Thank You Lovrinović for Prompting 12 Economists to React

When they were already gathered by the desire to defend the second pension pillar, Martina Dalić, Sandra Švaljek, Maruška Vizek, Velimir Šonje, and others should remain a group. And offer an economic program. It is time for them…

If it didn’t exist, it should be invented! This refers to Prof. Dr. Ivan Lovrinović, one of the parliamentary representatives of Most. By advocating for the freezing of contributions to the second pension pillar and redirecting them to the state budget, he managed to compel a portion of economists and lawyers to collective action. Twelve of them signed a letter opposing Lovrinović’s idea. An unprecedented miracle! It cannot be said that Croatian economists are silent and do not express their views. But most shy away from direct polemics. Everything is somewhat gloved. One can sense whose views someone is polemicizing about, but the dissenting opinion is not mentioned by name. Everything is somewhat wrapped. Salon-like. You know, Central European restraint, or whatever you want to call it. Besides, we are a small community, so no one wants to ‘offend’ anyone (to their face).

Respectable Signatories

Thanks to Lovrinović, who stirred the stagnant waters with his proposals for a radical change in monetary policy, and now about the abolition of the second pillar, the gloves have, at least temporarily, come off. It is worth noting who the signatories of the letter against the abolition of the second pension pillar are: Martina Dalić, Sandra Švaljek, Maja Vehovec, Željko Potočnjak, Predrag Bejaković, Velimir Šonje, Andrea Mervar, Nevenka Čučković, Maruška Vizek, Vuk Vuković, Marina Kesner-Škreb, and Ivana Vukorepa. A truly respectable group of economists and lawyers connected to the economy. I would not go into detail about the subject of the dispute, the fate of the second pension pillar, on this occasion. It is difficult to discuss without a comprehensive economic program of the future government. On one hand, the second pillar functions relatively well, so why fix something that is not broken. On the other hand, about 70% of our savings in the second pillar are invested in government bonds, which have junk status. On the third hand, there are already indications from the appointee Tihomir Orešković that he would use pension funds in his ideas about reviving investments.

Pension Funds – Instant Water Heater?

And also as an instant water heater for the sale of part of the state property. Simplified, the state owes the funds 52 billion kuna (in bonds). With the pension funds of the second pillar, a compensation is made – give them state property worth, say, 15 billion kuna and thus reduce the debt from 52 billion kuna to 37 billion. Then deficits and public debts suddenly become smaller. In the end, the funds find buyers for the property they received in exchange. Let’s say they actually get 15 billion kuna. Then they can invest it in state ‘junk’ bonds. Of course, the question arises why the state wouldn’t sell that same state property without the mediation of pension funds. One reason could be that the public would be less upset if the operation is somewhat obscured through the pension funds…

But let’s return to the unusual occurrence of the letter from twelve economists and lawyers. If this action were approached critically, the question would be: ‘It’s nice that you are united about something that shouldn’t be changed. But why haven’t you made any proposal about what should be done?’ However, the approach should be encouraging. If Lovrinović has already challenged you to gather in the ‘group of 12’, take advantage of it and propose your program with your authorities and synergy!

A joint appearance has been lacking for years among economists-scientists. The Croatian Economic Society has not moved beyond the annual gathering in Opatija. The Association of Modern Economics, which was once founded by some of the signatories of the letter, has long since ceased to exist. There is an active Facebook group Croatian economists (and friends), but so far it has not gone beyond occasionally inspiring virtual forums.

One does not have to agree with all the views of all members of that group, but it would indeed be useful for them to come out with some comprehensive, active proposal. Or at least equally uncompromisingly, let’s say, once a month, evaluate the announcements and actions of the new government. For example, I would be interested in the group’s stance on the idea of appointee Orešković to raise GDP by ‘attracting foreign investments’ and state projects for railways, LNG, or irrigation.

Otherwise, letters like this, in which like-minded individuals sign, are very rare in our country. One can only recall the letter from a group of generals which then-president Stipe Mesić retired them for. Interestingly, there were also twelve signatories then. But here the similarities end because no one will forcibly retire the economists and lawyers from the ‘group of 12’. And so – let them warm their seats and offer a comprehensive solution for where the Croatian economy and society should go. Together they are stronger.