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Cablegate: Union Disunity Causes Protestsq Failure

VZCZCXRO4089
RR RUEHIK
DE RUEHVB #0607 2800911
ZNR UUUUU ZZH
R 070911Z OCT 09
FM AMEMBASSY ZAGREB
TO RUEHC/SECSTATE WASHDC 9573
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS ZAGREB 000607

TREASURY FOR INTERNATIONAL AFFAIRS LARRY NORTON

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ELAB EIND EINV PREL HR
SUBJECT: Union Disunity Causes ProtestsQ Failure

1. SUMMARY. A series of September protests organized by the small
Croatian Trade Union Association failed to gather more than a few
hundred angry senior citizens, while Croatia's larger unions elected
not to participate. Relations between the government and unions
have been strained, particularly after the government raised the VAT
rate and introduced a new Qcrisis income taxQ to solidify the state
budget. Croatian labor unions all share the goal of eliminating
these recent tax increases. However, their effectiveness is
hindered by longstanding suspicion of one another and a lack of
cohesion on how to best deal with the government. The Croatian
Employers Association also wants lower taxes, as well as significant
labor reforms to improve competitiveness for foreign investment. If
unions hope to bring the coordinated pressure necessary to push the
government toward real changes in labor policy, they will have to
learn to put aside their differences. END SUMMARY.

2. (U) The six largest Croatian trade unions represent approximately
500,000 workers in the country. Their main objective is to get the
GoC to eliminate the recent 'crisis-tax' and to lower the 23%
value-added tax (PDV) on goods and services. However, infighting
and lack of agreement on how to accomplish their goals continuously
undermine their discussions with the GoC.

3. (U) Currently, there is an open feud between leaders of the Union
of Independent Trade Unions of Croatia (SSSH) and the Croatian Trade
Union Association (HUS) about whether to engage in direct talks with
the government over the tax issue or to pursue strikes and protests.
(Note: SSSH is the largest labor union with 225,000 members and HUS
is the smallest with 45,000 members. SSSH leadership currently
supports open and direct negotiations with the PM KosorQs government
on addressing their issues.)

4. (SBU) HUS recently organized protests in seven cities around
Croatia without the support of the other major unions. The protests
were widely viewed as unsuccessful. Participation ranged from a few
hundred in the smaller cities to approx 1,200 in Zagreb. About 90%
of the protestors were older than 45 with heavy turnout from
pensioners and the unemployed. HUS president Ozren Matijasevic was
disappointed with the protest turnout and told Econoff that HUS will
plan another series of protests later in the fall. He views current
talks with the GoC as "a waste of time" and said that HUS is a
public watchdog informing the Croatian people about the GoC's
mismanagement of the economy. Matijasevic criticized his union
counterparts for not supporting HUS's protests and claimed that SSSH
has "an interest in keeping the taxes because of its public sector
members."

5. (SBU) In a recent meeting with econoffs, SSSH President Ana
Knezevic expressed dismay about the protests. She believes
Matijasevic saw these protests mainly as an opportunity to increase
his media profile, but that their weak turnout undermined the other
unions' negotiating position with the GoC, not just on the tax issue
but on other labor law reforms they are seeking.

6. (SBU) The Croatian Employers Association (HUP) often finds itself
on the other side of the table from labor unions in these talks with
the government. However, HUP Legal Advisor Natasha Novakovic told
us that labor law reform and lower taxes are among their key
priorities as well. HUP represents 6,000 businesses in Croatia and
lobbies the GoC on behalf of employers advocating lower taxes and
subsidies.

7. (SBU) Novakovic was pessimistic about the GoC's willingness to
implement meaningful reform. Novakovic believes the new draft labor
law is only cosmetic legislation to fulfill Croatia's labor
requirements for EU membership. She added that the only way
significant labor reform would occur in Croatia would be through
compromise between the two major political parties on a strategy to
lower taxes and improve the business climate. She said that such a
strategy would include enough unpopular measures to make a political
compromise of this sort unlikely.

8. (SBU) COMMENT. Rising unemployment poses serious political risks
for PM Kosor and her HDZ-led government. Despite talk of potential
labor unrest all summer, however, the labor unions' first foray into
active protest this fall was a failure, and PM Kosor's government is
unlikely to feel coordinated pressure from labor groups anytime
soon. The opposition has not presented any serious policy
alternatives either, appearing happy to rely on a general sense of
dissatisfaction with the ruling HDZ party, rather than any pointed
or focused critique of the government. END COMMENT.

FOLEY

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