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		Echoes of Versailles in Zagreb Friday, 18th May 2007 In four intensive days in Croatia in May, I met the Prime Minister of Croatia, parliamentarians, entrepreneurs, foreign investors, Ambassadors of EU member-states, the media, and even the European Movement and the European Commission. They all agreed that Croatia suffers very severe problems of corruption, despite pressures for reform resulting from Croatia's status as an EU accession state. And they agree that efforts to reform are stalled. All, that is, except the government. I had an astonishing meeting with State Secretary Martina Dalic, responsible for administration of EU pre-accession funds, and for Croatia's economic strategy, and I summarised what I had heard through the week. She was simply in denial. Indeed she said "this is just your view, no one else agrees", until I reminded her of the comprehensive range of people whose views I was reflecting. My colleague Joel Anand Samy of the Adriatic Institute, who had set up my programme, pointed out that neighbouring countries like Bosnia, Serbia and Montenegro were pressing ahead with reform, and lowering taxes, and that this represented an economic threat to Croatia as inward investors, and even established companies in the country, looked to the more attractive business environment over the border. Mrs. Dalic's reaction was astonishing. Laughing derisively, she said "Businesses want to go to Serbia? Then let them go to Serbia!". I was irresistibly reminded of Marie Antoinette's (probably apocryphal) exclamation "Let them eat cake!". It showed a frightening willingness to ignore the threat until too late. In fact corruption in the system is widespread. On major foreign investor told me he needed approval from a dozen agencies and officials before making certain decisions. All would ask for a backhander to facilitate their approval. Another told how the land-registry is so ambiguous and chaotic that establishing ownership -- without paying kick-backs - is a nightmare. An amusing story emerged in the press while I was in Zabreb. It seems that investigative journalists had photographed the Prime Minister's wrist over several months, and identified a range of expensive branded watches which he had worn on different occasions, with a total value of €150,000 - far more than he could be expected to afford on his salary. In the overall scheme of things this may seem a detail, but it is an illustrative one. If history is anything to go by, the story will create waves for a few days, but be long forgotten by the next general election, which is in November. It is no more than Croatians expect of their politicians. There is a huge overlap between government and industry, with government representatives on the boards of companies, and "public-private partnerships" which are the fiefdoms of officials. The processes for the award of government contracts are opaque, and an invitation to back-handers. Planning decisions are made by officials with a direct interest in the land concerned. The government exerts huge influence over the media. It owns the national news agency and sets the news agenda. A very high proportion of advertising comes either direct from government, or from firms with close government links, creating unhealthy patronage and influence. The Heritage Foundation/Wall St Journal "Index of Economic Freedom" shows Croatia slipping from 55th place in 2006 to 109th place in 2007. Within Europe, it ranks 37th out of 41. Strange, then, that the European parliament's April report on Croatian accession is upbeat. Recognising that more work needs to be done, it nevertheless talks of great progress being made. It bears little relation to the reality on the ground. Of course MEPs making inter-parliamentary visits tend to spend their time listening to what the host government wants to tell them. Then they go back to Brussels and write it down. I know - I've been on such visits. Then of course the EU institutions are keen to ensure stability in the Balkans (which is an honourable aspiration), and keen to maintain the momentum of enlargement at all costs (which is less so). Perhaps another reason for the favourable report is the very close relationship between the EPP, the dominant political group in the EU institutions, and the Croatian ruling party the HDZ. The EPP may be more concerned about recruiting the HDZ to its cause than in shining a spotlight onto corruption issues. The pressure that the EU should be putting on Croatia for reform is perhaps the country's best opportunity to change. On the evidence of this visit, I wonder if they're taking the opportunity seriously.