technologies as possible areas of cooperation. Such a broad and vague invitation could hardly be called a development plan. Turkey received no invitation to collaborate in the achievement of specific aims in specific industries.

Bosnia was very much on the agenda during the Zagreb meeting. In Bosnia, the economic realities of peripheral capitalism, and the material necessities they entail are even harsher than those in Croatia. Erdogan hopes that Turkey, Croatia and Bosnia will create an effective trilateral mechanism at the highest political level. Yet, the idea of creating such a mechanism, which so poignantly excludes Serbia, is doomed from the outset. Nevertheless, Turkish, Croatian and Bosnian officials also agreed on strengthening trilateral cooperation to help Bosnia in its “political emancipation,” upgrading the Dayton peace agreement and fully activating NATO's Membership Action Plan. There were no reports about concrete plans for economic development assistance to Bosnia. But since the Croatian leaders did not have such plans even for their own country. That was (regrettably) to be expected.

Besides the economy, Erdogan and Grabar Kitarovic discussed other bilateral issues including Croatia’s strong and ongoing support for Turkey’s EU membership negotiations, and liberalisation of the visa regime. The countries were also in agreement about the disturbing state of refugee flows and international terrorism. Finally, after two intensive days, Erdogan left the pearl of the Adriatic, having fulfilled all the concrete goals on his agenda. Croatia, having made no concrete plans and with no concrete proposals to the Turkish delegation, was rightly left with the same old economic problems.

Something is being done

Erdogan’s visit to Croatia was an unqualified success for Turkey’s soft power. At the same time, Croatia will continue to be as poor as ever, if it keeps on waiting on investments Deus ex machina while being lulled by blind faith in the invisible hand of the market.

“Europe invented a ‘convergence machine,’ taking in poor countries and helping them become high-income economies,” Indermit Gill, World Bank's Chief Economist for Europe and Central Asia, claimed triumphantly. Today even the World Bank admits that “the European Economic Model has lost its lustre.” Amidst the economic destruction, masquerading as ‘economic restructuring,’ the arrival of a Deus ex machina from Turkey brought some hope, however fleeting. Lest citizens despair, take to the streets, and demand political accountability, Erdogan’s visit demonstrated to the impoverished Croatian voters that something is being done. However, if something is being done, why does prosperity remain as elusive as ever?

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