Croatia to privatise last state-owned bank, insurer

The European Union's newest member, recession-hit Croatia, decided on Thursday to privatise both its last state-owned bank and main insurer in a bid to reduce its debt and budget deficit.

The government will sell its 99-percent stake in the Hrvatska Postanska Bank (HPB) to "ensure the growth and development of the bank" which holds eight percent of the local market, Finance Minister Slavko Linic told a cabinet session.

Italian and Austrian banks play a dominant role in Croatia, which became the EU's 28th member on July 1.

The state holds an 82-percent stake in Croatia Osiguranje that controls more than one-third of the insurance market.

After privatisation, the government wants to retain a stake in the company in order to be able to influence certain strategic decisions.

Privatisation tenders were to be called by the end of the month.

Croatia's economy has either been in recession or stagnated for the past four years.

Public debt stands at some 55 percent of the country's gross domestic product (GDP), close to the EU's 60-percent threshold.

In 2012, Croatia's budget deficit was slashed to 3.5 percent of GDP from 4.5 percent the previous year.

The EU's ceiling for deficits is 3.0 percent of GDP.

This year it is forecast at 3.8 percent due to repayments of debts, the cost of EU entry and expenditure related to restructuring ailing shipyards.

International financial institutions say the centre-left government should reform the country's huge and inefficient public administration and improve the overall business climate.