From July 1, new rules between the state and public enterprises

The government has submitted a proposal for a law on the transparency of public funds flows to the Parliament from today’s session, which incorporates the European Commission’s Directive on the transparency of financial relations between member states and public enterprises into Croatian legislation.

This directive regulates the transparency of financial relations between public authorities and enterprises in majority ownership of public authorities, or entrepreneurs with special powers who, for example, provide services of general economic interest such as transportation.

These entrepreneurs are required to maintain separate accounts and related data on the receipt and use of public funds for their activities. Finance Minister Slavko Linić emphasizes that the law, which is expected to come into force on July 1, will completely prevent the misallocation of budget funds intended for public enterprises, for example, for salaries as has been the case in companies such as HŽ and Croatia Airlines.

The European Commission is particularly sensitive to this, as the reason is to protect market competition and curb unfair competition that may arise from public (co)financing of companies operating in the market, says Linić.

From July 1, it will not be possible to repay aircraft or cover losses from passenger transport during the off-season, as these are market activities, and it will also not be possible to use funds intended for maintaining railway infrastructure for salaries, emphasizes the finance minister. Those engaged in transportation will have to earn from it. Without that, we will close both passenger and freight transport, said Linić.

Prime Minister Zoran Milanović added that due to the previous government’s actions, a severance payment of 4 million kuna gross was paid to the former CEO of Croatia Airlines, despite poor results. He states that the government is fighting for common sense and survival in that company, and beyond. Speaking about pilots’ salaries, he mentioned that, for example, the pilots of Canadairs have low salaries compared to the responsibilities and dangers they are exposed to.

Furthermore, the application of the law on the transparency of public funds flows is not foreseen for the Croatian National Bank, public credit institutions when it comes to the deposit of public funds under usual market conditions, public entrepreneurs/entrepreneurs with special powers whose total annual net turnover is less than 40 million euros in kuna equivalent, or public credit institutions whose balance sheet amount is less than 800 million euros in kuna equivalent (over a period of two business years). The reason is to avoid administratively burdening entrepreneurs who do not pose a threat to market competition based on their turnover.