ZAGREB WEEKLY ACTIVITY REPORT- SEPTEMBER 25, 2009

UNCLAS ZAGREB 000575 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL PGOV ELAB NATO HR SUBJECT: ZAGREB WEEKLY ACTIVITY REPORT- SEPTEMBER 25, 2009 ¶1. (SBU) WORLD BANK PRESENTS REPORT ON CROATIA'S PREPARATIONS FOR EU: The annual World Bank study on Croatia reports the most serious problem hindering economic growth is an underemployed population. Croatia,s employment rate of 57% of the working age population in 2008 is lower than both the EU average and the regional average for Central Europe. The report mentioned several reasons, including generous pubic subsidies for a variety of categories that effectively reduce incentives for paid employment. The report concluded that an increase in the employment rate closer to EU levels would increase per capita income by 15% by 2025. According to media, the presentation of the report was poorly attended. Comment: Despite the strong recommendations from the report, the current Kosor-led government will have difficulty enacting any fundamental labor reforms in the short term. Unwinding the current net of social programs and payments will require both political will, planning and time. End Comment (TBULLOCK) ¶2. (U) INSOLVENCY RATES UP SHARPLY: Croatia's Financial Collection Agency (FINA) announced September 14 that "past due notices are skyrocketing." Local media speculate that this trend will continue unless the GoC takes action. FINA reported that the level of arrears for the month of July 2009 was 41.6% higher than in July 2008 and attributed the majority of the increase to Croatian retail and processing industries. The Ministry of Finance has not released any figure on how much the State sector contributed to payment delinquency, but many Croatian economists believe that public companies are to blame for the rise of non-payment because of their lack of timely payment (normally within 60 days) for goods and services. (TBULLOCK) ¶3. (SBU) EXERCISE JACKAL STONE 2009 UNDERWAY IN CROATIA The multination military special forces training exercise "Jackal Stone" began on September 9, 2009 and will run through September 29, 2009. The training operation involves nearly 1,500 troops from the United States, Croatia, Romania, Poland, Lithuania, Ukraine, Hungary, Macedonia, Sweden, and Albania. This year's exercises include a large number of operations at sea to take advantage of Croatia's unique coastal environment, but the multi-week training event also includes land and air training opportunities as well. (DMEGES) FOLEY