Croatia: HDZ may win Apr 17 general election, but be unable to form majority government
Metodi Tzanov
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Croatia is heading for an early general election on Apr 17, three months ahead of term. The last general election was held on Jul 5, 2020 - as the parliament was inaugurated on Jul 22, 2020, the next elections should have been held on Jul 22, 2024 or earlier. While senior ruling HDZ chairperson and PM Andrej Plenkovic claimed that he wanted the elections to be held earlier in order that the winner is able to form a government in a timely manner, we think that he hurried with the general election to be held before the EP elections scheduled for Jun 9 as HDZ usually does not perform very well at the European elections.
The latest opinion polls in the ten 'Croatian' constituencies indicate that the HDZ is to be the relative winner of the elections, but it may face difficulties to form a majority government as its coalition potential is low and the only likely potential coalition allies, in addition to HDZ partners, with which the party is running in the elections - HSLS, HDS, HNS, HSU, are the Most- Suverenists coalition and the Homeland Movement as all other parties have rejected cooperation with the HDZ and want it to bring it down from power to eradicate its corrupted rule. Yet, as HDZ tried to rule with Most before and failed with the latter leaving the coalition before the end of term, cooperation with Most and Hrvatski Suverenists coalition is little likely. Cooperation with the Homeland Movement is also problematic - it has not said which of the two blocks it would support, while some of its beliefs - such as abolishing the ratification of the Istanbul Convention will put hurdles to potential cooperation. The HDZ has been usually supported by the ethnic-Serbian party SDSS and its 3 MPs, but its support is now uncertain as indicated by recent statements of its leader. That said, even if the HDZ and partners become relative winner of the elections, they may fail to form a government as President Zoran Milanovic plans to entrust government formation mandate to the party or coalition proving it has the support of at least 76 MPs in the 151-seat Sabor. Overall, HDZ support may be hurt by the numerous scandals the party and its ministers faced during its two governments in the past seven years and a half. At the same time, its support should remain high on a number of achievements of the two HDZ-led governments - entry into the euro and the Schengen areas, Croatia attaining investment grade ratings by the three main rating agencies, wage and pension hikes, as well as robust economic growth despite the corona and the energy crises thanks to the resolute and obviously adequate measures worth nearly EUR 8bn in support of households, the vulnerable citizens and firms.
At the same time, polls indicate that the new coalition Rivers of Justice of six left-liberal parties led by the main opposition party SDP (comprising also Centre, HSS, Reformist, GLas, SiIP) is most likely to end second in the elections. Yet, it may lure more voters, especially in view of the fact that the most trusted politician, President Milanovic, has expressed readiness to become premier after the coalition wins the elections. Milanovic was ready to join the SDP slate, but the Constitutional Court banned him of doing so or to participate in the election campaign while being head of state. Nevertheless, Milanovic is in constant breach of the Constitutional Court decision and warnings as he is actively participating in the election campaign with numerous attacks on the HDZ and pledges for a government of national salvation he would head. Overall, Milanovic's behaviour is not only wind in the back of the opposition, but also a risk - note that most constitutional experts, some of the parties that are part of the SDP-led coalition as well as majority of Croats, say he should have first stepped down as president. Milanovic refusing to do so may hurt his credibility, respectively, result in SDP-led coalition getting fewer seats in the new parliament. Also, the situation is quite complicated and controversial from constitutionality point of view - if Milanovic wants to become premier, he must first step down from the presidential post, as the Constitutional Court ruled, which means that he cannot award a government formation mandate to himself as if he steps down, the Parliament's Speaker is due to take over the presidential powers on temporary basis until presidential election is called and new president is elected, which will give some chances for HDZ to continue to govern the country, even in minority government.
HDZ's victory in the elections would imply continuation of the current drive of responsible fiscal policy, including reducing budget deficit and the general government debt further, supporting the vulnerable groups of the population, raising incomes, among others. These commitments, which are unlikely to change, would support the country's sovereign ratings and enable Croatia to borrow at favourable costs, but also secure even faster economic growth while keeping public finances on track. At the same time, the SDP, i.e. its Rivers of Justice coalition, if forming the future government, would relax the fiscal policy in order to provide across-the-board social assistance and raise incomes, which would result into renewed worsening of the fiscal metrics and may risk even ratings' downgrades.
CAMPAIGN DEVELOPMENTS
The pre-election campaign became quite 'dirty' after President Milanovic announced his plans to form a government of national salvation, thus continuously infringing upon the Constitution and the Constitutional Court decision and warnings, and practically abdicating from his presidential duties to be independent and president of all people. Milanovic's despise for the HDZ and its leader Plenkovic found expression mainly in constant insults via media, not constructive arguments. The head of state has been claiming that HDZ was disregarding all moral standards by criticising him of placing himself above the law by refusing to adhere to warnings from the Constitutional Court and the State Election Commission. Milanovic was rude and aggressive to HDZ and its members, lashed out at the Constitutional Court judges for banning him to run on SDP slate and participate in the election campaign saying they were judges of the HDZ. A light-motive of the SDP-led coalition and the other parties running in the election was putting off the differences in order to bring down the HDZ from power and eradicate its corrupt governance.
The HDZ answered back picturing Milanovic as Voldemort on social media and claiming that he was leading the SDP to destruction; it claimed that Milanovic and SDP have sunk to the bottom, and warned that they would bring chaos and instability in the political system. Plenkovic claimed Milanovic deserved to take no state post. During the pre-election period, someone shot the car of HDZ-promoted State Attorney-General Ivan Turudic, to whom appointment to the post Milanovic opposed strongly, and guards were assigned to him; yet, there was no indication who the criminal offender was and whether it was politically motivated. A focal point in HDZ pre-election campaign were its achievements in the past 7 and half years - remedying public finances, reducing public debt, accession to euro and Schengen areas, upgrades of Croatia's sovereign ratings to investment grade, Croatia enjoying favourable debt financing costs on international markets, strong wage and economic growth. The nearly EUR 8bn worth of support packages during the COVID and energy crises, including the latest package for pensioners and households to cope with still high energy prices, the new tax reform that is said to have reduced the tax burden on the economy and allowed for raising the incomes of the population, the recent wage reform ensuring equal pay for equal work across the public administration and in the civil services were also part of the HDZ campaign.
OPINION POLLS
The recent polls by constituencies carried out by 2x1, Promocija Plus and Ipsos agencies indicate that the HDZ and partners are to convincingly win the elections in the ten 'Croatian' constituencies (without those for the diaspora where 3 MPs are elected and that for the national minorities where 8 MPs are elected). However, HDZ would likely get two-to-three mandates less than in the 2020 general election (62 MPs), meaning that it will be very difficult for it to form a majority government even if the MPs for the national minorities and the diaspora back it - in this case it would have 70-71 MPs or 5-6 MPs short of getting a simple majority of 76 MPs in the 151-seat Sabor. Note that President Milanovic has assured he would give government formation mandate only to the party/coalition that proves to him it has the support of at least 76 MPs in the parliament. This means that the HDZ would need the support of the remaining parties and coalitions outside the SDP-led Rivers of Justice coalition. However, HDZ has quite small coalition potential as all other parties said their main objective is to bring down the corrupt HDZ that syphoned money and left people poor from power. Among the possible but unlikely partners are the Homeland Movement and the Most and the Croatian Sovereignists coalition - it is not clear whether the HDZ would be willing to cooperate with the Homeland Movement, while cooperation with Most is little likely given the fact that they ruled together for some time after the 2020 elections, but Most eventually left thus jeopardising the existence of the HDZ-led government. The statements of ethnic-minority SDSS party also give indications that the party's support for HDZ is uncertain.
Therefore, even if the SDP-led coalition finishes second, it has higher chances to form a government, especially if Milanovic gives up his plan to be the premier, the latter being highly unlikely. Note that some of the parties that were initially part of it but left because of Milanovic's entry into the campaign - Focus, Workers' Front, IDS, PGS, may eventually support the SDP-led coalition. Yet, it seems that only Focus and IDS would enter the parliament. Moreover, the SDP and Mozemo! were negotiating on a dotted pre-election coalition ahead of the elections - so, there may be potential agreement as well. Homeland Movement may be also inclined to support the SDP-led coalition although the contradicting views on some issues - revocation of the ratification of the Istanbul Convention and insisting on adding the right to abortion to the Constitution, among others, makes such cooperation little likely. If these assumptions are met, the Rivers of Justice coalition may reap a narrow majority of some 78-79 or even more MPs in the parliament.
POST-ELECTION SCENARIOS
The post-election scenarios are few, but the probability for their materialisation is quite difficult to predict as neither of the two political giants - HDZ or SDP, is to win majority of seats in the parliament. Therefore, the presented below post-election scenarios and their probability for materialisation represent a combination of the possibility for forming coalition depending on the election programmes of the parties/coalitions and the number of seats each possible governing coalition would possibly secure in the future parliament. We overall exclude the formation of a minority government of the HDZ as President Milanovic has ruled out such a possibility; yet, a SDP minority government cannot be ruled out as Milanovic may step back on his initial plans in order to enable the SDP to return to power. A grand coalition of the HDZ and the SDP given the antagonism between the two is completely ruled out. Given the low coalition potential of the likely election winner HDZ, and the contradicting views between the SDP-led coalition and some of its potential coalition partners like Mozemo! and the Homeland Movement, and if President Milanovic keeps his promise to give government formation mandate to the one having 76 MPs in parliament, the probability of the scenario of repeated elections is relatively high.
HDZ and partners (40% probability)
We assign a higher probability for the HDZ and partners to form the new government along with the national minorities and the MPs elected in the diaspora, who usually support the rightist parties, as the HDZ is likely to win the elections and we expect that the election turnout will be higher given that the elections are to be held on Wednesday vs. the usual Sunday. If the election turnout is higher, there is a chance that the HDZ would win more mandates than currently predicted by the pollsters, we think. The probability for the formation of a HDZ government is not higher as the HDZ has small coalition potential with possible but highly unlikely partners being only Most-Suverenists coalition and the Homeland Movement. Therefore, the party is unlikely to be able to form majority in the parliament, unless it performs much better at the elections and win more mandates than in 2020 (62 MPs).
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HDZ's victory in the elections would imply a continuation of the current drive of responsible fiscal policy, including reducing further the budget deficit and the general government debt, supporting the vulnerable groups of the population, raising incomes, among others. The HDZ's vision for the election is successful, vital, just, sustainable and sovereign Croatia. The party pledges an average wage of EUR 1,600 (up by 30%) and pension of at least EUR 750 (up by 30%) by the end of the next election term in 2028, creating preconditions for opening 125,000 new jobs and reaching employment rate of 75% - to this end, to invest EUR 700mn through active employment policy measures, to control the system of work permits for foreigners who must be in the country legally, according to what the needs are. The HDZ goal is also to suppress inflation below 2%, reduce the share of public debt in GDP below 60%, and enable citizens to further invest in government securities; the HDZ wants Croatia's living standard to reach at least 80% of EU average in terms of GDP per capita within four years from the current 75%, and plans to relieve the economy of additional EUR 135mn in non-tax and parafiscal levies. The party pledged to invest EUR 2bn in kindergartens and schools, double the one-off financial support for a newborn child, and for each child born, mothers would receive one year of pensionable service to lower the age limit and calculate the pension. The HDZ considers a fair Croatia meaning strong institutions and the rule of law, freedom of the media, the continuation of the fight against corruption and respect for the Constitution. According to the programme, special attention will be paid to the prevention of all forms of addiction, including addiction to drugs, alcohol and nicotine, and to the development of prevention of behavioural addictions such as gambling and betting, including the regulation of advertising in public and media space. In order to secure sustainable Croatia, the HDZ plans continuation of Croatia's green transition policy via investments in water management and decarbonisation, installation of an additional 2,500MW of RES capacities in order to produce an additional 6TWh of electricity per year. Some 50,000 hectares of neglected agricultural land will be put into use, for which more than EUR 60mn will be invested. In order to secure a sovereign Croatia, the party pledges protection from threats, an even stronger police and army, and guarding the border. These commitments represent a policy continuity that would secure better economic, social and demographic development in the next four years, we think.
We are confident that a third government of HDZ and partners would be stable if formed as the HDZ and its chairperson Plenkovic are quite experienced in governing the country and satisfying the demands of their allies. It would also be able to meet the objectives set ahead, all the more that the HDZ election programme, which we believe will become the basis of the government's Programme Manifesto, contains concrete measures and often estimated budgetary costs to implement them. At the same time, it will continue to ruin the trust of people in institutions as we doubt that the HDZ and Plenkovic would take note of the opposition's criticism about their corrupt practices and would at least attempt to change.
SDP-led six-party Rivers of Justice coalition (35% probability)
The key policies of SDP's election programme are accessible and affordable healthcare for everyone, resolving the housing issues in Croatia - special fund for the construction and renovation of apartments, with which it plans to build 15,000 apartments in six years, free kindergartens for everyone and higher allowance for every child, fighting corruption, securing higher disposable incomes of people, average pension of at least EUR 750 or equal to at least 50% of the average wage with the aim of approaching 60% in 2030, putting end to the emigration of the young people. Furthermore, the party suggests more homes for the elderly. The SDP pledges to protect people's wallets from inflation, create well-paid jobs, enhance the sustainability of tourism and services, improve the life of farmers, the development of rural areas and to support local food production, to support economic growth via new technologies and innovation, ensure interest-free laws instead of high fees, secure safer and more stable position of workers (entrepreneurs to be encouraged to share their earnings with employees), introduce taxes on extra profits (especially those exploiting the high inflation). Yet, the pledges are rather general and populist, no concrete measures and their costs for their attainment are presented, which makes the programme rather a wish list and its implementation rather implausible and uncertain. Therefore, we think that if the SDP, i.e. its Rivers of Justice coalition, formed the future government, it would uncontrollably relax fiscal policy in order to provide across-the-board social assistance and raise incomes, which would result into renewed worsening of the fiscal metrics, hurt the economic development and may risk even ratings' downgrades.
And yet, such a coalition government is unlikely to be stable, in our view. First, the SDP-led coalition comprises 6 parties and it is unlikely that the SDP would allow the programmes of the other five to be implemented, which will give rise to tensions. Second, the Rivers of Justice are unlikely to win sufficient mandates to for a majority government, meaning that they will also have to cooperate with most of the others - the Homeland Movement, Most's alliance with Hrvatski Suverenisti and Mozemo!, which appear as kingmakers in the elections. Such cooperation will be rather unstable as they have differentiating views on certain issues like the Istanbul Convention, the right of abortion and its being embedded in the Constitution, the LGBTI rights, etc.
SDP minority government (15%)
Although President Milanovic has said he would not give a mandate for the formation of a minority cabinet, this option cannot be ruled out either given his behaviour of continuously breaking the rules, infringing upon the Constitution and the Constitutional Court decision and warnings not to participate in the election campaign. He may step back on his initial plan to award a government formation mandate only to the party/coalition proving that it has at least simple majority of 76 MPs in the parliament and give such a mandate to the SDP in order to enable its return to power. Such scenario seems little likely but may be the only one to avoid repeated elections given opinion polls and the complicated political situation. Mozemo! has already expressed readiness to support such a government if no right-wing parties participate in it. Still, such a cabinet will be highly unstable and depending on the whim of other parties outside the SDP-led Rivers of Justice coalition, meaning that it may not last the entire election term, we think.
Repeated elections (10% probability)
Given the complicated political situation and if President Milanovic keeps his promise to give a government formation mandate only to the party/coalition having 76 MPs majority (and not decide instead to give a mandate to the SDP to form a minority government, which will not be surprising in view of his behaviour of a person above the law and the Constitution), unless the two major blocks find additional allies, the probability for repeated elections is relatively high. Still, repeated elections during the summer are unlikely to produce much different results although the likely lower turnout may hurt both the HDZ and the SDP, meaning that the government formation talks might become even more complicated than they are likely to be now.
ELECTION FRAMEWORK
The Croatian parliament (Sabor) is unicameral and has between 100 and 160 members elected through a direct vote for four years. In the Apr 17 elections, 151 representatives will be elected, 140 from 10 electoral units (each giving 14 seats as they have a broadly equal number of voters), eight will represent national minorities, whereas three for Serbs, and three will be elected by expatriate voters. Parties must get 5% of the vote in an electoral unit (constituency) in order to be eligible for parliamentary representation, meaning that a party may be represented in parliament even if it scores well below 5% nationwide but has strong regional support. Candidates are selected using the most open list system for candidates getting at least 10% of the party's votes, while the others are chosen according to their ranking on the list.
In the upcoming elections, about a fifth of voters will change the constituency in which they voted before - last fall the parliament adopted a new law on constituencies, which does not change the existing electoral system, but to a certain extent changes the maps of constituencies to respect the Constitutional Court decision and ensure that each vote weights equally. The biggest change is in Zagreb, which, instead of four, is divided into three constituencies and now falls under the first, second and sixth constituencies.
About 3.733mn eligible voters will be able to cast ballots on Apr 17. Elections for the parliament abroad will be held at Croatian diplomatic and consular missions on Apr 16 and Apr 17. Electioneering ends at midnight on Apr 15, when the pre-election silence enters into force ahead of election and continues until polling stations close at 19:00 CET on the election day on Wednesday, Apr 17. The turnout in the July 2020 general election was 46.44%, down from 54.62% in the September 2016 early general election - we expect it to be higher this year as the elections are to be held in the middle of the working week, not on Sunday as usual. The State Election Commission DIP should publish official results within two weeks of the election day, though preliminary incomplete results will become gradually available after polling stations close during the election night.
CONSTITUTIONAL STEPS
The government is appointed by the president. President Zoran Milanovic (former PM and SDP chairperson) has stated he would entrust mandate for the formation of a government only to the party/coalition that proves it has the support of 76 MPs in the 151-seat Sabor. Within 15 days of its appointment, the government must submit its programme to parliament and seek a vote of confidence.