SCENESETTER FOR CROATIA'S NOVEMBER 25 PARLIAMENTARY

UNCLAS SECTION 01 OF 03 ZAGREB 000950

SIPDIS

SIPDIS

DEPT FOR EUR/PPD, EUR/SCE, DRL, INR

E.O. 12958: N/A
TAGS: PREL PGOV HR POLITICAL PARTIES
SUBJECT: SCENESETTER FOR CROATIA'S NOVEMBER 25 PARLIAMENTARY
ELECTIONS


1. This is the first in a series of reports on Croatia's upcoming
elections, providing a general overview of the issues central to the
election. Further installments will discuss specific parties and
issues in greater detail.


2. SUMMARY: As Croatia gears up for parliamentary elections
tentatively scheduled for November 25, polls are predicting a very
close race between the ruling center-right Croatian Democratic Union
(HDZ) and its biggest opponent, the center-left Social-Democratic
Party (SDP). With few differences between the parties' campaign
platforms, swing voters are expected to be swayed primarily by their
perceptions of candidates' credibility and honesty. The results
will also depend on the degree to which the Croatian electorate
expresses its desire for a change of government. Neither major party
is likely to win an absolute majority on election day, and will
therefore need coalitions with smaller parties in order to form the
next government. One thing is clear: neither an SDP nor an HDZ
victory will represent a significant departure from Croatia's
bilateral relationships and multilateral commitments. END SUMMARY.


TIMELINE: ELECTION DAY WILL BE NOVEMBER 25
--------------


3. On September 17, 2007 the Speaker of the Parliament announced
that the Croatian parliamentary elections would "most certainly"
take place on November 25, 2007. Croatia's current Parliament,
formed for a four-year term after the November 2003 elections, has
152 members representing 12 electoral districts. At the last
election, Croatia had 4.4 million voters registered, including some
some 400,000 registered Croatian citizens in the diaspora, mostly in
Bosnia and Herzegovina. (NOTE: Only 2.2 million votes were cast in
the last election. NGOs and other observers have pointed out that,
in a country with an estimated population of 4.4 million, having 4
million domestically registered is surely an inflated figure,
although no serious allegations of ballot-box stuffing have been
made. Efforts to clean up the register, deleting deceased
individuals and multiple addresses, have been underway, but no
official number of registered voters for the upcoming election have
yet been issued. END NOTE.)

THE PLAYERS: IT'S HDZ VS. SDP
--------------


4. GOVERNING MAJORITY: In the current Parliament, the HDZ holds 62
seats and heads the ruling majority in coalition with a host of
smaller parties: Croatian Social Liberal Party (HSLS - 3 seats),
Croatian Party of Pensioners (HSU - 3 seats),eight representatives
of national minorities, and two independents. The right-wing
Croatian Party of Right (HSP - 7 seats) generally votes with the
governing coalition, although it has not formally joined the
coalition.


5. THE OPPOSITION: The opposition consists of the SDP which
currently holds 33 seats, in coalition with the Croatian People's
Party - Liberal Democrats (HNS - 11 seats),Croatian Peasant Party
(HSS - 9 seats) and the Istrian Democratic Congress (IDS - 4 seats).
The far-right Croatian Democratic Alliance of Slavonija and Baranja
(HDSSB - 3 seats),and the lone Democratic Center (DC)
representative also consistently vote against the government.

THE POLLS: INCREASINGLY, A DEAD HEAT
--------------


6. According to the International Republican Institute opinion poll
conducted in September, if the elections were held today, 30.2% of
voters would vote for SDP and 26.6% for HDZ. No other party earned
more than 8%. Translated into parliamentary seats, SDP would win 58
and HDZ 51, leaving both parties in need of coalition partners to
assemble a majority (currently 77 seats). The SDP's lead has been
slipping gradually throughout the year, since a peak just after the
illness and death of former SDP leader Ivica Racan galvanized public
support for the SDP.

CAMPAIGN PLATFORMS: LITTLE TO CHOOSE BETWEEN
--------------


7. With less than two months to go, the parties are busy preparing
their electoral slates. Even with the campaign rhetoric heating up
during and after the conventions, however, few dramatic differences
exist between the major political parties' campaign platforms.
Reduction of unemployment, accelerated economic growth, the fight
against corruption, judicial, fiscal and health reforms, decreasing
the budget deficit, cautious privatization, membership in EU and
NATO, are all shared themes of both parties' platforms. Minor
policy differences, such as whether to introduce a capital gains
tax, or whether to call a public referendum as a prelude to joining
NATO (both of which are favored by the SDP),do not seem to have
caught the electorate's attention so far. The elections are
therefore expected to center more on personalities, i.e. on which

ZAGREB 00000950 002 OF 003


party is seen as more honest or less corrupt, and which is more
credible that it will be able to deliver the promised policies.
Public opinion on which party is more competent is split, depending
on the issue. According to IRI's April 2007 poll, SDP was perceived
as a better solver of Croatia's key problems - from economic
development and unemployment to corruption, workers' rights and
health and education. HDZ was perceived as more successful in
bringing Croatia into NATO and EU, helping war veterans and
defending the dignity of Croatia's Homeland War.

PERSONALITY FACTOR: STRONG LEADER VS. STRONG TEAM
--------------


8. One local observer has told the Embassy the campaign battle
essentially consists of one side (HDZ) "with a strong leader but a
weak team", and another (SDP) "with a stronger team, but untested,
even uncertain, leadership." Croatian Prime Minister Ivo Sanader,
who is also president of the HDZ, remains a relatively respected
figure for most Croatians, after four years in the office. The party
he leads, however, has been tainted by corruption allegations and
scandals. Most of his ministers are inconspicuous figures whose
accomplishments are few and little known to the average Croatian
voter, while others are polarizing figures who appeal to parts of
the HDZ's political base, but also suffer high negatives.


9. The SDP will also be banking heavily on its belief that Croatian
voters are simply ready for a change.
The SDP leader, 41-year old Zoran Milanovic, clearly represents the
face of a new generation of Croatian politicians. The election in
June of this young urban professional as the president of SDP,
combined with sympathetic nostalgia at the passing of former PM
Racan, contributed to an upsurge in SDP popularity. Milanovic has
sought to leverage his popularity, and to signal the SDP's breadth
of competence, by personally rolling out a slate of SDP candidates
for ministerial positions who are in general well-respected
individuals. This effort to impress voters with the strength of the
SDP's team, however, has been complicated by the SDP's decision to
nominate economist Ljubo Jurcic, rather than party president
Milanovic, as the party's choice for Prime Minister. Both Milanovic
and the party insist there is no discussion, but several
non-partisan Embassy contacts have suggested that after the
elections the SDP may look to shift Jurcic aside in favor of
Milanovic.

WILD CARDS: THE DIASPORA AND THE SMALLER PARTIES
--------------


10. With the election likely to be a dead heat between the HDZ and
SDP, other factors will gain in importance: the diaspora seats, how
many seats smaller parties can hold on to, and with whom they decide
to go into coalition.


11. DIASPORA: Under Croatia's electoral rules, since 1995, the
seats of the eleventh electoral district come from votes of some
400,000 Croatians who do not reside in Croatia, but rather largely
live in neighboring Bosnia and Herzegovina. Diaspora voters have
generally leaned towards the HDZ, giving them all four diaspora
deputies in the current Parliament. The number of seats from the
diaspora is determined by a so-called "unfixed quota", based on the
average number of votes cast for a seat in Croatia. In 2003, that
number was 17,209. The greater diaspora turn-out at the election,
the greater the number of diaspora seats in the Parliament. And
vice-versa: the greater in-country turnout, the fewer diaspora
representatives get elected. It is therefore theoretically possible
that HDZ gets fewer votes than SDP in Croatia proper, but still wins
most of the seats once the diaspora votes are added.


12. COALITION POLITICS: As noted, either HDZ or SDP will likely need
smaller parties to form a coalition government. The SDP can almost
certainly count on the support of the HNS and IDS parties. The
right-wing HSP and HDSSB are unacceptable coalition partners for the
SDP, and the HDZ would accept a coalition with them only as a last
resort. Both the HNS and HSP, however, have experienced internal
political struggles recently, leaving in doubt how many seats they
may hold on to. The pensioners of the HSU and the representatives
of ethnic minorities, which are "interest groups" more than they are
political parties, are expected to support whichever major party
wins the most votes. This could leave a centrist alliance of the
HSLS and the HSS, where the former supported the HDZ government and
the latter is currently in opposition, to tip the balance. While
HSLS and HSS politicians would relish the role, both parties have
been fading political stars over the past eight years, and even if
they end up as kingmakers, are not likely to be heavily influential
ones.

BOTTOM LINE: EITHER PARTY A GOOD PARTNER FOR THE U.S.
--------------


13. Both major parties are genuinely pro-Western and understand the
need for continued reforms, so any government formed after the

ZAGREB 00000950 003 OF 003


elections should be one that can work well with the U.S. The
declared preference of the SDP to hold a referendum on NATO
membership poses a political risk, if it is carried out, but it does
not raise any question about the SDP's pro-NATO orientation. On the
other hand, the outside chance of an HDZ-led government that
depended on the right-wing HSP, while not an appealing option, would
be more likely to mean the dilution of the HSP's nationalist agenda,
than to raise worries about Croatia's human rights performance. In
the end, the real impact of these elections on US interests, as for
Croatia itself, will be whether it delivers a government that can
effectively implement its program.

BRADTKE