HGK: The abolition of subsidies will reduce pressure on the state budget

In the latest package of measures presented today by Prime Minister Andrej Plenković, the Government is gradually abolishing existing support mechanisms, particularly those related to the subsidization of energy and the alleviation of business costs. The Croatian Chamber of Economy supports the gradual abolition of subsidies and a return to market conditions. As stated by HGK, they support ‘the Government’s efforts to care for and protect the most vulnerable segments of society’.

– We expect that the gradual abolition of subsidies will reduce fiscal pressure on the state budget while avoiding a sudden impact on citizens and the economy. It is well known that subsidies distort market prices and encourage excessive energy consumption, so their easing opens the way for long-term solutions, such as investments in energy efficiency and renewable energy sources.

It is essential to work on long-term solutions – how to ensure the resilience and competitiveness of the manufacturing industry considering energy costs, labor, and necessary investments in the transition. As the Government’s support measures are gradually abolished, it is crucial to ensure alternative mechanisms that will not be focused solely on short-term relief but on investments in resilience, productivity, and sustainability of the industry.

The proposals from HGK represent a framework for such measures and should be integrated into future policies so that the Croatian manufacturing industry can maintain its competitiveness in the domestic and international markets in the long term.

Namely, the Croatian Chamber of Economy proposed, among other things, a series of measures this summer aimed at mitigating the impact of high energy prices to increase the competitiveness of the manufacturing industry. We suggested support for the ETS sector (Emissions Trading System) specifically for energy-intensive producers, investment in the use of renewable energy sources, the introduction of systematic monitoring and management of energy consumption, and the development of a market for optimizing electricity production and consumption.

This is a contribution to the development of policies and measures that will be financed from national sources with the aim of creating a stimulating business environment and greater competitiveness – explains HGK.

The HGK believes that the gradual abolition of subsidies, along with the continuation of targeted measures for poorer households and the introduction of measures to assist industry and entrepreneurship, will be ‘economically justified and socially fairer’.