II - Changes to the Budgetary Process

udgetary process
Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in Croatia.

In Croatia, the core of the budgetary process is regulated by the Constitution that points out to the rules on annual state budget. Accordingly, at the end of every year, the Croatian Government proposes the annual budget (article 112 of the Constitution) to the Croatian Parliament which adopts the annual budget (article 80 of the Constitution). All the details are regulated by a separate Law on Budget, an ordinary law, that is adopted every year and that regulates the entire system of budgetary income and distribution.

Besides the adoption of the Law on Budget, the budgetary process is a complex process that was materially affected by the Croatian accession into the European Union, and consequently in the European Semester. Now, the process looks as following: 

1) by mid-March, the Ministry of finance together with the Ministry of regional development and EU funds sends to all other ministries and state bodies the instructions for development of three year strategic plans taking into consideration National Growth Survey and Alert Mechanism Report as adopted by the European Commission and the Employment Guidelines as adopted by the European Parliament

2) by mid-April, all ministries and other state bodies send to the Ministry of finance their three year strategic plans

3) by the end of April, the Ministry of finance together with the Ministry of regional development and EU funds sends proposes to the Croatian Government the strategy for the period of three years

4) by mid-April (before EU, the deadline was mid-May), the Croatian Government shall adopt the strategy for the period of three years in order to be sent to the European Commission by the end of April

5) In May, the European Commission assesses Croatian national plan and makes recommendations

6) by the end of May, the Ministry of finance proposes to the Government the priorities of economic and fiscal policies taking into consideration recommendations made by the European Commission

7) by mid-June, the Government shall adopt the priorities of economic and fiscal policies that shall incorporate the recommendation of the European Commission from the month of May and of the European Council from the month of June

8) by the end of June, the Ministry of finance sends to all ministries and other state bodies the instructions for drafting of the proposal of the State budget 

9) in July, the European Council adopts final recommendations for each Member State, now including Croatia, that shall be taken into consideration while drafting the proposal of the State budget for the next year.

General change    
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?

In 2010 Croatia adopted its Croatian Law on Fiscal Responsibility adopted in 2010 which entered into force on 1 January 2011[1] whose main goal is fiscal consolidation of Croatia. It requires a decrease of state spending of 1% of the GDR per year until the moment when primary fiscal amount does not become positive. This, rather short piece of legislation (only 15 articles) was proposed by the Croatian Government and adopted by the Croatian Parliament as an ordinary law.

The main goal of this law is strengthening and maintenance of fiscal responsibility, transparency and mid- and long-term objectives of sustainable public finances.[2]

The adoption of the Law on Fiscal Responsibility was not, at least in 2010 when the law was adopted, identified by the European Union as one of the necessary prerequisite for further progress of Croatia in its Euro-integration process. Passing of this law represents rather the result and means of the aim of relevant stakeholders in Croatia to establish clear and efficient rules of fiscal responsibility in the country.

The Ministry in charge of finance is in charge of monitoring over application of this law in practice. No particular role for the judiciary was envisaged by this law.

Institutional change   
What institutional changes are brought about by the changes in the budgetary process, e.g. relating to competences of parliament, government, the judiciary and independent advisory bodies?

On the ground of the Law on Fiscal Responsibility, the Croatian Government established the Committee for Fiscal Policy whose main task is assessment of the application of fiscal rules.

Change of time-line      
How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?

It has not changed.

What other information is relevant with regard to Croatia and changes to the budgetary process?

Not applicable.

[1] Official Gazette of Croatia No 139/2010

[2] Article 2(1) of the Law on Fiscal Responsibility