Buying Back INA Will Cost Croatia, Economist Warns

Croatia's planned purchase of the shares of the national energy company INA from the Hungarian energy company MOL is bound to increase Croatia's public debt, an economic analyst told BIRN.

Prime Minister Andrej Plenkovic said on Christmas Eve that purchasing MOL's share of INA - 49.1 per cent of the shares - can be done without enlarging the public debt.

But economic analyst Damir Novotny told BIRN that Croatia would struggle to buy out the shares - which could cost 4 billion euros - and that any attempt to buy them through a state company would clearly increase Croatia's public debt.

"Technically, it could be done through investments banks and funds that would hide the transaction being done by the state," he said, offering the example of the Greek government, which used US investment bank Lehman Brothers for such purchases.

But he explained that these transactions were later revealed and Greek public debt "exploded" in consequence.

"Such a move by Croatia would be risky in a situation when a fifth of the public debt has to be repaid in the following year, along with financing the budget deficit. In this sense, the government would be seen as inconsistent," Novotny explained.

The government did not respond to BIRN's inquiry about the way MOL's shares would be bought without raising the public debt. Croatia's public debt is now around 38.5 billion euros.

The government revealed the move at a press conference on Christmas Eve after Croatia lost its arbitration process against MOL before the UN Commission on International Trade Law, UNTRAIL, in Geneva.

Croatia sued MOL in January 2014, claiming that MOL's management rights over INA, incorporated into the 2009 shareholders' agreement, was the result of corrupt activity...

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