CROATIAN UNEMPLOYMENT GROWING

UNCLAS ZAGREB 000187 SIPDIS FOR EUR/SCE, EUR/PGI, EUR/PPD, and DRL/AE, TREASURY FOR INTERNATIONAL AFFAIRS LARRY NORTON E.O. 12958: N/A TAGS: ECON EINV ELAB PGOV HR SUBJECT: CROATIAN UNEMPLOYMENT GROWING ¶1. SUMMARY: After several years of steady decline, the Croatian registered unemployment rate rose in January and February. Union rolls and day-to-day conversations indicate the public is feeling the effects of the trend, despite relatively little attention from the media or the government. As the global recession creeps up on Croatia, public demand for government action will only increase. End summary. ¶2. According to the Croatian Employment Agency (HZZ),262,821 persons were registered as unemployed in February 2009, which is 3.4 percent more than January 2009 and 1 percent more than February ¶2008. The number of newly registered persons dropped 17.9 percent from January, but was 33.6 percent higher than in February 2008. Commenting to the press on the seemingly negative trends, HZZ director Ankica Paun Jarallah said given the global financial crisis, the figures are not as bad as they could be. While some analysts predict at least 30,000 layoffs in 2009, Jarallah gave a more optimistic estimate of 10,000-12,000. If, as expected, unemployment rises overall this year, it will be the first annual increase since 2005, when unemployment levels began to fall after a decade and a half at steadily high levels. ¶3. Union rolls give an indication of the large cuts hitting many industries. The Association of Independent Unions of Croatia (SSSH) has lost 5000 members in the last 3 months, primarily from textiles and energy, chemical and non-metals branches. Wood and paper industry representatives said they have lost approximately 2500 members since August. The head of the Independent Wood and Paper Industry Union recently told a major daily "if something isn't done, Croatia's wood industry will have to halt all production because there will be nobody to produce for." ¶4. According to Ljubo Jurcic, MP from the opposition Social Democratic Party (SDP) and a professor of economics, the HZZ unemployment numbers misrepresent the current situation. Jurcic told us the current figures do not reflect many lay-offs that have already happened, especially in the wood and textile industry, because collective agreements allow workers a grace period of up to three months before being officially dismissed. He predicts that the most accurate figures will be seen in September, by which time, he expects, 60,000 people will have lost their jobs (Note: with a total workforce numbering only 1.5 million, the loss of even a few thousand jobs in a particular sector can have comparably severe consequences.) ¶5. Although the media is not covering the unemployment situation extensively, day-to-day conversations indicate the average Croatian is very aware of the rising numbers. Many employees, particularly in large firms, say they are bracing for further cuts, as news of employers' plans to trim salaries and staff spreads daily through the workplace. ¶6. Comment: Although the government is saying little about unemployment in the run-up to the local elections in May, the rising numbers have not escaped the public's attention. The decline or loss of regionally important industries such as wood and textiles would deal a significant blow to local economies that were struggling even before the financial crisis. The rising number of unemployed will also put further stress on budget revenue, health insurance, and pensions. As the effects of rising unemployment and other aspects of the economic slowdown spread, the public will look increasingly to the government for answers they are not currently getting. Bradtke