CROATIA RESOLVES BILATERAL ISSUE WITH ITALY; STILL

UNCLAS ZAGREB 001232 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL HR IT REGIONAL ISSUES SUBJECT: CROATIA RESOLVES BILATERAL ISSUE WITH ITALY; STILL WORKING ON SLOVENIA ¶1. (U) Removing a bilateral irritant and potential obstacle to EU membership, the GOC announced October 9 that it would acknowledge by exchange of diplomatic notes with Italy that Croatian citizens face no obstacles buying real estate in Italy, and it will extend the principle of reciprocity to Italian citizens seeking to buy property in Croatia. The press reported that having "verified Italian statements" about the unimpeded ability of Croatian citizens to buy property in Italy, the Croatian MFA indicated that the domestic real estate market would henceforth be open to Italian citizens. ¶2. (SBU) MFA State Secretary Biscevic confirmed the reciprocity agreement to the Ambassador October 9. He also noted that in addition to resolving the immediate bilateral problem and meeting EU requirements for the free flow of capital, the deal overcame longstanding Italian political objections to accepting USD 34 million in Croatian compensation for property seized from Italian citizens (the "Esuli") after World War II. COMMENT: The market is still not fully liberalized. All foreigners wishing to purchase property need Justice Ministry approval, a slow process. To avoid this, many foreigners, including Italians, are already buying property by incorporating shell companies. END COMMENT. ¶2. (U) Meanwhile, the Croatian press reported on a similar request for reciprocal treatment from the Slovenian government, following the adoption in June of a law to permit Croatian citizens to buy property in Slovenia. The Croatian MFA announced that it would investigate the conditions under which Croatian citizens actually exercise ownership rights (as it had done with the Italian assertions) and had asked the GOS for additional information before making a determination about reciprocity. Bradtke