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