Contact UsOur Mailing List       About UsOur MissionThe Senior LeadershipLeadership Board and Senior AdvisorsLeadership Team and Research FellowsEndorsementsMedia Inquiries       Media - NewsroomAdriatic Institute Disappointed by Pending German Approval for EU to Admit Croatia Global Financial Integrity and Adriatic Institute Announce Strategic Partnership to Launch New Study on the Balkans’ Illicit Adriatic Institute Raises Concerns Regarding Upcoming Freedom Fest Conference, F. A. Hayek Institute Ties to Anti-Semitic Groups       Join Us/Contribute       Blog Adriatic LibertasTeach an Old Dog New Tricks?Sound reasons not to invest in Croatia yet        EventsRule of Law Events       Prisega       Tax Freedom Day       AI In The NewsInternationalRegionalCroatia       Croatia in the News       Video Highlights       IssuesThe State of the Economy Rule of Law and Judicial ReformProtection of Property RightsCombating CorruptionTax ReformLabor Law ReformPrivatizationGovernment ReformFree EnterpriseOpen Letter to German Chancellor Angela Merkel on Croatia       Int'l Leaders SummitILS 2011ILS 2009ILS 2008ILS 2007ILS 2006ILS 2005  2005 News Articles  Strategic Economic PoliciesILS 2004  Seven Strategic Recommendations  2004 News Articles  2004 Speakers and Topics  ILS 2004 Presentations       Links       Home       Past Events


A new study shows that economic freedom is still repressed in southeast Europe, and corruption is the biggest reason why. The article "Why We Aren't Free Yet" was published in Balkan Insight - an online publication of Balkan Investigative Reporting Network.



Angela Merkel, Chancellor, Federal Republic of Germany

Photo: Laurence Chaperon

A brief summary of the Open Letter in the
German and French languages.:

Offener Brief an Bundeskanzlerin Angela Merkel bezüglich Kroatiens

Lettre ouverte à la chancelière Angela Merkel à  propos de la Croatie

Open Letter in the Croatian language:




April 10, 2013

H.E. Angela Merkel
The Federal Chancellor of Germany
Willy-Brandt-Straße 1
10557 Berlin


12 Concerns the EU Should Consider, Including Corruption, Organized Crime, Persecution of Media, Fraudulent Elections, and Depressed Economy

Will German Taxpayers Have to Bail out Croatia?

Dear Madame Chancellor:

We strongly recommend that Germany reject the entrance of Croatia to the EU. However, if Germany determines it is willing to take on the financial and political risks of admitting Croatia into the EU, then we urge you to require conditions. Absent these conditions, it would be a mistake to admit Croatia into the EU and provide over €11 billion (2014-2020) in EU and German taxpayer funds to the country.  The recommended conditions are as follows:

1. Croatia agrees to accept foreign visiting judges and prosecutors from strong rule of law nations to be empowered with official duties. There are precedents for this in the Balkan region and in Commonwealth nations.

2. With the above assistance, the government of Croatia recovers illicit financial outflows of over €11.4 billion in crime, corruption and tax evasion (during 2001-2010) and confiscates the wealth illicitly amassed by Croatia’s politicians, government officials, and their private partners in crime and pays it back into Croatia’s treasury.

With a politically influenced judiciary, Croatia cannot effectively deal with rampant corruption. Foreign judges and prosecutors will be able to address the illicit outflows and illicit enrichment, and assist in establishing an independent judiciary with a proper foundation of the rule of law. Croatia’s corrupt politicians and their private partners in crime should be prosecuted; their assets in Europe and beyond should be frozen; and they should be barred from all EU offices and European parliamentary seats.


EU is closing its eyes to organized crime and massive corruption in Croatia. By prematurely accepting Croatia as its 28th member, the EU would not only fail Croatia’s citizens, but also expose EU taxpayers to costly bailouts. In the meantime, an unreformed Croatian government is unlikely to use EU structural funds as intended.

Dr. Daniel Kaufmann’s
study, completed at the Washington, DC-based Brookings Institution, with excerpts published in The Wall Street Journal, found that Greece’s crisis was due to rampant corruption and opaque public finances. Croatia
is on the path to becoming the next Greece.

For the past two decades, Croatia’s two major political groupings have rotated power while politicians enriched themselves. While engaging in rampant corruption, politicians have blocked judicial reforms, interfered with the judiciary, failed to strengthen the rule of law, encouraged a dysfunctional economy, held fraudulent elections, and brought the government debt down to junk status. Under these circumstances, investors with honest intentions avoid the country.

Investors have no legal certainty and lack the fundamental protection of property rights. According to the 2013 Index of Economic Freedom for Croatia, published by the Heritage Foundation and The Wall Street Journal, “Judicial corruption continues to undermine the rule of law. The court system is cumbersome and inefficient, and backlogs cause business disputes to drag on for years.”

Twelve Reasons for Concern

1.  $15.2 Billion in Illicit Financial Outflows (2001-2010) Via Crime, Corruption, Tax Evasion and Illicit  Enrichment Since 1991

Based on the research by Washington, DC-based Global Financial Integrity, Croatia experienced an illicit outflow of $15.2 billion (€11.4b) during 2001-2010 via crime, corruption and tax evasion. Croatia’s government has not yet answered the questions of the Open Letter of February 21, 2013 co-signed by members of the European Parliament Monica Macovei—Romania’s former justice minister—and Roger Helmer (UK) and Adriatic Institute’s leadership.  

Moises Naim, a scholar at the Washington, DC-based Carnegie Endowment for International peace and the author of “Mafia States,” explains: “In mafia states, government officials enrich themselves and their families and friends while exploiting the money, muscle, political influence, and global connections of criminal syndicates to cement and expand their own power.” Croatia fits the description.   

2.  Corruption and Money Laundering Related to Hypo Alpe Adria Group (HAAG)

While German taxpayers were bailing out Bayerische LB with €3.75 billion connected to the “losses” of the Hypo Bank in the Balkans, the accounts of corrupt Croatian politicians and criminals remained safe, protected by Liechtenstein’s banking secrecy and its new owner Prince Michael von Liechtenstein. Prior to Bayerische Landesbank’s purchase of the HAAG shell in 2007, Hypo Consultants Group, a lucrative real estate arm of the HAAG owning a portfolio of real estate in Croatia and Serbia, allegedly estimated at €1.6 billion, was divested. The HAAG branch in Liechtenstein was excluded from the purchase. Germany’s Honorary Consul to Croatia, RobertJezic, who allegedly received HAAG’s loans, was also a lobbyist for HAAG in Croatia.

Over the last 22 years, illicit gains from bribes, phony privatization schemes, illegal trade, and arms and oil smuggling left Croatia and allegedly landed in secret HAAG bank accounts in Austria and Liechtenstein. Part of that money was laundered back to Croatia, and invested in the real estate. The only individual held responsible was Mr. Sanader, Croatia’s former prime minister, who was sentenced to 10 years in prison for the multiple bribery cases. One of the cases involved Austria’s HAAG. Mr. Sanader is currently appealing the court’s decision.

3.  Extradition of Ex-General Vladimir Zagorec, and Public Assassinations in Zagreb

Vladimir Zagorec, Croatia’s former defense assistant minister and ex-general indicted for embezzling diamonds worth $5 million during the Balkan wars of the 1990s, was extradited from Austria to Croatia on October 2, 2008. According to published media reports, during the war in Croatia, Mr. Zagorec transferred about $450 million to secret accounts in HAAG, which he used as a deposit for his construction projects. Jorg Haider, an Austrian politician who spearheaded Hypo’s foray in the Balkans, and whose wealth of EUR45 million was found in Liechtenstein foundations, was killed in a car accident on October 11, 2008.

Prior to his extradition from Austria, Mr. Zagorec allegedly announced that he would reveal
77 secret accounts belonging to politicians in Austria and Liechtenstein. On October 6, 2008, Ivana Hodak, the 26-year-old daughter of a lawyer defending Mr. Zagorec, was executed in front of her apartment, shot twice in the head. On October 23, 2008, a bomb explosion in Croatia’s capital killed Ivo Pukanic, a publisher of an independent weekly Nacional, and another company executive, Niko Franjic. Mr. Pukanic was one of the key witnesses against Zagorec.  
Vladimir Zagorec was sentenced to seven years in prison in Croatia. He has not yet publicly revealed the names of politicians with
secret foreign accounts in Liechtenstein and Austria

4.  Ministry of Interior’s Obstruction of Investigations

Tomislav Karamarko, a former intelligence head (currently party leader of HDZ political party, which is under investigation for corruption and for siphoning around €9.5m for HDZ party slush funds used by senior party officials) was hand-picked by Mr. Sanader to immediately replace the Minister of Interior after the assassinations of Ms. Hodak, Mr. Pukanic, and Mr. Franjic.  The only result of the investigations under Mr. Karamarko’s authority was that a homeless person was jailed for allegedly killing the lawyer’s daughter. Tomislav Karamarko eventually appointed his people to police departments.

Croatia’s current Minister of Interior, Ranko Ostojic, has an apparent conflict of interest, having worked for, and resided in a Zagreb apartment owned by, Nino Pavic, a media tycoon. Mr. Pavic is the  owner and founder of EPH, with 50% of the print media market share. As reported by Washington, DC-based Freedom House, Mr. Pavic has not yet been charged in the HGAA corruption scandal, which was allegedly discarded by Croatia’s main prosecutor, Mladen Bajic. Mr. Pavic also has been mentioned as one of the alleged owners of Hypo Consultants Group.  German Westdeutsche Allgemeine Zeitung (WAZ) is a 50% owner of EPH in Croatia.

5.  Persecution of  Journalists and Independent Voices

Just two weeks ago, the Croatian state-run broadcaster’s HRT executive editor Denis Latin and his colleagues were removed from their positions. OSCE expressed concern about the treatment of journalists “following criticism from the country’s Prime Minister Milanovic” and it called “the government and the HRT management to refrain any action that could lead to censorship and threaten editorial independence.”  OSCE also stated, “This action can undermine media freedom in the country...”  According to media reports, HRT’s director, Goran Radman serves on the supervisory board of Hypo Alpe Adria Bank in Croatia and is tied to alleged conflict of interest cases.

TomislavKaramarko, former head of Croatia’s intelligence and minister of interior, and currently HDZ party leader, was called out by journalists and anti-corruption activists for harassment.

Under the title, “Judicial Harassment of Zeljko Peratovic Must Stop,” Reporters Without Borders released this statement, “As he already tried to do last year, [Tomislav] Karamarko probably hopes to be able to convince the court to ban Peratovic from publishing information for an indefinite period, thereby preventing him from working as a journalist, whether writing for his blog or for other media.”

Police protection was denied to media publisher Ivo Pukanic, who was assassinated in a car bomb explosion in October 2008. Those who ordered Mr. Pukanic’s murder have not been found. The assassination attempts on Dusan Miljus, a journalist who has been covering corruption and its ties to organized crime, and Igor Rađenović, director of Zagreb Roads who allegedly unearthed corruption in a company owned by the city of Zagreb, have never been resolved. Journalists on the state-run television HTV have been exposed to constant harassment.  

6.  Involvement In the The Balkan Route

Croatia lies on the “Balkan Route,” which originates in Afghanistan/Pakistan via Iran and is used by criminals and terrorist networks to smuggle heroin, weapons, and young women and children into Europe. In the arrest of several Balkan criminals in Spain in February 2012, all possessed official Croatian passports. Further investigations led directly to Croatia’s Ministry of Interior and a record of illegal sale of passports since 2006. This corruption has emboldened Balkan criminals to run an international criminal enterprise and the Balkan Cocaine Ring with direct access to the EU. No high-level official was held responsible in Croatia.
The Balkan Route’s heroin trade is estimated at
$20 billion annual market value. The Western Balkans, which includes Croatia, is included in Europol’s organized crime threat assessment

7.  Fraudulent Elections and Other Political Abuses:  One Million Illegal Voters for a Nation of Four Million

In spite of the reports on Croatia’s electoral fraud by Brussels-based The Parliament, a Written Question to the European Commission by Daniel Hannan, member of the European Parliament from UK, and in BBC’s live interview with Stefano Sannino, the European Commission's director general for enlargement, in December 2011, the EU failed to include Croatia’s democratic deficiency in its monitoring reports. Croatia’s current Minister of Administration, Arsen Bauk, finally admitted in May 2012 that in his country of just 4.2 million people, “over 1 million surplus voters” were on the electoral list in 2011 December’s parliamentary elections.  These illegal votes had a potential to determine more than 70 seats in Croatia’s 151-seat parliamentary assembly.

Croatia’s 2011 parliamentary elections and the January 2012 EU referendum were decided on the basis of more than one million illegal votes. The upcoming elections for the European Parliament and Croatia’s local elections in May of 2013 will be decided through the same fraudulent electoral list.

Sasha Radović (72), retired colonel and anti-corruption activist, was arrested on November 17, 2011, the very day he announced his candidacy in the December 2011 elections. In his many books, Mr. Radovic had exposed political corruption and unexplained wealth of top state leaders, including cabinet ministers and a military general. Extortion charges against Mr. Radović were brought by Ivan Cermak, an ex-general and alleged war-profiteer whose wealth has been investigated by journalists and anti-corruption activists but ignored by Croatia’s authorities. Mr. Radovic is currently appealing the decision of two years of jail time through Croatia’s court system.

Croatia’s current foreign minister, Vesna Pusic, and the Croatian People's Party (HNS) she heads, forged a coalition with HDSSB political party of Branimir Glavas, convicted of war crimes and serving jail time in Bosnia. Croatia’s electoral commission, presided by the president of Supreme Court Branko Hrvatin, approved Mr. Glavas’ leading the HDSSB list in the 2011 parliamentary elections despite his serving the sentence. Three members of HDSSB were reported for murder threats and a physical attack on a journalist. According to published reports, Mr. Glavas is alleged to have threatened a judge and journalists.   

8. State Prosecutor Mladen Bajic’s Blocking of Corruption  Investigations

The current Prime Minister, Zoran Milanovic, investigative journalists, and whistleblowers have accused Croatia’s Chief State Prosecutor Mladen Bajic of blocking corruption investigations. The EU’s Comprehensive Monitoring Report on Croatia, released on October 10, 2012, urged that “further attention should be paid to the system for checking on dismissals of criminal cases by the prosecutor. The current system does not provide for independent checks on decisions by State prosecutors to dismiss reports of crime.”

9. Conflicts of Interest and Abuse of Office

The media have reported conflicts of interest and the abuse of public office. However, those allegedly involved generally have not been prosecuted. Allegations have been made against Croatia’s current Prime Minister Zoran Milanovic; President Ivo Josipovic; deputy prime minister and minister of foreign and European affairsVesnaPusic; finance ministerSlavko Linic; former tourism minister of the current government Veljko Ostojic; former interior minister Tomislav  Karamarko; former finance minister Ivan Suker; former economy and defense minister BrankoVukelic; former transportation minister BozidarKalmeta; former minister of public works, construction and reconstruction Marina Matulović Dropulic; former minister of foreign affairs Miomir Zuzul; former speaker of the house and currently president of the anti-corruption parliamentary committee Vladimir Seks (who has not yet been charged for alleged war crimes); former minister of public works, construction and reconstruction RadimirCacic; former Prime Minister Jadranka Kosor; former minister of foreign affairs Mate Granic; Istria county prefect and IDS president IvanJakovcic; former foreign minister KolindaGrabar-Kitarovic; chairman of the state-owned oil company, Petrokemija, JosipJagust; and a host of other politicians in Croatia.

The EU’s comprehensive monitoring report from October 10, 2012 stated, "Croatia has not fully implemented the conflict of interest legislation and has overturned the previous provisions on the criteria for membership of supervisory and management boards of public companies." Vesna Pusic’s attempt to appoint HNS party secretary-general Srecko Ferencak to the supervisory board of a state-run oil pipeline operator, after he was sentenced for embezzlement, would be considered highly problematic in rule of law nations.

In sharp contrast to the record in Croatia,
Monica Macovei, former Minister of Justice, Romania and member of the European Parliament stated through the EU’s post-accession monitoring mechanism, “1,000 [Romanian] public officials ended up behind bars for corruption.” Based on evidence, Ms. Macovei
recently advocated for “the establishment in Croatia of a post-accession mechanism to evaluate the track record of conflict of interest, corruption and organized crime cases as well as the implementation of the judiciary reform action plan.”

10. Abuse of Private Property Rights

Individual property rights are trampled on, and, according to the US State Department, the adjudication process in expropriation cases is an area of potential concern for investors. Croatia’s legislature ensured inherent conflicts of interest in the legislative framework for the restitution and compensation of the property confiscated during communism. According to the EU report from 2010, “This strategic move by the Croatian Government and legislature places the rule of law and the rights of people entitled to restitution or compensation in jeopardy.”

11.  Arms Sale to Syrian Groups, in Violation of EU’s Embargo

Croatia was recently reported to be selling arms to Syria. The unanswered questions remain: Where did these arms come from, how were they originally purchased, to whom were they sold, who is getting the proceeds from the sales, and why has the EU not reacted in light of the EU’s embargo?

12.  Depressed Economy

As a consequence of corruption and poor policies, including high taxes, Croatia’s government budget has been drained; business and consumer confidence has been lacking; the economy has been in recession since 2009; unemployment has been above 20% for years; youth unemployment has been around 45% since October 2012; public debt and budget deficits are unsustainable; people are suffering from poverty; and people are leaving the country.


We look forward to your positive response and leadership in blocking Croatia’s EU accession or requiring the conditions described above.   


Natasha Srdoc
Co-Founder and Chairman
, Adriatic Institute for Public Policy          
Co-Founder and Co-Chair, International Leaders Summit

Honorable Maurice McTigue, QSO
Co-Chair, Executive Advisory Board, Adriatic Institute for Public Policy 
Advisor to US Members of Congress, US Administrations, US State Governors 
New Zealand's Former Cabinet Member, Member of Parliament and Ambassador

Joel Anand Samy, Co-Founder and Trustee, Adriatic Institute for Public Policy and Co-Founder and Co-Chair, International Leaders Summit

Boris Divjak
Senior Fellow, Adriatic Institute for Public Policy
Founder and Board Member, Transparency International, Bosnia and Herzegovina

Norbert Lammert, The President of the German Bundestag
Mark Rutte, Prime Minister, The Netherlands
Elio Di Rupo, Prime Minister, Belgium
Helle Thorning-Schmidt, Prime Minister, Denmark
Frederik Reinfedlt, Prime Minister, Sweden
Jyrki Katainen, Prime Minister, Finland
David Cameron, Prime Minister, United Kingdom
François Hollande, President, France
Jean-Marc Ayrault, Prime Minister, France
John Kerry, US Secretary of State
Chuck Hagel, US Secretary of Defense
Eric H. Holder, Jr., US Attorney General
Janet A. Napolitano, US Secretary of Homeland Security
Carl Levin, US Senator
John McCain, US Senator
Jeff Sessions, US Senator
Tom Coburn, US Senator
Bob Corker, US Senator
Ben Cardin, US Senator
Jeanne Shaheen, US Senator
Kelly Ayotte, US Senator
Mark Begich, US Senator
Susan Collins, US Senator
Jeff Flake, US Senator
Tim Kane, US Senator
Tedd Cruz, US Senator
Marco Rubio, US Senator
John Boehner, Speaker of the US House of Representatives
Ed Royce, US Congressman
Eliot L. Engel, US Congressman
Christopher H. Smith, US Congressman
Adam Smith, US Congressman
Howard P. McKeon, US Congressman
Frank Wolf, US Congressman
Ileana Ros-Lehtinen, US Congresswoman
Joe Wilson, US Congressman
Martin Schulz, President of the European Parliament
Monica Macovei, Member of the European Parliament, Romania
Roger Helmer, Member of the European Parliament, U.K.
Daniel Hannan, Member of the European Parliament, U.K.
Geoffrey Van Orden, Member of the European Parliament, U.K.
Herman Van Rompuy, President of the European Council
Jose Manuel Barroso, President of the European Commission
Catherine Ashton, Vice-President, European Commission
Viviane Reding, Vice-President, European Commission

Štefan Füle, EU Commissioner for Enlargement