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Financial Cold Shower Awaits Croatia, Poland Announces Military Spending Splurge

Plus, Russia mulls amnesty for economic criminals and Armenia's president explains why he skipped a Eurasian security summit.

by Ioana Caloianu, Ky Krauthamer, Vladimir Matan, and Molly Jane Zuckerman 4 June 2013

1. EU rookie Croatia could face economic scrutiny


Croatia's first test after joining the European Union on 1 July could be a fiscal grilling.


Reuters writes that a recent European Commission paper flagged the country's growing budget deficit and public debt, as well as a business environment deemed unappealing for foreign investors. “Croatia faces important challenges in terms of reviving growth, strengthening public finances, and promoting competitiveness," the commission said.


Zoran Milanović 100Prime Minister Zoran Milanovic

The EU requires member countries to keep public debt below 60 percent of gross domestic product and hold budget deficits at no more than 3 percent of GDP. The figures for Croatia are expected to reach 62.5 percent and 5.6 percent, respectively, in 2014.


The paper called for improved tax collection and anti-fraud measures, as well as privatizing state-owned companies, echoing recommendations in a March 2011 report on Croatia's path toward accession.


Croatia is not the only new or recent EU member receiving advice on how to boost its ailing economy. The Wall Street Journal writes that the International Monetary Fund has recommended short-term economic stimulus measures for the shrinking Czech and Hungarian economies, as well as Poland, where the relatively strong results of recent years are leveling off. 


Both Hungary and Slovenia recently announced new austerity measures meant to avoid the threat of EU sanctions, successfully in the case of Budapest: the European Commission announced last week that it will stop Hungary's financial monitoring in light of the country's progress.


2. Potential economic amnesty in Russia for thousands


A proposal to grant amnesty to thousands of Russians jailed for economic crimes may soon land on President Vladimir Putin's desk.


Putin suggested a redraft of a State Duma bill after declaring the first version “too rough” and citing the need to clarify its scope, government-owned Russia Beyond the Headlines reports.


A new version could be ready within three or four weeks, a co-author of the original proposal, Andrei Nazarov said, according to Forbes. The new draft would reduce the number of potential amnesty recipients to about 6,000.


The other co-creator of the original proposal, entrepreneurs' ombudsman Boris Titov, had said it would have applied to about 100,000 people convicted for some 50 economic crimes during what he called the “harsh period that followed perestroika,” RBTH writes.


It was time to rectify mistakes made by entrepreneurs and the authorities alike that fostered an environment where it was difficult for businesses to operate legally and honestly, he told The Moscow News.


Putin has not commented on whether the amnesty would apply to imprisoned oligarch Mikhail Khodorkovsky, the ex-chief executive of Yukos Oil, and his business partner, Platon Lebedev, Forbes writes.


A poll by the VTSIOM agency found 33 percent in favor of an economic amnesty, 36 percent opposed, and 31 percent undecided, Itar-Tass reports.


3. Poland announces $40 billion military spending drive


Poland is set on modernizing its military and boosting defense spending, Prime Minister Donald Tusk announced 3 June. Going against the stagnant trend for defense spending in the EU, Warsaw plans to invest about $40 billion in its military in the next 10 years, RIA Novosti writes.


Tusk said the priorities of the ambitious program are guided missiles for its U.S.-made fighter jets, special-purpose divisions, and drone aircraft. Polish authorities said last month they will look favorably on bids from local arms makers, which could run counter to EU guidelines against such favoritism, according to the Financial Times.

Polish soldiers training with the British army ahead of deployment to Afghanistan. Photo by Cpl. James Williams RLC/Flickr


Poland's economy weathered the recession and stagnation of the past five years better than most of its EU peers, although recently signs of a slowdown have appeared. The economy has grown by nearly 20 percent since 2009, the FT writes. This year's defense budget, about $9.5 billion, reflects a 7 percent increase over last year. Warsaw spends an average 2 percent of domestic product on defense, more than most other NATO members.


Tusk also stressed continued defense collaboration with Czech, Hungarian, and Slovak partners, RIA Novosti reports.


4. Wife of oligarch Ablyazov deported to Kazakhstan


Fugitive Kazakhstani businessman Mukhtar Ablyazov, already wanted by British authorities in connection with an alleged multibillion-dollar fraud, is under renewed pressure following Italy's deportation of his wife.


Alma Shalabaeva and her daughter are now in Almaty after being flown out of Italy last week. She has pledged not to leave the city, a spokesman for the Prosecutor General's office said, according to

Mukhtar Ablyazov

Ablyazov won political asylum in Britain two years ago, Reuters notes, after falling afoul of Kazakhstani authorities. Shalabaeva is now accused of involvement in a scheme to issue false passports to her and other relatives of the businessman, whose whereabouts are unknown. The prosecutor's spokesman said several immigration police officers in Kazakhstan had been charged for issuing the passports.


Ablyazov is a former cabinet minister and once headed the BTA bank in Kazakhstan. He fled the country in 2009 when the bank was nationalized and declared insolvent. writes that fraud allegations leveled at him by the bank led a court in London to order him jailed in 2012. A judge said he engaged in “deliberate and brazen” deception by concealing assets.


Ablyazov's legal difficulties in Kazakhstan date back to 2002, when he was convicted of abuse of power when he tried to form a political movement opposed to the country's long-serving president, Nursultan Nazarbaev.


He denies the fraud allegations and accuses Kazakhstani authorities of waging a political campaign against him. Astana has tried to link him to a number of controversial incidents, including an oil workers' strike in the western city of Zhanaozen in 2011 and terrorist attacks, writes.


5. Yerevan downplays Sargsyan's absence from regional security gathering


Armenia remains on “excellent” terms with Russia, presidential security adviser Artur Baghdasarian said, smoothing over concerns about President Serzh Sargsyan’s absence from last week's informal summit of the Collective Security Treaty Organization, led by Russia.


Sargsyan remained at home to celebrate the Armenian independence day holiday rather than travel to the Kyrgyzstani capital, Bishkek, for the meeting, Baghdasarian told a press conference, according to Radio Free Europe's Armenian service.


Noting that Sargsyan also skipped a meeting of the Russia-led Eurasian Economic Community in Kazakhstan, “some observers” in Armenia surmised he was unhappy over a 50 percent hike in the price of Russian natural gas, RFE writes.


Baghdasarian, who attended the CSTO meeting along with the Armenia’s foreign and defense ministers, rejected that notion, saying Armenia will still pay less than other countries for gas imports from Russia's Gazprom. writes that the presidential absence “rather looked like a demarche against Russia.” The U.S.-based site mentions as other possible reasons for his displeasure Russia's sale of military equipment to Armenia's enemy Azerbaijan and Moscow's obstruction of Yerevan's overtures to the EU.


The summit's focus suggests further reason for Sargsyan's absence, ArmeniaNow writes. The statesmen discussed a greater role for ex-Soviet militaries in Afghanistan once most NATO troops leave the country in 2014. According to political analyst Igor Muradyan, NATO sees Russia and the other CSTO members taking over much of the responsibility for security in Afghanistan. Armenian peacekeepers are serving in a German contingent now, but Yerevan is unlikely to join a CSTO-led operation in the highly unstable country, according to ArmeniaNow.

Ioana Caloianu is a TOL editorial assistant. Ky Krauthamer is a senior editor at TOL. Vladimir Matan and Molly Jane Zuckerman are TOL editorial interns.
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